UBI or the minimum wage?
whose families received them and that the benefits they brought continued into later life (Costello et al., 2010). Furthermore, a third-party analysis of the data gathered by Dr Costello found that the payments caused a decrease in arrests amongst parents who received casino pay-outs (Akee, Copeland, Keeler, Angold and Costello, 2010), suggesting that a UBI would, as its supporters claim, decrease crime.
In conclusion, a UBI would bring many social and human benefits, including improving the mental health of citizens and decreasing crime and, socially speaking, it is a very effective policy.
3.2
The effects of a UBI on employment, unemployment, and wage rates
The effects a UBI would have on employment levels are controversial: in a consistently free market, a UBI would almost certainly decrease employment in the short run, but since the UBI would be replacing the minimum wage the impact it would have is a lot harder to predict.
Since the introduction of the UBI would also abolish the minimum wage, the going wage rate would decrease and demand for low-skilled labour would increase back to the free-market equilibrium. However, most social security schemes are designed to encourage entry into the workforce, and since a UBI would be replacing these, in the short run labour supply would probably shift in. Many workers may also use their new-found financial freedom to return to education or take time to find a job that they prefer, further shifting labour supply in the short term (Hoynes and Rothstein, 2019). These shifts are shown in figure 4. However, the exact size of these impacts depends on the PED, PES and equilibrium position of the labour market so are nearly impossible to predict without empirical evidence. It is nearly certain that both the wage rate and unemployment levels will decrease to some extent but gauging the direction of the employment shift is much more difficult since it depends on both the supply (which would decrease) and demand (which would increase) of labour. However, in the short run, it is arguable that none of these changes pose problem to the economy regardless of the employment shift. Firstly, these are short-term effects and will not have much impact on the economy long term. Secondly, not everything can be measured using purely economic indicators: the people who Figure 4, showing the effect of abolishing the minimum wage and introducing a UBI scheme on the labour market. Q1 and P1 show the amount of labour consumed and the price paid before the minimum wage was abolished and the UBI implemented, Q2 and P2 show the quantity and price of labour after this change.
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