Eliminating the Minimum Wage: A Road to Universal Basic Income (UBI)
When I was 15, I got a job that paid the minimum wage of $1.15. If the minimum wage had increased with inflation and productivity since 1965, it would have reached approximately $24.00 per hour. This reflects what I believe should be the current standard.
Transitioning to Universal Basic Income
Instead of maintaining the current minimum wage, it would be more beneficial to transition to a Universal Basic Income (UBI) of around $1200 per month. The intent of the minimum wage is to ensure a certain income for people, but it fails to achieve this goal effectively. When someone works less than the required hours, they do not see an improvement in their financial status. Unemployed individuals earn $0 per hour, and businesses often hesitate to hire individuals with low skill levels or part-time workers.
By removing the minimum wage, employers and employees can engage in a more open bidding process for labor. However, workers often find themselves at a disadvantage in these negotiations. A UBI provides a form of leverage, enabling low-skilled workers to offer their labor for a lower wage without the fear of complete financial ruin. For higher-skilled workers, this added leverage allows them to negotiate for better pay or accept lower pay for jobs they are highly passionate about.
Replacing Welfare Programs with UBI
A significant challenge with implementing UBI is the need to replace existing federal welfare programs. The federal government currently spends approximately $2 trillion annually on non-social security or Medicare welfare programs, such as food stamps, EBT, housing, Pell Grants, and more. A UBI would require these programs to be phased out. However, individuals would receive $1200 per month, providing the financial support necessary to address the problems these programs aim to solve.
To offset the costs, UBI should be integrated into the taxable income system. The standard deduction could be set at $14,400, with tax rates structured so that the amount retained from the UBI tapers off as total income increases. This way, the government can recover a significant portion of the funds without creating a situation where individuals lose money. For example, a person who only relies on UBI as income should still benefit from it, but their overall financial situation would improve as their income exceeds that of solely relying on UBI.
Impacts and Benefits of UBI
A UBI not only helps individuals stay above the poverty line but can also encourage employment. It can help families establish a single-income household, creating a more stable environment for children. With fewer expenses related to day care, more parents can spend time investing in their children's education, even engaging in homeschooling. Maternity leave becomes non-essential, as parents receive financial support during this period. There are numerous potential benefits to UBI that go beyond financial stability, including improved social safety nets tailored to local needs.
By removing the federal government from the welfare equation, UBI allows states, counties, and municipalities to develop their own social safety nets. Homeless shelters could become self-sustaining by charging a small amount for room and board. States would have the freedom to establish universal healthcare programs or adopt alternative models.
Conclusion
Minimum wage policies do not offer the same flexibility or potential benefits as UBI. Over the long term, UBI could be more cost-effective than maintaining the current system. Transitioning to UBI not only ensures financial security for citizens but also promotes employment and family stability, making it a more comprehensive solution for economic and social challenges.