Over the last decade we have posted numerous blogs relating to the continuing interest in some kind of universal basic income (UBI). During the last several years, a number of experiments have sought to assess the benefits, if any, of a carefully constructed and monitored program based on some form of UBI. To date, none of these experiments have proven to be definitive.
Now come some of Silicon Valley’s elite, who share a concern that a large fraction of jobs currently performed by humans, will soon be turned over to machines. This concern has given rise to an increasing interest in UBI, as a potential offset to the disappearance of a large number of jobs. That is, if an economy can no longer provide enough jobs, then give everyone a guaranteed income that is enough to live on.
Historically, one of the critical questions has been whether an inflow of unearned cash would become a career choice leading to a shortage of workers. Of course, the new thinking about UBI seems to revolve around a potential surplus of workers.
Regardless of which theory gains credence, investors should be aware of the potentially inflationary aspects of UBI. Any actual distributions are likely to be funded through increased deficit spending, generally a contributor to inflation. In addition, increasing purchasing power without a commensurate increase in supply is also likely to result in inflationary pressures as prices are bid up.
All comments and suggestions are welcome.
Walter J. Kirchberger, CFA
