Section 9 - Inflation
UBI will definitely cause inflation. The first consequence of destitute people becoming not-destitute is inflation.
People who now are struggling to survive (many students for example) will be able to afford proper food, clothes, haircuts, etc. This creates a demand and in the short term allows businesses to increase prices. In the long term it causes the local economy to grow - more hairdressers, clothes shops and cafes will open.
Section 10 - Employment rates
It can be argued that UBI either increases or decreases total employment rates. In fact there have been many global trials showing both results. Generally they have not been properly implemented though, so it’s hard to extrapolate the results to real UBI as described here.
People stuck in the welfare trap will be free to get jobs. But in general there is a shortage of jobs and a large surplus of job-seekers (although in highly-skilled jobs it’s often the reverse). So this alone won’t increase employment rates. Under UBI, everyone has an incentive to get a job, but nobody will be forced by regulation to fill in futile applications each week, or accept job offers they are not suitable for. All of the people who are not really able, available or motivated to work will stop applying. So life will become much easier for both employers and serious job applicants - both will immediately see greater prosperity. But this won’t be visible in the headline employment rate.
Students, entrepeneurs, charity volunteers, many of the groups in section 3 - many will quit their day-jobs. This might cause wage-inflation in casual labour. Or maybe the people from the welfare-trap will immediately take all of these jobs.
It’s hard to predict. I think it’s safe to say that the overall employment rate will not change much, but the employment landscape will change for the better.
Section 11 - Redistribution
In the example above, dole-earners and high-earners both pay about the same tax as before. The high earner pays slightly more tax - but he gets it back indirectly if he has adult dependents. But single high earners will lose income, and very low earners are getting much higher income than before. There are three ways to deal with this:
Do nothing - UBI has a slight wealth-redistributive effect
Lower the minimum wage to 200euro/week. This acts like a subsidy for employers. They save 50% on their payroll - it can an incentive to hire more.
Add a 50% tax on the first 200euro/week earnings. So the state gets some extra income.
Options 2 and 3 mean that every type of worker has about the same income as before. But we have still achieved the goal of removing the welfare trap.
It sounds unfair that low-earners must pay 50% tax - much more than high earners - but this is what they do today. Today, there is a hidden 50% tax on low earners. It is created by the interface between the welfare/tax systems. UBI (with option 3) just makes this explicit.
Section 12 - Real welfare trap examples
Of course legislators have thought the welfare trap before and tried to fix it. For example here and here where your income stays nearly the same no matter how much you work, which is effectively a 100% tax on the lowest earners.
This increases complexity but does not actually solve anything. It creates smaller welfare traps which the poor need to navigate, to avoid being pushed further into poverty.
Section 13 (TBD) Balancing the budget
It would be useful to prove that UBI does not cost the government money, using calculations on real-world data.
[extra money needed] = [adult population]*[dole payment] - [current dole bill]
[extra money needed per week in tax, from each employed] = [extra money needed] / [number of employed]
Then convert that into an extra flat tax rate. This might be a sophisticated calculation requiring detailed taxation data.
A plot would be useful, showing how an individual’s income would change. X-axis is income before tax. Y-axis is income after tax. Traces: status-quo, single worker on UBI, worker with 3.1 dependents on UBI.