The logical leap that you are missing is that prices don’t always rise quickly enough as a response to increase in wages. What a person is willing to pay is only part of the pricing equation. You also have to consider what competitors are charging and how much potential margin there is to play with.
Inevitably though, all prices consolidate and all players in the market will charge more to meet the increase in wages, it’s just a slow process.
The only time it happens quickly is if each business conspires to raise prices simultaneously, which isn’t going to happen or may be illegal.
So yes, increase in wages or handing out UBI inevitably raises prices after a period of time, necessitating the need for even more increase in wages and more UBI. It’s not a one and done thing.
Here's the thing though: typically, the market discerns that wages have increased slowly and incrementally, which is why it's only able to incorporate that information over a period of time. If we passed a UBI in this country, suddenly, my landlord, the grocery store, etc. would all instantly know that my wages have increased, and by what amount.
Because housing expenses are generally the single largest expense in any household budget, that means landlords are going to reap the majority of the benefit here. People selling homes also know that wages have gone up and by what amount, so this will impact the sale price of new homes. So, any amount of UBI would end up being a huge cash transfer from renters to landlords and other existing homeowners.
While land is constrained and should probably be dealt with separately, wouldn't the price increase in consumer goods, i.e. the grocery store to use your example, require collusion between every merchant?
Isn't the other part of Adam Smith's supply and demand stuff the idea that competition will drive down prices? Sure, everyone's got another $2,000, but if I can undercut the guy who's trying to mop it all up, wouldn't I? And wouldn't someone else try and undercut me?
Wouldn't that bring prices down? And if not, why not? If there's another larger force at work keeping prices high and keeping people in poverty -- and if poverty is something we want to do something about -- doesn't that suggest that we need to constrain sellers' behavior in some ways we aren't really doing now (like laws against gouging)?
> Inevitably though, all prices consolidate and all players in the market will charge more to meet the increase in wages, it’s just a slow process.
All prices? No. Clothing is now effectively free, for example.
Prices of necessities are the only things you want to watch. Basic food products, healthcare, etc. Those prices have risen around the same as the rate of inflation or spiraled out beyond. Food prices cannot outstrip the inflation ever, because of food subsidy and/or ebt which is tied to it.
You could buy a shirt for $5 at walmart. And there is even a reasonable chance the material quality would be good. It almost certainly won't be fashionable. Purchasing quality second-hand clothing in North America is even cheaper.
For food, some people buy bulk staples and some buy high-end food at Wholefoods.
The degree of substitutes and variety available on the market is staggering for consumer items.
The logical leap that you are missing is that prices don’t always rise quickly enough as a response to increase in wages. What a person is willing to pay is only part of the pricing equation. You also have to consider what competitors are charging and how much potential margin there is to play with.
Inevitably though, all prices consolidate and all players in the market will charge more to meet the increase in wages, it’s just a slow process.
The only time it happens quickly is if each business conspires to raise prices simultaneously, which isn’t going to happen or may be illegal.
So yes, increase in wages or handing out UBI inevitably raises prices after a period of time, necessitating the need for even more increase in wages and more UBI. It’s not a one and done thing.