An increase in the cost of living would occur, particularly for people for whom essential goods form the large part of their consumption (luxury goods, in contrast, would likely decrease in price). The details of extent, however, depend on the magnitude of the basic income.
A couple things counteract that increase in price. For one, capital would flow more toward producing essential goods owing to a larger demand: this would prioritize research and development in those goods, and in hunting out inefficiencies that hamper their production and distribution, leading to a lower real cost. For two, most people already consume the bare essentials of life--the real question is just where that money comes from, be it a basic income, a demeaning job, a good job, or debt. (These two counteracting factors are at odds, btw: the more one is a factor, the less the other is. The second prevents inflation from being an issue at all, while the first merely mitigates against it. Two is the larger factor, imo.)
In addition, there's an individual psychological factor that helps. Not having a guaranteed income means that, at a moment's notice, you can have no financial ability to take care of yourself: this puts you into bad situations and leads you to make locally rational decisions that are globally suboptimal (where you do less-than-ideal things to survive today that cost you a lot more down the line than the benefit you got today). And this has a broader deleterious social impact: for instance, you might be forced to abandon all your social networks to move back home (if you have a home to go back to!), which significantly increases search costs and destroys valuable information, making labor markets less efficient. So even if there's been serious inflation because of a basic income, it still allows you to stay afloat instead of throwing your life into radical chaos.
I share your concern about the exact shape of what would happen, and the level of basic income that best improves social outcomes depends on such a number of factors that it seems very difficult to calculate. Phasing it in over a range of increasing values seems like one way to deal with that.
So, that is an interesting point you brought up regarding the psychological factor of knowing that your well-being is tied completely to your job that prevents you from making rational decisions. But we are speaking about this from the perspective of a well-adjusted (presumably) adult.
I'm going to do something I shouldn't and try to imagine myself as a teenager again (urgh), and whether or not I would have ever held down a job if I had guaranteed money to fall back on. There are times I think I would have done it, and times I could easily see myself throwing hands in the air and going home to play video games at the first sign of adversity.
The whole exercise leaves me wondering, even though I think the 'Basic Income' is an interesting idea for replacing needs-based programs, whether or not these individual choices, acted out en masse, would cause some severe productivity problems down the line. We aren't post scarcity just yet, after all.
Not that it matters. Most of us will be dead before something like 'Basic Income' ever makes it to the US. We are still hanging on to some pretty severe depression-era baggage.
A couple things counteract that increase in price. For one, capital would flow more toward producing essential goods owing to a larger demand: this would prioritize research and development in those goods, and in hunting out inefficiencies that hamper their production and distribution, leading to a lower real cost. For two, most people already consume the bare essentials of life--the real question is just where that money comes from, be it a basic income, a demeaning job, a good job, or debt. (These two counteracting factors are at odds, btw: the more one is a factor, the less the other is. The second prevents inflation from being an issue at all, while the first merely mitigates against it. Two is the larger factor, imo.)
In addition, there's an individual psychological factor that helps. Not having a guaranteed income means that, at a moment's notice, you can have no financial ability to take care of yourself: this puts you into bad situations and leads you to make locally rational decisions that are globally suboptimal (where you do less-than-ideal things to survive today that cost you a lot more down the line than the benefit you got today). And this has a broader deleterious social impact: for instance, you might be forced to abandon all your social networks to move back home (if you have a home to go back to!), which significantly increases search costs and destroys valuable information, making labor markets less efficient. So even if there's been serious inflation because of a basic income, it still allows you to stay afloat instead of throwing your life into radical chaos.
I share your concern about the exact shape of what would happen, and the level of basic income that best improves social outcomes depends on such a number of factors that it seems very difficult to calculate. Phasing it in over a range of increasing values seems like one way to deal with that.