The problem is that this then leads to Wal-Martification, where the existence of social services pushes down the amount of wages that a company is willing to pay. While I do believe in a social safety net, I prefer option #2 to #1, because #1 means that the product itself is being subsidized. If the product is essential enough that it needs to be subsidized, it should be subsidized directly, rather than through lowered wages/social assistance. If, on the other hand, the product is not so essential that it should be subsidized, then workers’ wages should be allowed to rise to a living wage, and the cost of the good or service to rise as well. Otherwise, it’s just a subsidy on the product by another name.
This is why I prefer the idea of living-wage UBI to the piecemeal social assistance that currently exists; if you get enough money to live by whether or not you do some horrible job, then horrible jobs will have to pay enough that people will want to work there.
