When people talk about automation causing massive job losses, they often suggest that we’ll handle this by paying everyone a universal basic income. If the basic income is large enough, then we can hope for a kind of utopia, where we enjoy lives of prosperity and leisure while automation works for us. This is on the right track; clearly the unemployed will need incomes. However, the phrase “universal basic income” suggests a program that has been worked out, thought through, and which we merely need to initiate once automation-induced unemployment gets high enough.
This is misleading. A universal basic income is simply an income paid to everyone, where everyone’s basic income is the same size. There’s no off-the-shelf program we can switch on and use to handle displacement caused by automation when the time comes.
The topics and ideas discussed in this blog are drawn from a book I have under submission to a publisher. The working title is “The Road to Utopia: Automation, Justice, and How to Support Everyone When AI and Robots Create a Post-Work World.” “Utopia” here refers to a world without work, where automation serves us and we enjoy prosperity and leisure. The book is about how to make this happen. Bear in mind that “utopia” is not a synonym for “paradise,” and that the road is long and rough.
Moreover, basic incomes are universal because they’re typically proposed to be funded from property that everyone owns collectively, where we each own an equal share. The Alaska Permanent Fund Dividend is a good real-world example. The people of Alaska collectively own the oil reserves on public land, and every year the revenues from those reserves is distributed equally to all of them, including children. Alaskans typically receive from $1000 to $3000 a year. Notice why a basic income is universal: If everyone has an equal ownership interest in something, like the oil on Alaska’s public lands, then they should all get an equal share. Basic income proposals are often tied to collectively owned property of some kind, usually natural resources. I strongly suspect that some of those who claim basic incomes will support those who are displaced by automation really mean a guaranteed minimum income of some kind, which is not universal, and not necessarily tied to collective property.
But let’s look at the details of a couple of basic income proposals made with automation in mind. When Andrew Yang ran for the Democratic party nomination for President in 2000, he raised concern about automation and unemployment, and proposed paying every adult U.S. citizen over the age of 18 $1,000 a month. Yang’s basic income would be funded primarily through a value-added tax of 10% on goods and services produced by business, and by shifting spending from current welfare programs to the basic income fund.
Sam Altman proposes “universal basic wealth” under a scheme where everyone has an ownership interest in AI companies and in land:
We could do something called the American Equity Fund. The American Equity Fund would be capitalized by taxing companies above a certain valuation 2.5% of their market value each year, payable in shares transferred to the fund, and by taxing 2.5% of the value of all privately-held land, payable in dollars.
This is actually not a basic income, but something sometimes called a “citizen’s capital account,” but Altman’s version does yield a monthly income. Altman estimates each adult American would receive about $13,500 a year, or $1,125 per month. Neither Yang’s nor Altman’s proposals would be funded from collective property, but they are universal.
Jack Dorsey of Twitter and Block, Inc., Darion Amodei of Anthropic, Elon Musk, prominent AI researcher Geoffrey Hinton, and Facebook founders Chris Hughes and Mark Zuckerberg, are all on record as endorsing basic incomes for the displaced, or at least they say so when addressing worries about automation and unemployment.
So the basic income programs from Yang and Altman would pay people $1000 to $1,125 per month. These figures are typical of basic income proposals, which are usually considered supplemental, rather than something one can live on. Without Alaskan oil to draw upon, these programs must rely on taxes alone.
The problem, of course, is that no one can live on $1000 a month. If you’ve been displaced from the job market by automation, you’ll need a lot more than that, even if you manage to find some low-paid gig work or something similar.
In early 2026 the average blue collar worker in the U.S. earned just over $53,000 per year before taxes, or $40,000 to $42,000 after taxes. Many of the displaced will have been making more than that, but let’s start with figures that keep the problem manageable. Now let’s assume we want to give every displaced person $40,000 in nontaxable income. If you’re unemployed for long periods of time, or even permanently, it won’t be possible to live decently on much less than that.
Let’s suppose further that, somewhere down the road, automation has eliminated so many jobs that 25% of the potential workforce is unemployed. I pick this figure because that was the rate of unemployment rate during the worst of the Great Depression, so we know it can get that bad. Many AI experts predict much greater job losses than that.
If we give $40,000 in nontaxable income to 25% of the total workforce of 147.3 million, we will need to raise $1.473 trillion from the owners of capital and/or the three quarters of workers who still have work. The American GDP in 2023 was approximately 27.36 trillion dollars,[1] so the cost of supporting half the workforce at their current income levels would be roughly 5.23% of total GDP, or roughly 1.5 trillion dollars. We can scale this up or down; if the displacement rate is, for example, 50%, then we need twice as much: roughly 10.46% of total U.S. GDP, or roughly 3 trillion dollars.
This is a lot more money than Yang and Altman are proposing to raise. I’m basically in favor of taxing to fund incomes for the displaced (whether they are universal basic incomes in the strict sense or just guaranteed minimum incomes for the displaced), but I want say something about where the money should come from. As it turns out, this is a problem that contains its own solution.
We need to start by understanding the difference between automation and displacement. Automation is the substitution of machines and software for human labor. Automation eliminates jobs and always has (that’s the point), but throughout history new jobs have eventually arrived to replace those lost to automation. Displacement happens when new jobs do not arrive. This can be either temporary, when there’s a lag between old jobs disappearing and new jobs arriving, or permanent, if new jobs never arrive in sufficient numbers.
There are reasons to believe that displacement will increase in the near future, and might even become permanent. The reason is something called task encroachment. The task encroachment analysis was developed by economists David Autor, Frank Levy, and Richard Murnane, though they don’t use that phrase. The basic idea is that there is a finite range of tasks that humans do, a sort of alphabet of tasks from which we build all the various jobs. This alphabet includes counting and math, logical and deductive thinking, quantitative relationships, sensorimotor skills and physical flexibility, common sense, judgment, intuition, creativity, and spoken language, among many others.
Over time, machines and software encroach on that range of tasks by learning to perform them. We saw this recently with ChatGPT and similar programs that can write and speak. The worry is that AI and automation are now proceeding so fast that there will not be enough tasks that only humans can do, and that the economy won’t be able to employ all humans.
When an economy becomes automated in ways that produce displacement (that is, new jobs are not arriving to employ the displaced), that economy will—all else being equal—be producing the same GDP with a smaller percentage of potential workers on the job. That’s just what it means to automate jobs out of existence: it now takes fewer people to produce the same total economic output. That, in turn, means that the total labor cost in that economy is now smaller. If, for example, it now takes only 75% of the potential workforce to generate the same total output, then the total payroll is (again, all else being equal) 25% less than before.
Now, this won’t happen if new jobs do arrive to employ the displaced; we are talking about a situation where jobs go away and no new jobs arrive to replace them. That’s displacement. There’s a difference between automation eliminating jobs but new jobs arrive to replace them, and automation eliminating jobs and new jobs do not arrive. The latter situation is displacement.
However, if GDP is undiminished, then the money that used to pay the 25% of people who are now displaced is still out there somewhere in the economy. Most or all of it will almost certainly land in the hands of capital owners, or some of them. Those who receive some of that money have received a displacement windfall. I’ll say more about this in a future blog post, but this windfall won’t always appear in the form of a smaller payroll. We’ll also see that not all firms receive part of it, nor do they receive it in the same percentage relative to their size.
But what have these capitalists done to deserve that windfall? Are they working harder, showing greater entrepreneurial energy, taking greater risks, or otherwise outperforming the capitalists of fifty or 100 years ago? The economy was not experiencing noticeable long-term displacement in 1900, 1950, or even 1970, yet today’s business managers, investors, entrepreneurs, and capitalists in general are not working any harder, or better, or smarter, or making greater social contributions, than their counterparts in those years. What, then, justifies them in getting a windfall equal, say, to the incomes of 25% of the potential workforce? What have they done to deserve this? This is a truly colossal transfer of wealth from potential workers to owners of capital. Is it morally justified?
The answer to that question starts with the assumption that the capitalists, investors, and entrepreneurs of 1970 and earlier were fairly compensated for their work. Well, if they are still fairly compensated today, and as a group they are getting a windfall equal to the incomes of 25% of the potential workforce on top of that fair compensation, then they are now compensated beyond what fairness requires.
Here’s another way to illustrate my point. Imagine two cases. In the first case, automation has occurred, making the economy more productive, and total economic output is now much greater, but there’s no displacement because new jobs arrived to replace any jobs lost to automation:
No Displacement. Thanks to gains in productivity over the last 20 years, the GDP has doubled from $500 million a year to one trillion dollars a year. One-quarter of all jobs were eliminated by these gains in productivity, but they were all replaced by new jobs that pay just as well (or better), and there is full employment. No one is displaced from the workforce. The money that pays incomes for the new jobs comes ultimately (and after many complex circulations through the economy) from money saved through productivity gains.
The second case is just like No Displacement, except that new jobs failed to arrive, and displacement occurs:
Partial Displacement. Thanks to gains in productivity over the last 20 years, the GDP has doubled from 500 million dollars a year to one trillion dollars a year. One-quarter of all jobs were eliminated by these gains in productivity, but no new jobs arrived to replace those that were lost. One-quarter of the potential workforce is permanently displaced from the workforce. There is 25 percent displacement.
In both cases the money saved by gains in productivity are the same, but in Partial Displacement none of it pays incomes for new jobs. Instead, it’s a displacement windfall.
In both cases business owners expended the same amount and intensity of work, the same level of creativity and enterprise, and the same managerial skill. If the product they own by virtue of their labor is directly proportionate to the amount and quality of labor they expend, then they have rights to the same amount of property in both cases.
Therefore, if the business owners in No Displacement were fully and fairly compensated by their incomes, stock options, returns on investment, and the like without receiving a displacement windfall, then the business owners in Partial Displacement will be fully and fairly compensated without receiving a displacement windfall either, provided the rest of what they receive is comparable to what business owners in No Displacement got. They did not work harder or better than those in No Displacement, so the fruit of their labor should not be greater. However, they did receive part of the windfall, so they have received assets they are not morally entitled to.
Notice the pattern of argument: Business owners behave the same way in both cases, they have earned the same amount of wealth in both cases, they are entitled to and receive the same profits and returns in both cases, but they get a windfall only in Partial Displacement, therefore their behavior doesn’t justify their claim to own the windfall.
Now, why are they getting the displacement windfall in the first place? Simple: they are lucky. They happen to own capital at a time when automation is leading to displacement, and they don’t have to share the gains from automation with as many people as before. They did not create automation, nor did they create displacement. Those things are happening as a result of 300 years of scientific, technological, and organizational changes in the economy and in the ways we produce things. Those developments are the collective achievement of generations of people working on a vast array of projects, and no one of those people, nor even a small subset, can take credit for that collective achievement. Even those investors and managers who are involved in financing and developing automated systems did not produce a world where automation is possible. They are simply in the right place at the right time.
So here is where I will leave off: displacement is a colossal transfer of wealth from people who are displaced to people who own capital, and those who own capital have done nothing to deserve this extra compensation. They are already fully compensated by their incomes, stock options, returns on investment, and the like. The displacement windfall is an extra benefit on top of all that, and they don’t deserve it.
Creating the displacement windfall is a collective achievement, and, like Alaska’s oil, the displacement windfall belongs to all of us, collectively. Leaving it in private hands amounts to endorsing a massive transfer of wealth from the many to the few, when it belongs to the many.
In future blog posts, I’ll talk about where in the economy the windfall went, how big it is, and how to devise a tax base to collect this overlooked collective property.