Universal Basic Income in the Post AI era

Thousands of jobs are at risk due to the development of artificial intelligence and its growing capability to perform certain tasks better than humans, especially in domains where human intelligence was traditionally rewarded. 2023 was the first year when we saw artificial intelligence posing a real threat to jobs, and by 2025, the fear of job loss had materialized, with several prominent companies laying off employees. Amid these job losses and the potential disruption of the labor market, Universal Basic Income (UBI) has emerged as a proposed solution, advocated by tech CEOs and prominent economists across the globe.

However, moving forward, I do not clearly see how UBI can be beneficial for society or how it will take humanity to a better level. To understand it better, I am here dissecting the concept of Universal Basic Income first by starting with a closed economy, and in future blogs, going deeper into UBI’s impact on different stakeholders in the UBI era.

Let us construct a closed economy with limited players to understand its impact, and then expand our understanding further in future blogs.

Assumptions:

• Infinite supply of goods and services because of artificial intelligence

• One AI company controlling all goods and services

• 100 residents living in the economy

• UBI of 100 units distributed to each resident monthly by the government

• No saving

How the economy works:

If 100 units are given to 100 people, it means the economy has 10,000 units of currency in circulation that people can spend on goods and services.

All of the people spend their money on goods and services, and the money reaches the AI company because it controls all goods and services.

Since we do not have any type of money flowing from the company to the people through salaries or other firms, the only way money can return to the people is through the government.

Now the government taxes the 10,000 units of revenue earned by the firm. This leads to the following scenarios:

If the government taxes 50% or less, the money collected is 5,000 units. Hence, only 5,000 units are available for redistribution as UBI, and the UBI decreases gradually over time while the owner of the company becomes better off.

If the government taxes 100%, the money collected is 10,000 units. In this case, all the money is transferred from the company back to the people, creating an infinite cycle of 10,000 units in revenue and the same amount redistributed. However, if the government taxes 100%, this disincentivizes the company from operating, as there is no incentive to produce goods and services.

In this closed economy, I am not able to see how UBI can actually work, especially in a system where all services are being produced by artificial intelligence. In a period without artificial intelligence, I believe UBI might have been a wonderful concept. However, according to my preliminary understanding, I see severe limitations in the UBI system.

In the future blogs, I will think more about the following concepts in detail and understand where the world is heading, towards a dystopia or a utopia.

1. Does UBI takes us back to the era where human gets limited to survival?

2. UBI and inequality

3. Will UBI enable the world to unlash the full potential of artificial intelligence?