If AI replaces jobs, what will we live on?
An unemployment rate of 20% raises a question beyond the number of jobs: how are the gains from automation distributed?
Lower production costs can expand consumption opportunities, but do not guarantee an income for people who lose their jobs.
The question
MacroVision studies a scenario in which firms replace human labor with automation, prices fall, and benefits partly replace wages. Unemployment of 20% is an assumption to test, not a forecast or an estimated probability.
What conditions must hold for this scenario to work?
Test three mechanisms separately: the pass-through of costs to prices, ownership of profit-generating capital, and funding for transfers to households. Higher productivity alone determines none of these outcomes.
Why does this matter to readers?
Two households receiving the same benefit can experience different outcomes. Nominal debt and expenses that are difficult to reduce limit the gains from lower prices, compared with a debt-free household receiving capital income.
What remains unknown?
There is no verified estimate of job replacement, consumption-basket price declines or government funding capacity. The scenario models test assumptions; they are not calibrated policy forecasts.
Integrated model: testing the thesis
Step 71 links wages, prices, profits, taxes and benefits over 20 years. With 20% unemployment and 50% cumulative productivity gain, real output rises 20%, but budget-limited benefits preserve only 50.6% of debt-free displaced-worker purchasing power. Full benefits raise government net debt/nominal output from 60% to about 132.5%. Conditional normalized results, not economic forecasts. Benefits target only unemployed model workers.
Who benefits and who loses?
Step 72 separates employment, debt and ownership across four cohorts. Concentrated ownership with budget-limited benefits preserves about 49.9% of purchasing power for debt-free displaced workers and 38.1% for indebted displaced workers. Broad initial ownership gives 91.5% and 90.1%, relative to different starting incomes. A conditional mechanism test, not decile proof or costless redistribution. Unpaid debt and valuation limits are shown.
What changes when households save?
Step 73 adds saving, share trading and debt-principal repayment. Two consumption rules and four pricing rules have matched no-transition controls. Workers can accumulate capital; falling asset prices may reduce owners' wealth despite higher income. Investment/financing rules matter. Not an empirical automation effect.
Sources and transparency
This publication explains the existing research in accessible language. Its accounting example and scenarios are neither official forecasts nor investment recommendations.
What do you think?
Which mechanism most constrains the scenario: employment, prices or benefit funding?