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Concept guide · 5 min read

Could a basic benefit preserve living standards?

A purchasing power test must include prices, debts, taxation and the source of the benefit's financing.

MacroVision editorial team · Updated:

In one minute

A benefit can buy more when prices fall, but only if it is financed and household expenses allow it.

TechnologyProductivity and costs
DistributionIncome, capital and debt
PolicyTaxes, benefits and financing
A mechanism map for illustration only; it contains no quantitative forecast.

The basic equation

Real purchasing power is approximately calculated as nominal disposable income divided by the price index. For example, disposable income of NIS 8,000 and a price index of 0.8 relative to the base are equivalent to NIS 10,000 in base prices. This is an accounting example only.

Why does debt matter?

A household paying a fixed nominal debt repayment may be left with less money for consumption, even when the prices of some products fall. Variable interest rates, arrears and income erosion change the picture further.

Financing is not a technical detail

A fixed benefit requires sources of financing over time: taxes, income from assets, cuts to other spending or debt. Each alternative can feed back into investment, employment and prices.

What does the model examine?

The purchasing power frontier study separates financing capacity from consumption needs, and indicates when resources are insufficient to maintain a consumption floor. Such a result is not a recommendation for an actual benefit level.

Limitations

An average consumption basket does not adequately capture differences between renters, homeowners, families and single people. The quality of public services is also not captured by simply dividing by a price index.

Sources and transparency

This publication explains the existing research in accessible language. Its accounting example and scenarios are neither official forecasts nor investment recommendations.

To the research and methodology ←

What do you think?

What should a minimum consumption floor include in the age of automation?

Further reading

Data guide · AI and work

Which occupations are most exposed to AI? The full ILO ranking

Office and clerical work at the top of the list, physical work at the bottom. What the International Labour Organization's index really measures, and what it does not say about layoffs.

Empirical finding · AI and work

Is AI already eliminating jobs? What the data from Europe show

We examined 13 countries and 39 occupational groups: did exposed occupations lose more jobs in places where firms adopted AI faster? The answer for now: no effect can be detected.

Research finding · Simulation

Even when benefits protect them, those who lost their jobs fall behind

In all 42 matched comparisons in the automation simulation, displaced workers ended below the path in which the change did not happen, even when benefits maintained their level of consumption.

Research scenario

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?

Accounting illustration

Prices have fallen. Will the benefit buy more?

Purchasing power also depends on wages, taxes and debt. A simple example shows why lower prices are not the whole story.

Descriptive findings

Can corporate tax fund a world with less work?

The available data help frame the question, but do not yet provide a causal answer or guarantee tax revenue.

Descriptive case study

Tax expense and cash tax — why do the numbers differ?

A case study of three companies illustrates the difference between tax expense and actual payments, and the effect of weighting choices.

Scenario analysis

20% global unemployment: an inevitable crisis?

An extreme scenario can lead to very different outcomes — depending on income distribution, debt and public financing.

Economic explainer

Cheaper machines, cheaper products?

The link between automation and prices depends on competition, non-labor costs and how quickly the economy adjusts.

Distributional analysis

Asset ownership versus debt: who is more resilient to automation?

The difference between labor income and capital income may become decisive — but asset owners are also exposed to risk.

Behind the research

Behind the forecast: how do you build a model for the age of automation?

From scenario assumptions through government accounting to sensitivity tests — and what still cannot be concluded.

Research finding · Simulation

Falling prices do not reach everyone: why renters are hurt more

In the automation simulation, when savings pass through to prices, renters and mortgage holders fall behind. Indexing the benefit to housing costs helps only when there is budget.

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