INTERACTIVE MODEL · AI AND THE ECONOMY
When the Worker Stops Getting Paid
This model asks what happens when AI raises output while shrinking the wage income that sustains consumer demand. Adjust the assumptions and compare four possible responses, from leaving the gap unfilled to returning income through transfers or taxes.
This is a thought experiment, not a forecast. Change the assumptions and see which conclusions survive.
How income moves through the model
Change the assumptions
Move the sliders to see which conclusions survive.
8% / yr
Share of remaining jobs automated each year
8% / yr
Share of remaining jobs automated each year
80%
Households typically spend 75–85% of income
0.8
Below 1: firms absorb demand loss before cutting jobs. Above 1: fragile labour market
10% of wage
AI running costs paid to foreign providers. This money leaves the loop
20 / period
Flat universal transfer with no dedicated funding mechanism
70%
Share of the automated wage-equivalent base returned to households
70%
Share of the total wage shortfall replaced, funded by a corporate surtax
10%
Automated activity that goes unreported. Evasion shrinks the transfer, never the budget
25%
Assessed surtax not collected: avoidance, exemptions, base erosion, enforcement gaps. The statutory rate grosses up to compensate, until the cap
50%
The highest extra tax rate companies can be charged. Once this limit is reached, any remaining UBI funding gap becomes government debt.
20%
Share of private investment & other non-government spending that holds up when demand falls. Government purchases always hold
Four ways the economy responds
Ten years into the modeled displacement, each policy produces a different balance between household spending, corporate profit, employment, and public debt. The grey figures show the economy before displacement. All scenarios begin from the same wage-income baseline of 100.
No policy response
No intervention
Household spending
17 · before automation: 64
Corporate profit
28 · before automation: 19
Government shortfall this year
46
Total 10-year shortfall
289 · 7.2% of baseline wages
How it is funded
No mechanism. Nothing is paid to households; falling tax revenue meets unchanged public spending, and the gap becomes the shortfall.
Borrow for a fixed UBI
Fixed, debt-funded UBI
Household spending
39 · before automation: 64
Corporate profit
43 · before automation: 19
Government shortfall this year
98
Total 10-year shortfall
805 · 20.1% of baseline wages
How it is funded
A flat transfer of 20 per quarter with no dedicated revenue source. The full cost lands on the budget.
Return part of automated income
Agentic contribution
Household spending
51 · before automation: 64
Corporate profit
25 · before automation: 19
Government shortfall this year
40
Total 10-year shortfall
240 · 6.0% of baseline wages
How it is funded
Wages displaced by automated work: 51
Contribution rate: 70%
Contribution due from firms: 36
Contribution transferred to households: 32
The missing 4 was never collected: it is the share of automated work that goes unreported, set by the disclosure evasion slider.
Firms contribute a share of the wages tied to work now performed by AI instead of employees. What is collected goes back to households, replacing purchasing power that would otherwise disappear from the economy. Transfers never exceed contributions collected, so the program does not require deficit funding.
Contribution rate: 70%
Contribution due from firms: 36
Contribution transferred to households: 32
The missing 4 was never collected: it is the share of automated work that goes unreported, set by the disclosure evasion slider.
Firms contribute a share of the wages tied to work now performed by AI instead of employees. What is collected goes back to households, replacing purchasing power that would otherwise disappear from the economy. Transfers never exceed contributions collected, so the program does not require deficit funding.
Tax profits to support wage replacement
Indexed UBI, EBITA-funded
Household spending
59 · before automation: 64
Corporate profit
27 · before automation: 19
Government shortfall this year
50
Total 10-year shortfall
204 · 5.1% of baseline wages
How it is funded
Tax rate needed to fully fund the UBI: 74% of corporate operating profit (EBITA)
Legal maximum: 50%
Amount owed to households: 40
Tax collected: 27
The transfer is owed in full; whatever the tax cannot collect becomes shortfall.
Legal maximum: 50%
Amount owed to households: 40
Tax collected: 27
The transfer is owed in full; whatever the tax cannot collect becomes shortfall.
Explore the results
Household spending
Does demand keep circulating?
How this model works
Read the assumptions, policy mechanics, limitations, and normalization method behind the simulator.