Pay people so AI can do the work

Israel should legislate a generous, universal, and automatic income floor now—not because AI has caused mass unemployment, but so that it does. If that sounds callous, its goal is the opposite: to unleash rapid, economy-wide automation to the benefit of all the businesses and citizens of Israel.

No Income Security, No AI Revolution

Surveys, including Microsoft’s 2024 Work Trend Index, show most employees fear that using AI makes them replaceable. If history is anything to go by, that anxiety will manifest as quiet obstruction of AI in the workplace—delays, foot-dragging—and open confrontation on the picket lines. Resistance may ultimately prove futile—but not before it slows Israel during the jostling phase of the race, when an early lead becomes a lasting advantage.

Daniel Schreiber.

(Photo: Calcalist)

Elevator operators held back the just-press-the-button-yourself functionality for 50 years; dock workers fought shipping containers—literally a metal box—for two decades because of the automation they enable; grocery unions delayed barcode scanners for 20 years; the taxi drivers’ union kept Uber out of Israel indefinitely; and to this day it is illegal for drivers in New Jersey to pump their own gas.

Costly as such delays are, they don’t threaten local industry. After all, tech forward places like Singapore or Seoul cannot take business from an elevator, dockyard, teller, driver, or gas stations an ocean away.

Not so in the cloud-based era of AI. Hollywood’s 2023 walkout offers a sobering promo of things to come: in Act I, unions shut down the studios and secured limits on AI adoption—a tactical victory. But in Act II, AI startups elsewhere will produce movies in days rather than months, for hundreds of dollars rather than hundreds of millions—a strategic defeat.

This dynamic is what the Israeli economy should expect if nothing stronger than “it will be okay” is instituted: labor will scuttle AI initiatives—it’s the rational thing for them to do—and global competitors with no such constraints will outcompete the Startup Nation.

A guaranteed income—delivered via a negative income tax (NIT) or equivalent mechanism—minimizes the political and industrial resistance that will otherwise slow AI adoption and hobble Israel in the age of the machines. It aligns labor, capital, and the state behind a single aim: deploy AI everywhere, faster than rivals, and bank the gains at home.

The Promise of Full Unemployment

It’s natural to recoil at the thought of high unemployment. In the standard macro playbook, each lost job means one fewer person producing and one fewer person consuming. Historically, every percentage-point increase in unemployment has been associated with roughly a two percent drop in GDP. Disaster.

But in the AI economy that dynamic is inverted, and it may soon be time to reframe “unemployment” as “leisure,” “retirement,” or “freedom.” Because displacement of people by machines can yield more production and more consumption, standards of living can be far higher at full unemployment than at full employment. It’s a brave new world.

Doesn’t sound right? Let’s think it through. Imagine you own a law, accounting, architecture, or software firm and replace all your employees with AI. As more firms do the same, the ballooning cost of universal income payouts requires tax hikes. In the limit—at 100% unemployment—tax revenues need to replace the entire wage bill. On average, firms then pay in taxes roughly what they once paid in salaries. At first blush, you’re no better off.

But at second blush, you are: Israel’s average employee works 1,898 hours per year, while AI works all 8,760, about a 5x boost; AI gets far more done per hour: in controlled trials, AI performs tasks 2–3 times faster than humans, and that number is rising sharply; and even with the new tax, you save about a third of your ‘labor costs’ by avoiding severance, rent, recruiting, training, and overhead.

The upshot is that your firm now produces anywhere from five- to fifty-fold more (and better) law/accounting/architecture/code—for about a third less. You are all set to slash prices and take share from businesses abroad still laboring under human constraints.

And those people you let go? They are now far better off too—at least financially. Because automation cuts costs, it is inherently disinflationary. As AI displaces humans, everything gets cheaper, and your erstwhile employees’ guaranteed income buys them far more than their old paycheck did. What’s more, they have leisure time to invest in their parenting, volunteering, socializing, and studying.

Like all thought experiments, this one glosses over real-world challenges—societal, psychological, transitional—to make an overarching point: unemployment in the AI era isn’t another economic cycle—it’s a regime change. And as with all revolutions, those who don’t embrace the new order will have their wealth taken by those who do.

The Compensation Principle

When factories make profits while polluting the water, we insist they compensate those harmed. Economists call this the compensation principle, and it should apply to AI too. In practice, that means that the AI bounty should be taxed, enough to ensure those who lost their livelihoods are made whole. Since automation’s gains far exceed the costs of job loss, everyone can end up better off.

The details can be debated, but the principle should be fixed now. Today, a little over half of Israel’s national income goes to households as wages and benefits; the rest goes to business owners and investors. That split between “labor” and “capital” should be locked in. Not because it is theoretically perfect, but because it is a pragmatic bargain: investors keep their current slice of a fast-growing pie, while households’ share is guaranteed whether they are employed or not.

As AI grows the economy, that share can reach citizens in three ways: wages for those still working; direct income payments to those who are not; and lower living costs as essentials such as transport, AI, child care, and lifelong education become free. This approach gives investors certainty while assuring households that the benefits of automation will not pass them by.

Israel faces a choice. Cling to the old world where humans must work to eat—until AI-powered rivals eat its lunch. Or strike a new bargain: income without employment, automation without resistance, prosperity without precedent.

It’s natural to postpone talk of universal income until unemployment surges—“if it ain’t broken, why fix it?”—but the sequencing matters. Every successful tech company knows: you distribute equity before the IPO, because aligned interests are a precondition to success, not a consequence of it. This is how Israel became a hi-tech powerhouse: by aligning labor and capital, ensuring everyone from the CEO to the cafeteria staff owns a piece of the future they’re creating. The same principle applies to nations. Allow automation to threaten people’s livelihoods, and they’ll turn all Luddite. Guarantee their share of the prize, and watch them become its champions.

This isn’t just good economics—it’s the nation’s inherited values and vision. Maimonides described an idyllic future when “it will be very easy for people to make a living, so that with very little effort they will achieve great benefit,” and “goods will flow abundantly and all delights will be as freely available as dust.” What for generations was a Jewish pipe dream can now be adopted as Israel’s operational plan. Like Herzl said, “if you will it, it is no dream.”

The window is narrow, and global competition is heating up. The first nation to align its entire population behind AI—not through force but through shared prosperity—will move at startup speed, while others crawl at committee pace. Isn’t that what Startup Nation is all about?

Framed this way, the choice makes itself: Grow the pie, but don’t shrink people’s slice. Guarantee income, not jobs. Pay people so AI can do the work.

Daniel Schreiber is the Co-Founder and CEO of Lemonade.