Things are starting to get very interesting. We are seeing a massive shift in how productivity is derived. It is a transition that will only continue over the next 10 years.

At the core, as mentioned in the past, is the fact that the labor-capital equation, which is the basis of our economy, is changing. Actually, this isn't a new concept since it really started in the 1970s.

The percentage of labor as a total component of the economy has steadily declined. Ultimately, workers are taking home less of the total. Of course, this causes many with political agendas to promote ideas that are in alignment instead of solving the problem.

One major challenge is few even mention the problem. Productivity increases at a pace faster than wages due to automation. The next decades is expected to put this concept on steroids.

Sadly, this is an issue which should have been addressed decades ago. Because it wasn't, some of the viable options will be delayed in having impacts.

Post Labor Economics - Universal High Income

Elon Musk and others have mentioned the concept of "Universal High Income". How could something such as this be achieved?

To really grasp the concept, we need to understand the different funding mechanisms a household has. Here is where breaking out of the ideological mindsets is important.

There are three ways in which households get income:

• wages
• capital
• transfers

This is mostly self explanatory.

Wages are just that. Capital is money that comes as a result of owning an asset. This can be dividends, capital gains, rent and royalties.

The one area that might confuse people is transfers. This is money that goes from a government to individual (or family) benefit. Most think of direct payments such as food stamps or UBI. That said, this is more expansive. Things such as public healthcare, entitlement programs, and education are included. So are public highways and libraries.

Here is the important factor: these are the only three buckets to pull from. Hence, if one declines, it is necessary to increase the others. Without that, the household income will decline, if not fall off a cliff.

This has ramifications on the economy since we operate under this basic structure.

Since many developed countries as consumer spending as the basis, we can see, if we follow the path, how the entire system can implode.

So what is the answer?

It is a multi-pronged approach that few are considering.

Multiple Streams of Income

The key is going to be focusing upon the capital and transfer options. Here I have to caution against thinking of this in terms of private versus public. Many will conclude that capital is private (capitalism) whereas transfers are public (socialism). This is where the ideological mindset needs to shift.

For example, the US government passed into law a savings account for children. The government will contribute $1,000 upon the birth of each child born over a 13 year period. In addition, the parents can contribute up to $5,000 each year. The money is locked up until the age of 18, at which time it can be withdrawn.

This is an example of a capital fund. It is financed by the government but can be enhanced by the private sector. Michael Dell and his wife announced they were contributing $6.25 billion to the program.

A program that is often cited is the Alaska Permanent Fund, which pays residents of that state an average of about $1,200 each year. This is a 50 year old fund that is financed through the profits of the oil rights agreements the state has.

In the US, there are 4 such funds at the state level.

Then we can take a look at ESOPs, DAOs, Co-Ops and other innovative financial structures that can provide incomes on a regular basis.

All of this falls under the capital heading. Of course, we didn't even mention things such as private investments and other personal business investments.

As we can see, this is much larger than just UBI.

Universal High Income

Is Universal High Income possible?

The answer is yes. We are likely to see such a massive increase in productivity that the wealth generated will usurp anything the masses can comprehend.

I am on record as saying the economic singularity will be reached in 10-15 years. The contingency is how fast robotic scaling takes place. Nevertheless, I define this as a 30% annual growth rate in GDP, keeping in mind the flaws with that metric. It simply does not work well in a deflationary environment. Even worse, it completely fails when dealing with a "disappearing environment".

This is another factor to consider. So far, the idea is lost on the younger generations. Those who are around 50 or older can comprehend it.

There was a time where we paid for things that are now basically free. Long distance communication is an example. That does not exist on a household balance sheet. Technology made the long distance phone bill obsolete.

Yet, in spite of that, we have not only faster communication, we can also do it in multi-media.

This is a factor to consider.

Economic output is still the driver. With the expected increase, we can see how this is going to affect things. The question remains will we have Universal High Income or will only a few reap the rewards?

To achieve the former steps must be taken. Adopting a wealth mindset is crucial for everyone involved in the discussion. This is no longer public versus private. Creativity and commitment is required. For example, investment in funds on behalf of the citizens is something that must be looked at by every level of government. In today's political environment, that is impossible.

Sadly, politicians only react and this will be the case here. Individuals really need to start talking about this topic to ensure that people start to pay attention.

We are going to see a massive shift in the economy. Those who realize it have time to make the proper moves. Failure to do so will be catastrophic.