Elon Musk says robots will push us to a universal basic income—here’s how it would work

If robots take your job, the government might have to pay you to live

Burger flippers, truck drivers, and cashiers are going to be out of work in the coming decades, thanks to the accelerating pace of robotics and automation technology, some experts warn.

And as large swaths of the population lose their jobs, the only viable solution might be for the government to institute a universal basic income, which would mean paying every resident a fixed amount of money to cover their needs.

There's a lot that's still unclear about universal basic income, but here is what's known so far.

Why universal basic income may be necessary

A 2013 study by Oxford University's Carl Frey and Michael Osborne estimates that 47 percent of U.S. jobs will potentially be replaced by robots and automated technology in the next 10 to 20 years. Those individuals working in transportation, logistics, office management and production are likely to be the first to lose their jobs to robots, according to the report.

In less developed countries, the potential for job loss is more severe. A 2016 analysis from the World Bank estimated that roughly two-thirds of all jobs in developing nations around the globe are susceptible to replacement by automation.

As the global workforce modernizes and low-skilled workers lose their jobs, momentum builds around the idea of a universal basic income, or a fixed, regular payment that all residents, no matter their employment status or wealth, would receive from the government.

There is a pretty good chance we end up with a universal basic income, or something like that, due to automation.
Elon Musk
Founder and CEO of SolarCity, Tesla, and SpaceX

Elon Musk, the founder and CEO of SolarCity, Tesla, and SpaceX, recently declared that a universal basic income was a reasonable next step for the U.S. "There is a pretty good chance we end up with a universal basic income, or something like that, due to automation," Musk told CNBC. "Yeah, I am not sure what else one would do. I think that is what would happen."

The entrepreneur and futurist is not alone in his sentiments. While no country has fully implemented a universal basic income yet, individuals are experimenting with a version of the idea, as are several Scandinavian nations.

Where universal basic income stands worldwide

Finland is preparing to test out a universal basic income. Currently, the country is soliciting feedback, and the actual test is expected to be carried out in 2017 and 2018 with results available by 2019, according to a written statement from the country's Ministry of Social Affairs and Health. As part of the study, 2,000 individuals will receive a payment of 560 euros ($598) per month, according to a press release.

Activists in the Netherlands collected 60,000 signatures requesting that the government consider a referendum on a universal basic income. The Dutch group, which calls itself Basisinkomen 2018, promotes the idea of a basic income of 1000 euros ($1067) per adult and 200 euros ($213) per child.

"We are in favor of a basic income because everybody has enough security to feel free and to make own choices. To care or to have an own business. To work or to volunteer," writes Johan Luijendijk, the leader of the Basisinkomen 2018 movement, in an email with CNBC. "When someone can live starting from own talents and callings, it's better for everyone. With basic income we can cut social security and huge bureaucracy."'

Meanwhile, Switzerland considered instituting a universal basic income of 2,500 Swiss francs ($2578) a month this summer. Voters ultimately rejected the plan.

Where universal basic income stands in the U.S.

In the United States, universal basic income remains a long shot.

"Obviously, it's politically not feasible. It's not something that is going to happen in the near future here in the United States," says Martin Ford, the author of the New York Times bestselling novel, Rise of the Robots: Technology and the Threat of a Jobless Future, in a phone conversation with CNBC.

"When it comes to building social safety net programs we are not on the forefront, that is for sure. We are the worst of any industrialized country. I am pretty sure we are not going to lead the way," says Ford. While President Obama was able to push through a version of universal health care, it is likely to be repealed under President-elect Trump.

This idea of giving people money for nothing is a real adjustment for people. It goes against our basic values.
Martin Ford
Author of 'Rise of the Robots: Technology and the Threat of a Jobless Future'

Countries like Finland, Switzerland, and the Netherlands are more likely to see a universal basic income before the United States, the author says, because they are smaller and more homogeneous. They are also already more supportive of government services.

"When you have more racial divisions and so forth, politically it will be harder to pass strong safety net measures," says Ford.

"This idea of giving people money for nothing is a real adjustment for people [in America]. It goes against our basic values, a Protestant work ethic and all."

That said, there is currently one privately-funded, short-term pilot program being run by the Silicon Valley accelerator, Y Combinator, in California. The goal is to see how people react in the U.S., says Sam Altman, President, Y Combinator Group. The program gives "unconditional" payments to selected residents of Oakland. The administrators write, "we hope basic income promotes freedom, and we want to see how people experience that freedom." If it is successful, the plan is to follow up the pilot with a larger, longer-term program.

"I'm fairly confident that at some point in the future, as technology continues to eliminate traditional jobs and massive new wealth gets created, we're going to see some version of this at a national scale," says Altman, in a blog post about the project. "50 years from now, I think it will seem ridiculous that we used fear of not being able to eat as a way to motivate people."

What a universal basic income would entail

If the U.S. were able to set the political and cultural challenges aside and implement a universal basic income, most estimates Ford has seen float in the $1,000 per month range.

The goal would be to keep the hand-outs low enough that citizens would remain incentivized to keep working, perhaps part-time or by starting their own businesses.

"Some day in the far future we might have an automatic economy where robots and computers are doing all the work. Right now that's a long way out. We don't have that and we are not going to have that any time soon so we don't want to destroy that incentive to work," says Ford.

When you have a safety net, people will take more risks.
Martin Ford
author of Rise of the Robots: Technology and the Threat of a Jobless Future

Determining exactly where that line would lie is a delicate task that will require testing and experimentation.

Even if provided with regular payments from the government, Ford predicts that America's workforce won't give up altogether. "The vast majority of people will do more. They will want to work if they can. They might work part time; maybe they can only find a part-time job. That combined with the basic income will be enough. Or maybe they will start a business."

Indeed, giving individuals a safety net could actually spur creativity and innovation. "A lot of people might do more entrepreneurial things. One thing that they have shown is that when you have a safety net, people will take more risks," says Ford. "It could actually result in a more dynamic economy."

"Of course," Ford adds, "some people, hopefully not too many, will do nothing. They will stay home and play video games, they will take drugs, whatever. That is unavoidable, that's part of the cost you are going to have to accept."

How governments could afford to pay a universal basic income

Paying to help support every resident is a mammoth undertaking. If each of the 319 million people living in the U.S. right now get $1,000 a month, it would cost $319 billion a month to pay a universal basic income. That's nearly $4 trillion a year.

In the Netherlands, the universal basic income would be paid for with revenue from a number of taxes, including a 30 percent tax on business profits, tax on air pollution, and a higher tax on "big fortunes," according to Luijendijk. Also, the Basisinkomen 2018 advocacy group argues that the universal basic income would be affordable because it would replace other government support programs, like social security.

The Dutch proposal to use universal basic income as a replacement for other social welfare programs is unique, though. The thought-leaders at Basic Income European Network (BIEN), which in 2004 expanded its scope to be include the whole world, agreed at its most recent general assembly in Seoul in 2016 that universal basic income should not be a replacement of other social services or entitlements, but instead should work in combination with other services, according to Karl Widerquist, the founder of Basic Income News and an Associate Professor at SFS-Qatar, Georgetown University.

Universal basic income "is not 'generally considered' as a replacement for the rest of the social safety net. Some see it primarily as a replacement. Others see it as a supplement, filling in the cracks," says Widerquist in an email with CNBC.

"Some people who want it to be a replacement try to create the impression that it is generally considered to be so. But that's not accurate."

Humanoid robots made by Japan's telecom giant Softbank.
By Kazuhiro Nogi | Getty

Most proposals for a universal basic income suggest making the actual payment tax-free, says Widerquist. He suggests that it could be possible to tax the universal basic income payments to higher net-worth individuals. The government could also raise taxes on their other sources of income.

Either way you look at it, "it's going to be expensive," says Ford. In some way, shape or form, taxes will have to increase. Because automation contributes to the wealth gap, Ford estimates that those individuals at the very top of the new economy would have to pay more.

"What we are seeing is that technology is driving inequality. A few people, very wealthy people, especially people who own lots of capital will do extraordinarily well because robots and technology are capital, right? A few people are going to own most of that. We are going to have to tax those people more," says Ford. Other potential sources of tax revenue could be tax on capital wealth, consumption, or carbon, he suggests.

Regardless, says Ford, "At some point we will get to a point where the cost of not doing this is greater than the cost of doing it. And at that point maybe it becomes easier."

Elon Musk: Robots will take your jobs, government will have to pay your wage