Economists, investors pitch Washington on AI-driven job loss safety net
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America has no plan for how to manage an AI wipeout of jobs. Now, there are calls for lawmakers to design a safety net before any crisis emerges.
Why it matters: No one knows whether and how fast AI-related job displacement will ripple across the economy. Massive labor market disruptions of years past — including the "China shock" — had long-term economic and political consequences.
- Some investors, former policymakers and economists are trying to draft the fiscal architecture that could help avoid a repeat.
- The idea: Design the response before the shock, rather than try to hash out a panicked plan while it's underway.
Driving the news: In his annual shareholder letter this week, BlackRock CEO Larry Fink warned of the "real risk" that AI widens wealth inequality — with huge rewards for those on the inside.
- The question is what happens to Americans who see only the downside, including from AI-related job displacement that many believe will create an all-out crisis.
- "For decades, many societies have equated success with a university degree and a white-collar path. As technology reshapes parts of that landscape, we need a broader conversation about opportunity, dignity, and the value of different kinds of work," Fink wrote.
- "What are we going to do about that?"
Catch up quick: Gina Raimondo, the former Commerce Secretary, offers one set of solutions: "What we need is a new grand bargain between the public and private sectors," she wrote in the New York Times.
- This is a world "in which employers are held responsible for defining skills essential to the AI economy and for creating pathways into jobs and government invests in the training, incentives and safety nets" that get workers into them, she wrote.
The intrigue: AI investor Alap Shah, who co-authored Citrini Research's viral AI apocalypse paper that spooked financial markets last month, is out with a new post.
- It lays out a policy framework, including plans that would be triggered in a worst-case economic scenario.
- The first proposal suggests foundational fixes to prepare for a changing economic landscape, including making benefits portable across jobs.
- It also suggests a new corporate tax mechanism whereby firms that heavily rely on human workers would pay less in corporate taxes. Companies generating huge output with fewer employees would pay more.
It also proposes a "circuit breaker" plan that would set off automatic stabilizers if AI-related job displacement spikes — measured by labor's share of GDP. They include wage insurance and expanded income support tied to labor market stress.
- There's also the "backstop" — a more extreme plan if consumer spending collapses, there are widespread defaults on household debt, and the financial system is under strain.
- It broadly flicks at an income replacement plan, mortgage forbearance and investing a portion of corporate taxes on behalf of every American.
- That would come alongside progressive corporate tax rates tied to AI-displacement metrics: "The companies seeing the most margin expansion pay the highest rates. If margins are expanding while headcounts collapse, the tax goes up. If the labor market recovers and labor share climbs back above the threshold, rates step back down," Shah wrote.
Between the lines: It's difficult to design a plan for a crisis that could take any number of shapes.
- "Should nothing get passed, and the scenario we're worried about comes to pass — is it going to be like Armageddon, and we're never going to figure it out? No, of course not," Shah tells Axios.
- But then it will be "sort of panic legislation, which is ultimately not how you want to do this," he adds.
It's all well and good to brainstorm bold new ideas for the social safety net in an era of AI. But it could miss the value of relying on — and further bolstering — tried-and-true programs meant to help people grapple with lost jobs.
- So argues Martha Gimbel, executive director of the Budget Lab at Yale and a former Biden administration economist, in a piece titled "Don't get fancy with your labor market fixes for AI."
- The unemployment insurance system, while sometimes clunky, "is flexible, automatic, and responsive to a range of shocks," Gimbel wrote in The Argument. "UI already exists in all 50 states and has a strong track record of responding to technological disruption in the labor market."
Zoom out: There is much we don't know about how big the AI jobs impact will be, which workers it will hit hardest and how quickly new types of jobs will be created.
- For example, will early-career workers prove the most resilient and able to adjust? Or will they be the most vulnerable, because the technology can more easily replace their labor?
- Historically, there have been plenty of predictions about a technology causing specific job losses that proved to be incorrect, such as that the ATM would eliminate bank teller jobs. (Turns out, it was a later innovation, smartphones and mobile banking, that did that.)
What they're saying: "When you're talking about an uncertain shock, you want to prioritize policies that can flex to any state of the world," Gimbel tells Axios. "Instead, we have seen some people start to lock into ideas that only work for one version of it."
