There is a lot of news lately about how AI will affect the labor market. Essentially, it is stated that AI is going to replace humans as employees. A recent report by investment bank Goldman Sachs states that AI could replace the equivalent of 300 million full-time jobs. This is most likely to happen, as Google is reportedly planning to lay off up to 30000 employees to be replaced by AI. The conclusion here is that in the long run, more and more people are losing their jobs, and there will be fewer jobs available than people living.
This also means that there will be fewer people going to buy stuff, therefore less demand for goods, especially luxury goods. Less demand for products and higher productivity reducing the cost to produce goods leads to a decrease in the price for buying goods. That’s a good thing, but still, people won’t afford them because they can’t earn money to spend. So in the long run, the solution will be a universal basic income, where people will receive money to cover their basic needs. There isn’t much left for buying luxury goods though. Getting a job is not about higher education anymore, it’s about acquiring a unique skill that is not replaceable (yet) by AI or a robot. Still, those employees are fewer in quantity than before. The majority of people won’t have a job in the future. They won’t generate any benefit to society in a capitalist system. There will be a small number of super-rich and highly-paid individuals, and the rest without any money to spend. There won’t be a gap in between, which leads consequently to a two-class system.
From history, we know that this kind of social system won’t last for long until there will be unrest. That is the long-term scenario of what is going to happen without any measures. One country that comes to mind which will face significant turbulence in the near future is China. The youth unemployment rate in China has reached a record high, with the jobless rate for people aged 16 to 24 hitting 21.3% in June 2023. These young people are mostly highly educated individuals with a university degree. Imagine what happens when, in addition to this group, there are layoffs caused by AI replacement. China is, and must be competitive against the US, and in order to maintain an advantage, they need to use AI.
Imagine a huge country like China with more than 1 billion people and half of them being unemployed. Civil unrest is expected. There is more to consider. What is more dangerous to a regime or a dictatorship is an army of educated people who have already gotten a taste of having enough money to spend. So, China will face immense challenges in the coming decade from internal turmoil. The Taiwan issue is actually laughable compared to what they are going to face in the near future.
For countries like Japan though, AI is going to be a second raising. The Japanese population is decreasing like all industrialized nations. But unlike other countries, they can’t compensate it with immigration because their culture has never been very open to foreigners. The productivity boost by AI will help them to grow their economy again. What was an issue before, that Japan does not have enough workforce to keep their economy up, becomes an advantage.
The lack of workforce due to the decreasing population in industrialized countries can be compensated by AI. In the long run, though, there will be a gap between the poor and the rich. A capitalist system where money is needed to acquire goods, but to get money one needs to have a job in the first place and there are no jobs available, just won’t work.