AI Jobs Shock

Hi, welcome back to the channel. In today's episode I want to talk to you about artificial intelligence and whether the technology that's supposed to make us all richer could actually leave millions of people struggling to earn a living. Hundreds of billions of dollars are being invested into artificial intelligence infrastructure right now. Businesses are getting very excited about increased productivity, investors are looking for higher profits and we keep hearing about how this technology is going to transform the global economy. But there is a rather uncomfortable question underneath all of that excitement. If artificial intelligence allows companies to do more work with fewer people, what happens to everybody who's no longer needed? Because saving money on salaries sounds fantastic if you own the company. It sounds rather different if you're the salary that's being eliminated. This is already happening. Barclays Bank recently announced plans to cut around 5,000 jobs. American Express. It's planning to eliminate around 3,500 positions and these are profitable businesses looking to become more efficient. So we could end up with rising profits, rising share prices and economic growth alongside higher unemployment and falling living standards. Could investors be celebrating the very same changes that are destroying somebody else's career and lifestyle? That's what I want to look at in today's episode. But before we get into the details, if you're enjoying my videos, could you please give this one a thumbs up? Please subscribe to the channel if you haven't done so already, trying to get to 500,000. So if you could help out, that would be great. Hit the hype symbol if it's available to you. And why not have a look at my membership scheme where you get early access to my videos and help to support the channel. And before we talk about the future impact of AI, let's have a look at what's already happening with unemployment, because we already have significant problems in many economies. This table shows the latest available unemployment figures for the G20, the 20 notionally largest economies in the world. And you can see that two countries are already in double figures. South Africa, the unemployment is at 33.6%. That means around one in three people in its labour force is unemployed. And Spain is now above 10%, having increased from just under 10% last month. Then we have a whole group of economies where unemployment is sitting at 5% or higher, including Turkey, France, Argentina, Canada, Germany, Italy, Brazil, China and India. France is at 8.3%, the highest of these countries. Canada 6.5%, Germany 6.4%. These are major developed economies with substantial numbers of people already out of work and looking for work that are unemployed. Further down the table. The United Kingdom, Australia and Indonesia are around 4.7% and the United States is at 4.2%. Now, even those lower percentages represent large numbers of people without employment. If you compare the latest readings with the previous figures, you can see increases in many of the economies, including South Africa, Spain, Turkey, France, Argentina, Canada, Italy and the United States. So this is the starting position. We already have millions of people. Out of work, looking for jobs, and we have yet to see how far businesses will take AI and what its full impact on employment is going to be. The question is what happens when companies that would previously have recruited more people discover that they can grow without needing to do so because they can now use AI. So let's start off by talking about Barclays because its announcement illustrates the issue. The bank recently reported quarterly profits of £2.3 billion which are up 12% compared with last year. Alongside that increase it announced plans to reduce its workforce by approximately 5,000 people with around 1,000 positions already removed. Technology investment, simpler processes and AI are helping the bank to improve efficiency. Management specifically identified fewer developers as one consequence of AI making its people more productive. Now just think about what that means. Software developers have spent years acquiring skills that businesses need. Now the technology that they help to create is allowing employers to operate with fewer of them. Quite ironic really. And this is a bank reporting higher profits. It's improving its financial performance whilst continuing to reduce its workforce. American Express provides another example. The company has announced plans to eliminate around 3,500 positions while raising its full-year profit forecast. Management wants a more agile and efficient organization. Its restructuring is broader than simply replacing employees with AI but it illustrates the pressure on jobs even when a business is performing well. For shareholders these announcements can represent an improvement. Lower costs mean higher margins And more money available for investment, dividends, or share buybacks. So the share prices generally go up. For the employees affected, those savings mean losing their jobs and their income. Now extend that thinking across banking, insurance, administration, customer support, software development, and professional services. If AI allows an existing team to handle more work, management has a choice. It can expand the business using the same number of employees or maintain its existing output. With a smaller workforce, either way, it needs fewer people than it would otherwise have employed. And AI does not need to perform every part of a job to create that outcome. Imagine a department with 10 employees. They process documents, answer queries, prepare reports and check information. New software takes over enough of those tasks that management decides seven employees can handle the workload. The department still exists. Human judgment is still required. But three jobs have disappeared. Those three people now need another employer and if other businesses are introducing similar systems they may also be reducing their workforce or cutting recruitment. That's where a productivity improvement for an individual company can become a much bigger problem for the economy. The International Labour Organization estimated in its 2025 assessment that around one in four jobs worldwide had some degree of exposure to generative AI. That means tasks within those jobs could be affected Now it's not a forecast that a quarter of all jobs are going to be wiped out by AI but it shows how widely this technology could reach across the workforce and I think things are changing rapidly it could actually be more than that and the impact extends beyond redundancy announcements. The company can stop replacing employees who retire, it can cancel vacancies, reduce its use of contractors or decide that its next phase of expansion doesn't require any additional staff. There might never be an announcement saying that thousands of jobs have been eliminated, like we've heard from Barclays and American Express, but the jobs simply may never become available. For somebody trying to find employment, that is a serious problem. They send applications, receive rejections, and discover that every available position seems to attract an enormous number of candidates. Younger workers are particularly exposed to reduced recruitment. Stanford researchers examining American payroll data found that young employees in highly AI-exposed occupations had fallen behind their peers in less exposed work, with reduced hiring appearing to be an important mechanism. Now I actually think that the issue of youth unemployment is so big that I'm going to cover that in a separate video so please watch out for that. But this matters to everybody because a weaker recruitment market also makes it harder for experienced workers to move between employers. Now the argument in favor of all of this technology is that it's always changed employment and that new jobs will emerge you know we will all adapt and that is probably true. AI will create opportunities Building the infrastructure requires workers, businesses... We'll develop new products. Some employees will become more productive and more valuable, get paid more. Cheaper services can also attract additional customers, allowing companies to expand. But the new jobs created need to be accessible to the people losing the old ones. If you lose an administration job in your 50s, an increase in demand for advanced computing specialists doesn't automatically solve your problem. You still have to pay your rent or your mortgage. You still need to buy food and pay the electricity bill. Your financial commitments don't pause. while the economy works out what your next career move should be. And even if you find another job, it may pay considerably less. And this brings us to the bigger question about economic growth. We tend to assume that if the economy is growing, people must be getting better off. But GDP measures output. It doesn't tell us how securely that income is distributed between households. If technology allows businesses to produce more with fewer working hours, output can increase without employment increasing alongside it. The benefits could reach employees through higher wages or shorter working weeks, but they could also be concentrated in higher company profits. So we could have huge investments in data centres supporting growth, businesses reporting stronger margins, and shareholders enjoying greater returns, while workers in affected industries struggle to maintain their income. That's how the headline economic figures could improve while life becomes harder for a substantial number of people. And you don't have to lose your job to feel the consequences. If there are fewer vacancies in your profession and more people competing for them, your bargaining position weakens. It can become harder to negotiate a pay increase, harder to change employers, harder to challenge deteriorating conditions when you know that finding another position could take months or maybe is just impossible. Your employer might benefit from substantial improvements in productivity while your salary doesn't move. Then consider someone who loses a well-paid job and eventually finds work on a much lower income. They are counted as employed again but their household finances have deteriorated, their spending power has fallen and their plans for a retirement may have been pushed back. The unemployment rate alone does not capture that loss of living standards and this is where the consequences spread beyond people directly affected. A salary pays for shopping, restaurants, holidays, home improvements and countless other services. If that salary disappears, Those businesses lose revenue too. The local cafe. Doesn't need to replace its employee with AI to suffer from the office next door, reducing its workforce. A business saving money on payroll may be making a rational decision for itself. But if enough businesses do the same thing, the resulting pressure on household spending could affect demand across the whole economy. Now, there is an obvious question here. Who buys all the additional goods and services if too many potential customers have lost their income? Some of the savings will return to the economy through investment. Lower prices and shareholder spending, how much reaches ordinary households and how quickly will help determine the outcome. Governments also face a financial challenge. Employees pay income tax and social contributions. Their spending generates further tax revenue. If they become unemployed or move into lower paid work, some of those tax receipts will reduce. At the same time, demand for benefits, social security, retraining and other support can increase. Higher company profits could provide additional revenue through tax, but there's no automatic guarantee that the government losing taxes from employment will collect an equivalent amount from the businesses benefiting from automation. And many governments are already struggling with large debts and pressure on public services. A sustained deterioration in employment would make those problems harder to manage. And there is a personal cost here as well. Work gives people independence, routine and the ability to make plans. Losing a job can affect their confidence, relationships and health. When we talk about productivity improvements, it's easy to overlook what happens inside the household behind the payroll savings. Telling people to retrain is easy to say. Providing an affordable route into secure employment with a salary that supports their existing commitments is considerably more difficult. For me, this is where the discussion needs to go. Businesses have a powerful incentive to introduce technology that reduces costs. Investors have a powerful incentive to support companies that can improve profitability. But we need equally serious attention paid to the people whose income is threatened by those changes. Will productivity gains support better wages? Will employers invest in helping staff move into different roles? Will new industries create enough suitable employment? Those questions will determine whether this technology improves living standards widely or leaves the gains concentrated amongst a smaller group. We can't yet know how large the eventual employment impact will be, but the incentive for businesses to operate with fewer people is already clear. And that's the concern I want to leave you with. We're investing enormous amounts of money in systems designed to perform more of the work that people currently get paid to do. We're excited about what that could mean for productivity, company profits and share prices. But have we properly considered what it could mean for salaries, careers and the ability of ordinary households to support themselves? This could be an extraordinary digital revolution. It could also produce a painful employment shock if the jobs being removed are not replaced by sufficient new opportunities. An economy can report growth, but the benefits may pass millions of people by. So I wanted to make this video really just to put the AI revolution into perspective and talk about what it means from the other side of the coin. It's not just all about who owns the companies and can they make more profit and improve their productivity. What happens to all the people who are currently working in jobs that are going to be replaced or made redundant because of AI? Where are they going to go and what are the implications of that, not just for the economy but also for society? So hopefully you've enjoyed today's video, you found it useful, informative and most importantly thought-provoking. If you've liked what I've said then please give me a thumbs up, please subscribe to the channel if you haven't done so already, hit the hype symbol if you can see it and have a look at my membership scheme If you're interested. Thank you so much for the people who've already signed up. If you're a member or a patron, thank you for that long term support. Really keeps me focused. If you bought me a coffee or sent me YouTube super thanks. Thank you for that generosity. Really appreciate it. I'll see you again next time.