Two economists, Gerry Tsoukalas and Brett Falk, warn that companies could be self-destructing by replacing workers with AI and eroding consumer demand.
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Economists are warning that AI could push companies into a wave of layoffs that ends in self-destruction.Gerry Tsoukalas and Brett Falk, authors of "The AI Layoff Trap," a research paper published by The Wharton School, said CEOs can become trapped in a race to automate that erodes consumer spending on which their businesses depend."The main question we wanted to understand is who's going to be left to buy products if everyone gets automated and replaced by a robot?" Tsoukalas, a senior fellow at Wharton, told journalist Katty Kay on the New Normal podcast that was posted on Monday.The paper describes a classic economic dilemma: A single company may recognize that laying off too many workers reduces demand for its products, but in a competitive market, every company has an incentive to automate, because failing to do so risks losing to rivals."So no matter what you do, no matter what the other companies are doing, your best strategy is to adopt as much of this technology as possible," Tsoukalas said. "And that's called a dominating strategy in economics."The warning comes as global institutions raise similar concerns about AI's impact on work. In a July report, the World Economic Forum said traditional reskilling programs are struggling to keep pace with AI-driven disruption, adding that jobs are changing faster than workers can be retrained and that it's not economically realistic to keep retraining a large population."The global conversation about AI and the future of work has been asking the wrong question for a decade," the report said. "We keep asking which jobs will survive. We should be asking whether 'jobs' is still the right unit of analysis at all."
