The Automation-Demand Collapse Law suggests that automation could lead to economic collapse if left unchecked. This law states that when the profit share of income surpasses a critical threshold, aggregate demand begins to decline, leading to a self-reinforcing economic contraction. Economist Daron Acemoglu notes that each new robot reduces employment by 0.2 percentage points and wages by 0.42 percent, highlighting the potential severity of this issue. Sectors like fast food, manufacturing, and transportation are most vulnerable to automation, which could replace up to 100 million U.S. jobs within a decade.
The economic consequences of automation are already visible, with stagnant wages, record profits, and declining demand being symptoms of this collapse. The IMF's Kristalina Georgieva emphasizes the need for regulatory and ethical foundations to address AI's impact, while Senator Bernie Sanders proposes a "robot tax" to offset social costs and fund retraining programs. However, some experts argue that AI will create new jobs, albeit with a potential skills gap and unequal access to opportunities.
A Yale University study suggests that AI hasn't significantly disrupted the U.S. job market yet, attributing job slowdowns to macroeconomic shifts. Nevertheless, the Automation-Demand Collapse Law warns that without intervention, automation could lead to a catastrophic economic collapse. Redesigning the economy to sustain purchasing power, implementing policies like universal basic income, and investing in education and retraining programs could mitigate these effects.
To address the looming crisis, it's crucial to develop and implement policies that prioritize workers' welfare and ensure equitable access to opportunities. By acknowledging the potential risks and opportunities of automation, we can work towards creating a more resilient and inclusive economy. The future of work depends on our ability to balance technological progress with social responsibility and economic sustainability.
