Surviving the AI shock

We are seeing the dawning of the age of artificial intelligence (AI). While this holds great promise for the world economy, it also holds the possibility of seeing political crises, if not managed properly.

The biggest promise of AI is the possibility of tremendous growth in productivity. Productivity is the amount of goods and services produced per worker. This is also the most important measure of a country’s overall economic success. Slow productivity growth has meant poor growth in average incomes, which in turn has fueled much of the political turmoil manifested across the globe in the last generation.

In the Philippines, slow productivity growth has kept average income extremely low. The main reason is that our businessmen have resorted to low wages as a means of competing, rather than investing with the objective of increasing productivity.

Even now, most businessmen are resisting the increase in minimum wage. The Philippines at this point is clearly unprepared for the age of artificial intelligence. If we want to see what the future will hold, then we should examine how AI is impacting the United States today.

Despite the economic promise of AI, it is also creating possible political turmoil. This is the result of the potential destruction of jobs at a faster rate and a wider scope than the government and business sector can reasonably address. This is to be expected.

Innovation has always reduced labor demand for some goods and services. Sometimes, the innovation did not result in widespread loss of existing jobs but rather in the disappearance of old jobs. Innovation often permanently reduces demand for certain jobs. Here are some examples of people who lost their jobs in the past due to new inventions. These included people producing horse-drawn wagons when the automobile was invented, typists with typewriters when the use of personal computers became widespread and, in some progressive countries, workers on assembly lines are being replaced with robots.

This disappearance of jobs is a fundamental feature of productivity growth. In fact, the disappearance of jobs, companies and sometimes entire industries is often considered a necessary condition for creating new jobs, higher incomes and greater wealth.

However, this phenomenon can also spark political resistance. During the Industrial Revolution, skilled British textile workers protested the invention of new machines, raided factories, destroyed power looms and knitting frames.

Recently, the flood of low-cost Chinese exports in the United States reduced demand for many American goods, leading to the loss of hundreds of thousands of US manufacturing goods. This actually led to the election of Donald Trump, who promised to impose severe tariffs on Chinese imports.

In many western countries, evidence is building that AI is reducing labor demand in many industries, causing unemployment in certain business sectors.

The AI shock, however, may be different from the so-called “China shock.” The coming AI shock may prove more destructive to present industries. It is also believed to be affecting the young, rather than the old, the educated rather than the less educated and the full sweep of industries rather than mainly manufacturing.

In the Philippines, for example, there is mounting fear that AI will have negative effect on employment in the outsourcing industry which is a major source of employment for young people with college degrees.

If we look to the US, AI has started affecting employment in major companies. For example, in October 2025, Amazon announced the elimination of 14,000 jobs along with plans for further cuts. Job cuts announced across the US in 2025 total 1.2 million jobs. Increasingly, companies cite AI as the reason for these massive layoffs. In June 2025, Amazon CEO Andy Jassy warned that the company expected to “…reduce our total corporate workforce as we get efficiency gains from using AI extensively.”

In January, Bank of America CEO Brian Moynihan predicted staff reductions as the company pursues “…operational excellence and application of new technologies, including AI.”

Researchers have found that workers between the ages of 22 and 25 are in occupations most vulnerable to AI such as software developers and customer service representatives.

This year, the jobless rate for recent college graduates in the US and China are higher than the overall population.

Business leaders all over the world are already bracing for the impact of the AI shock. Forty-one percent of approximately 10,000 global executives polled in a 2024 World Economic Forum said they expected AI to reduce their workforces by 2030.

All these developments due to a coming AI shock make for a fertile ground animated by backlash to the AI revolution. Younger, more highly educated workers around the world are already voicing dissatisfaction with the economic, political and social system in which they are growing up.

Already, the AI transition has become unpopular even before it has begun in earnest.

Countries all over the world are looking for ways to survive the AI shock.

*      *      *

Email: [email protected]