Your Job is at Risk from Artificial Intelligence… but not for the Reasons You Think

It’s three years since the public launch of ChatGPT, and the rapid roll-out of artificial intelligence apps since then has amplified fears that AI will lead to massive job loss as human workers are replaced by algorithms. For many concrete reasons, this is unlikely. However, the exaggerated financial hype associated with AI investments poses a more imminent threat to employment. In this commentary, originally published in the Toronto Star, Centre for Future Work Director Jim Stanford explains how the stock market’s mania for AI assets is inflating a financial bubble that will inevitably pop, with major consequences for the real economy.

You Won’t be Replaced by an Algorithm, but you Could be Disemployed by a Financial Collapse

By Jim Stanford

Many people worry that artificial intelligence (AI) threatens their future job security. But this concern is largely misplaced. Most AI applications have dubious productive merit. Few algorithms can do tasks actually performed by humans. Many AI users are students cheating on their homework, or bored commuters creating silly videos.

And like previous technologies, AI facilitates new functions and capacities that will likely offset whatever jobs are eliminated by the technology. Without doubt, right now AI is currently creating more jobs than it is destroying.

However, there’s another way AI may indeed threaten your job – and it’s got nothing to do with an algorithm replacing you. Since ChatGPT launched three years ago, an unprecedented financial bubble has inflated in AI-related investments, concentrated in the U.S.

Fueled by speculative hype, the share prices of AI-adjacent companies have soared to valuations unprecedented in the history of the stock market. The top seven alone (the so-called Magnificent Seven) are worth over $20 trillion (U.S.), accounting for 35 percent of the combined value of the S&P 500.

This bubble magically creates trillions in paper wealth, in turn fostering all kinds of risky gambits. Financial investors take on debt to buy AI-related assets, pushing share prices even higher. Tech companies spend enormous sums on data centres, computers to put in them, software to operate the computers, and carbon-belching power plants to run it all. Incestuous transactions and financial engineering within and between the big AI firms artificially inflate revenues even further, pouring gasoline on an already-blazing market.

Meanwhile, consumer spending by rich Americans (who think they are even richer thanks to soaring portfolios) is the biggest source of new demand in the U.S. economy. Inflated by sky-high AI stocks, stock market equity now accounts for one-third of all U.S. household assets (most held by the richest tenth of the population).

This mania is reminiscent of the dot-com bubble that popped in 2001 – causing a short recession in the U.S., and laying waste to much of Canada’s then-promising tech sector (anyone remember Nortel Networks??). As usual, the stock market’s hyperactive search for the next big thing creates a bandwagon effect that vastly outstrips any realistic cost-benefit analysis.

No major AI services are currently profitable, and tech executives now publicly doubt the trillions they are investing will ever generate an acceptable return. Indeed, every query submitted to ChatGPT or other AI apps generates a further loss, since the costs (including soaring U.S. electricity prices) exceed the revenue.

These ethereal valuations also badly distort Canada-U.S. economic comparisons, even more than usual. Conservative commentators habitually post memes showing bemoaning that Canadian capital investment lags the U.S. But the AI frenzy now accounts for most of that apparent U.S. advantage. Genuine manufacturing investment and employment in the U.S. is falling, not growing. Canadians will soon be grateful we didn’t buy into this speculative mania as much as our southern neighbours.

If I could predict exactly when the AI bubble will burst, I’d short the stock market and make billions (which I would promptly donate to the activists fighting to protect privacy against creeping AI surveillance). I can’t do that. But I am completely certain that the financial exuberance on full display in America right now has no real economic foundation, and will eventually come crashing down.

When the AI bubble pops, it will cause a recession and major job losses in the U.S. Overheated capital spending on data centres and power plants, and excessive luxury consumption by those who’ve been made rich (on paper) by the speculative flight of the market, will quickly shift into reverse. That downturn will spill over into Canada – although not as fully as in past downturns, since our exposure to the U.S. market has been moderated (a silver lining to Donald Trump’s trade war).

This is the real reason workers should fear AI – or, more precisely, fear the misdemeanours of the tech bro’s and financial wizards whose profit-seeking is exposing us to massive, needless risks. The AI algorithms cannot perform most of the useful work we do every day. But in a world dominated by greed and speculation, they could nevertheless put millions of us on the soup line.