AI Will Create Jobs, Not Kill Them

America's rate of fiber optic penetration is half the OECD average

The global artificial intelligence (“AI”) arms race heated up when China’s DeepSeek was released to the public on January 20.  A few days later, Alibaba released its AI which allegedly surpasses DeepSeek across the board.

Predictably, America’s media industrial complex was stirred into a frenzy.  Calls to ban and regulate AI were trumpeted from the ramparts.  CNN claimed that AI would cause catastrophic job loss.  Meanwhile, Bloomberg reported that Wall Street may shed up to 200,000 jobs as AI replaces humans.

What is the elite’s preferred solution to this alleged problem?  The same dead horse that has been trotted out at every twist and turn during the last century: more government.  In this case, a universal basic income.

Despite the media’s histrionics, the sky is not falling.  AI will not cause mass unemployment.  Instead, AI offers economic and employment opportunities of a magnitude not seen since the dawn of the Industrial Revolution.  The simple application of logic, and a brief survey of economic history, prove this point.

Fire has proved / for men a teacher in every art

The question of whether any new technology—be it a more supple pencil eraser or a superintelligent AI—will make or break jobs can be answered by looking at the relationship between two factors, productivity and output.

Productivity simply refers to how much “stuff” can be made during a specified time.  “Stuff” can include anything from automobile chassis to lines of code.  Meanwhile, output refers to the total amount of stuff that is made.  That is, how many automobiles are made, or how many lines of code are written.

The relationship between productivity and output determines how many people are employed making stuff.  As productivity increases, less labor is needed.  Conversely, more output requires more labor.  Although this may sound confusing at this stage, a practical example should make the logic clear.

Let us pretend that you run a software company.  You employ 100 engineers.  These engineers produce 1,000 useful lines of code per day.

You are a savvy business owner and see the potential of AI.  You buy a program, and you are happy to see that it makes your engineers 10 percent more efficient.  This means that you can write the same amount of useful code with 91 engineers.  As a result, you lay off 9 engineers.  In this case, AI destroyed jobs.

But remember, productivity is only one side of the equation. Now, let us pretend that your company made a hit app last year.  To capitalize on the success, you decide to make a sequel app.  To do this, you anticipate that you will need to write 1,100 lines of code per day—an increase of 10 percent.  As such, you will need to rehire those 9 engineers that you laid off.  Increasing output creates jobs.

Overall, the number of people that your company employs is determined by the dance between productivity and output.  If both factors increase equally, then employment is not impacted whatsoever by productivity improvements—no matter how disruptive the technology may seem.

The takeaway from this logic is that AI will only destroy jobs if AI makes workers more productive at a faster rate than output grows.  This is unlikely, because it is in human nature for our reach to exceed our grasp.  That is, our desire to consume always outpaces our ability to produce.

If that philosophical maxim is unpersuasive, then a brief survey of economic history proves this point.

Rumplestiltskin’s Spindle

Economic growth has very little to do with abstract concepts like “supply and demand” or “comparative advantage”.  Instead, history shows us that economic growth is little more than the application of human creativity and invention, the story of technology and how we use it to make more and better stuff.  And even more importantly, history teaches us that there is no limit to our desire for more output.

Consider the printing press.  In 1440 Johannes Gutenberg, a German goldsmith, built a printing press with moveable type.  What was special about Gutenberg’s printing press could be “reprogrammed” with different text day-by-day.  This invention not only allowed Gutenberg to print some 3,600 pages per day, but it allowed him to change the content as well.  This was an astronomical improvement over the scribes of the day, who could manually copy just 40 pages in the same amount of time.

Gutenberg’s invention made the printing industry 90 times as efficient.  Did this cause mass unemployment in the publishing industry?  On the contrary, the output of printed materials increased dramatically.  Pamphlets, newspapers, and books soon became commonplace.

There are many other examples of technologies exponentially boosting productivity, while having little impact on employment rates.  For example, during the Industrial Revolution Great Britain’s economy changed rapidly.  Between 1870 and 1820 steam-powered machinery “replaced” humans at an alarming place—so rapidly that fearful workers waged war against new machinery.  These people were nicknamed Luddites.

The Luddites were correct in their observations: technology made workers much more efficient.  Economic historians estimate that the power loom alone made British textile weavers 40 times more efficient.  And yet, mass unemployment did not follow suit.  Instead, Britain experienced a labor shortage, as textile output grew more rapidly than productivity.

As impressive as the productivity gains afforded by the printing press and the power loom, they pale in comparison to the efficiency reaped by the forklift.  Before the forklift and pallet system was invented, products were transported either in bulk, or in product-specific containers like barrels, crates, or sacks.  People employed animals and cranes to move products, but overall the process was cumbersome and inefficient.

Forklifts changed everything.  For example, it is estimated that the forklift mad stevedores—the workers who load and unload ships—200 times as efficient.  Did forklifts cause mass unemployment?  No.  Instead, shipping prices decreased dramatically, and ipso facto trade volumes correspondingly increased.

Rattling the ol’ Tin Lizzie’s Chassis

Technologies like AI do not destroy jobs, instead they help us make more output with less labor.  This makes us richer.  A good example of the link between technology and consumer prices takes us to Dearborn, Michigan.

In 1908 the American industrialist Henry Ford released the Model T.  What made the Model T so special was its reasonable price tag of $850 ($21,000 in today’s currency).  For the first time in history, even average Americans could afford an automobile. In fact, the whole world was teetering on the brink of a massive paradigm-shift.

But before that could happen, Ford needed to reduce the Tin Lizzie’s cost.  He spent the next few years tinkering with production methods, and by December of 1913 Ford had developed his first mobile assembly line.  This made Ford’s factory an order of magnitude more efficient, reducing the time it took to build a Model T from 12 hours to just 93 minutes.

These efficiency gains allowed Ford to slash his prices. For example, in 1914 Ford built 308,162 Model Ts—more automobiles than all other manufacturers combined.  Prices decreased too.  By 1924, a new Model T cost just $260, or $3,500 in today’s currency.  This was 83% cheaper than Model Ts made a decade earlier.

The Automotive Age had begun, and Americans were richer for it.

Today, we stand at the dawn of the AI Age.  Although we are right to be skeptical of this new technology on moral and philosophical grounds, economic arguments against AI are built on foundations of sand.  Logic and history show us that AI is not likely to cause job loss, and in fact, AI has the potential to make us all much richer than we were yesterday.

About Spencer P Morrison 161 Articles
Lawyer, writer & independent intellectual with a focus on applied philosophy, empirical history & practical economics. His work has been featured on major international publications including the BBC, Real Clear Politics , the Daily Caller, the Western Journal, the American Thinker, and the Foundation for Economic Education.