The Labor Market Is Not Ready for What AI Is About to Do

In 1811, as England’s Industrial Revolution was gaining momentum, a group of textile workers decided to fight back.

Led by the mythical ‘General Ludd’ of Sherwood Forest, what began as a concentrated movement in central England quickly spread across the nation. Traditional workers took hammers to the stocking frames and power looms – the machines erasing their jobs, their wages, and centuries of hard-won craft.

They weren’t irrational or anti-progress. They were simply watching their livelihoods evaporate in real time; and they understood that, unfortunately, no one was coming to help them. 

History remembers them as the Luddites, a cautionary tale about resisting the inevitable. But what history forgets is that they were right about what would happen to them. The looms won. The weavers lost. And it took generations of political struggle to rebuild something resembling dignity for working people.

Right now, a similar story is beginning to unfold; only instead of stocking frames and power looms, AI is the existential threat. 

While investors are worrying about Big Tech’s AI capex, the ground beneath our feet – the very foundation of how we earn a living – is turning into quicksand.

The biggest risk we face isn’t a correction in the Nasdaq. It’s structural: the permanent devaluation of human labor. 

Forget a stock market crash. It’s time to prepare for what’s in store for the labor market…

The Iceberg Index: The Truth About AI Job Loss in America

The latest research shows just how far this displacement has already advanced beneath the surface.

MIT, partnering with Oak Ridge National Laboratory, recently released what it calls the “Iceberg Index.” And it’s terrifyingly blunt. 

Its models suggest that roughly 12% of existing U.S. jobs are already technically and economically viable for AI replacement right now.

That’s 1 in 9 people whose economic output can be matched by a software subscription that doesn’t need health insurance, doesn’t take bathroom breaks, and doesn’t complain on Slack.

And that’s just based on current technology. We aren’t even talking about what happens when the next iterations of models – like those with the agentic capabilities that we’re seeing in Gemini 3.0 – fully mature. 

When an AI can not only write the email but also plan the project, execute the code migration, handle the vendor dispute, and reconcile the budget without human intervention, the need for the human “manager” in the middle evaporates.

We are already seeing the results…

HP Inc. (HPQ) just announced it is cutting up to 6,000 jobs by 2028 to “fund AI investment.” Its CEO openly admitted the goal is to redesign processes with AI agents to save $1 billion.

UPS (UPS) cut 12,000 corporate roles earlier this year, explicitly stating that automation meant those jobs aren’t coming back. Klarna (KLAR) replaced hundreds of customer service agents with an AI that speaks 35 languages and works 24/7. Amazon (AMZN) is undergoing its biggest corporate layoff ever. 

This isn’t recessionary. This is a capital pivot. Companies are trading variable-cost, high-maintenance human workers for fixed-cost, exponentially improving silicon ones.

The labor bubble is already leaking.

AI Is Breaking the Link Between Productivity and Wages

The reason this feels different – and increasingly scary – is because it breaks the fundamental pact of modern economics.

For the last century, as technology improved, productivity went up. As productivity went up, wages did, too. A rising tide lifted all boats, even if some boats were lifted higher than others.

But AI is breaking that link. 

When a company deploys an AI system that allows it to double its output without hiring a single new employee, where does that extra value go?

It does not go to the remaining workers. It goes to the company’s bottom line, then to dividends, buybacks, and share price appreciation.

This is the brutal arithmetic of the next decade: The slice of the global economic pie going to “wages” will shrink, and the slice going to “profits” (capital) will explode.

And that doesn’t even take an economic downturn into account.

Right now, we have historically low unemployment (around 4%). The economy is showing cracks but is still fairly stable. And yet, companies are aggressively automating.

Imagine what happens in a recession.

Economists call it the ‘cleansing effect.’ When revenue dips, companies are forced to cut costs mercilessly. If we enter a recession, CFOs won’t just trim travel budgets. They’ll take a hard look at that expensive marketing department, compare the capabilities of the latest generative AI tools, and pull the trigger on mass replacement.

It gives them cover. “Due to macroeconomic headwinds, we are restructuring.”

And when the economy recovers, those jobs won’t come back. 

The recession will be the accelerant. The recovery will be jobless.