Block Laid Off 40% Of Staff

Forecasts Of More AI Job Losses

Unemployment Could Surge

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In 2023, Goldman Sachs (NYSE: GS) put out a report titled “The Potentially Large Effects of Artificial Intelligence on Economic Growth.” The authors wrote, “Extrapolating our estimates globally suggests that generative AI could expose the equivalent of 300mn full-time jobs to automation.” The authors did say that AI could increase GDP growth and that labor productivity would rise. They added that new technology may create new jobs. It was, the authors reported, not possible to know if a boom would add a large number to the global workforce.

Although it will not apply to all industries, Block (NYSE: XYZ) has just laid off 4,000 people, which was about 40% of its workforce. At the time of the announcement, CEO Jack Dorsey said, “Something has changed. We’re already seeing that the intelligence tools we’re creating and using, paired with smaller and flatter teams, are enabling a new way of working that fundamentally changes what it means to build and run a company. and that’s accelerating rapidly.” As an affirmation of his decision, Block’s stock rose 20%.

Does the Block move mean that other industries can make similar cuts? Few people will say for sure. A survey by the Harvard Business Review found that “Overall, however, 90% of the survey respondents said that their organizations are getting either moderate or a great deal of value from AI.” The survey was done at the end of last year and was based on answers from 1,006 global executives.

Opinions about the effects of AI on jobs vary widely. Dario Amodei, CEO of Anthropic, told Axios, “AI could wipe out half of all entry-level white-collar jobs — and spike unemployment to 10-20% in the next one to five years.” Taking into account the size of the US workforce and the current unemployment rate of 4%, that is between 10 million and 27 million jobs.

Where does the loss of jobs come from? Generally, the areas of business identified are white-collar jobs, entry-level jobs that involve data analysis, factory jobs that can be done by AI-powered robots, and a large number of retail jobs at stores and fast-food chains. The New York Times recently wrote that “Executives told Amazon’s (NASDAQ: AMZN) board last year that they hoped robotic automation would allow the company to continue to avoid adding to its U.S. workforce in the coming years, even though they expect to sell twice as many products by 2033. That would translate to more than 600,000 people whom Amazon didn’t need to hire.” Of course, that is not primarily layoffs. They are jobs that in the past would have been done by people.

How many jobs could be lost to AI? If the Block decision were applied to the S&P 500, which employs 29 million people, a 40% layoff would be 12 million jobs.

Kristalina Georgieva, managing director at the International Monetary Fund, recently told a group at the World Economic Forum that “We see potential to up of 0.8% boost to 0.8% over the next few years, but it is hitting the labor market like a tsunami, and most countries and most businesses are not prepared for it.”

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