AI-driven layoffs highlight need for policy overhaul in new economy

“Today’s unemployment rate is 10.2 percent. The S&P index has fallen 38 percent from its October 2026 peak.”

That stark scenario opens a headline-grabbing report that rattled Wall Street last week. Published by Citroni Research, the study on a so-called global intelligence crisis is written as a narrative set on June 30, 2028, imagining how artificial intelligence has upended the economy.

The report follows a fictional former employee of Salesforce who, after being laid off, turns to driving for Uber. It portrays sweeping layoffs and income losses among highly paid white-collar professionals as the catalyst for a mortgage market collapse that mirrors the 2008 financial crisis. Rather than delivering a surge in productivity and growth, as many had predicted, AI in this scenario produces a jobless economy marked by shrinking consumption and mounting fiscal strain.

In reality, the U.S. unemployment rate stood at 4.3 percent in January, underscoring that the Citroni report is speculative. Citroni is not a conventional Wall Street research house but a platform that drew attention through the online newsletter Substack. Even so, the report spread quickly across social media and unsettled U.S. financial markets.

Its resonance reflects a broader shift in public anxiety. Until last year, concerns centered on excessive investment in AI and the risk of financial losses. Now, the unease runs deeper. Many are questioning what it would mean if humans became less economically valuable than intelligent machines. AI, once seen as a helpful assistant capable of transforming family photos into Studio Ghibli-style images or retrieving information in seconds, is rapidly evolving into more autonomous, agentic systems. With that evolution comes fear that it could displace not just tasks but entire livelihoods.

Such warnings are not new. In his 2015 book Homo Deus, historian Yuval Noah Harari envisioned the rise of a “useless class.” Unlike the industrial-era proletariat, which could at least offer labor, large segments of humanity in an AI-driven age, he argued, risk becoming economically irrelevant.

The idea that humans could become a “useless class” and trigger an economic crisis within two years is widely regarded as overstated. Still, the anxiety persists because white-collar layoffs are no longer theoretical. They are happening.

Recently, Block Inc., the fintech firm founded by Jack Dorsey, eliminated 40 percent of its workforce in a single round of cuts, jolting Silicon Valley. The company described the move as part of AI-driven restructuring, underscoring how automation is beginning to reshape even high-skilled sectors.

South Korea is not immune. Structural constraints make outright dismissals less visible, but hiring freezes and executive downsizing are increasingly apparent. According to January data from Statistics Korea, employment in professional, scientific and technical services, including lawyers and accountants, fell by 98,000 from a year earlier. It marked the steepest decline since related statistics were first compiled in 2013. A senior executive in the legal department of a major domestic company said AI now appears capable of handling tasks typically assigned to both new recruits and employees with six or seven years of experience.

Ironically, even the Citroni report casts South Korea as an “AI-special” country despite its grim outlook. As AI systems replace human labor, demand for semiconductors powering data centers is expected to surge. That dynamic may bolster national growth. But growth without jobs offers little reassurance, as it risks widening inequality and hollowing out the middle class.

AI-driven job displacement also challenges the foundations of economic policy. Growth and employment, once closely aligned, are beginning to diverge, weakening the effectiveness of traditional tools. Officials at the Federal Reserve Board have acknowledged that monetary policy alone cannot resolve structural unemployment stemming from AI and have urged broader social responses.

An economy in which humans compete with machines for relevance will demand more than incremental adjustments. It calls for a fundamental rethink of education, welfare, taxation and industrial policy to ensure that technological progress does not come at the cost of social cohesion.