AI, job displacement and the case for a new social contract

A recent study by US investment bank Morgan Stanley found that job losses in the UK due to artificial intelligence (AI) are twice the global average, with British companies shedding around 8% of roles over the past year.  

Among the five major economies surveyed – Australia, Germany, Japan, the UK and the US – the US was the only country to see a net gain in AI-driven employment. 

Experts say this is an early warning of AI's seismic impact on the workforce.  

Last month, JP Morgan CEO Jamie Dimon told the World Economic Forum in Davos that governments and businesses must  step in to support displaced workers or risk civil unrest. 

Against this backdrop, UK government officials have hinted that a universal basic income (UBI) could be introduced to support workers whose jobs are lost to AI.  

UBI: idea or inevitable? 

Companies today face a paradox: AI offers unprecedented efficiency and growth, yet it also threatens employment structures, explains Donal Laverty, chair of Baker Tilly International’s global people steering committee and partner at Baker Tilly Mooney Moore.  

“With the threat of productivity slowing and the need for a safety net, some form of intervention seems inevitable. 

“More broadly, for the AI-driven economy to thrive, society must ensure consumers retain purchasing power.  

“A UBI, or a variant, could provide that safety net.” 

Lessons from abroad 

Countries such as Finland and the Netherlands have already trialled forms of unconditional income support.  

While these pilots showed only modest effects on employment, they consistently improved wellbeing, financial stability and confidence – all of which are critical during periods of economic transition.  

Elsewhere, political momentum is building. Japan and South Korea are actively debating basic income in response to automation, while the US continues to frame UBI as a response to AI-driven inequality, even in the absence of federal policy. 

The impact on employers… 

For companies, AI promises cost savings and efficiency gains. But these are unlikely to come tax-free, warns Mr Laverty.  

“Funding a UBI would almost certainly require higher corporate taxes or new levies, fundamentally reshaping the business environment.” 

…and workers 

For workers, outcomes are tied to how government and businesses manage the transition.  

“In the short term, a spike in underemployment and reduced productivity is likely.  

“Yet AI will not take over every role. With strategic investment in retraining and reskilling, new roles can emerge, particularly for the middle-skill workforce.” 

A key challenge, explains Mr Laverty, is that AI disproportionately threatens high-skill, white-collar jobs, so-called laptop workers.  

“A flat-rate UBI may not replace those professional incomes, raising difficult questions around adequacy and incentives.  

“Confidence and consumption could drop. Or, optimistically, AI could redefine human expertise, creating better jobs for middle-skill workers.” 

Affordability is a major issue  

As AI adoption accelerates, job displacement is increasingly unavoidable, says Mr Laverty.  

While a UBI could help ease the transition, its affordability remains a central challenge. 

“Although AI may ultimately generate trillions in economic value, unemployment is likely to rise before those gains are realised, creating short‑term shocks that governments must be prepared to absorb. 

“One proposed solution is to pair a UBI with AI‑specific taxes, comprehensive retraining programmes and long‑term economic planning to build a more resilient safety net.  

“This raises a fundamental question: is UBI prohibitively expensive or an inevitable response to the scale of disruption ahead? And, if introduced, should tech giants, the primary beneficiaries of automation, bear more of the financial burden?” 

Ultimately, history shows that work continually evolves. As with past industrial shifts, new roles will emerge, even if they are difficult to foresee today.  

The real test, Mr Laverty argues, is how prepared society is to manage the transition.