An economic tidal wave is heading straight for America

May I be candid with you about the U.S. economy? It’s growing nicely, and the stock market has soared. But on what really counts to most Americans — jobs and wages — it’s sh---y.

The Bureau of Labor Statistics reported this morning that employers added 130,000 jobs in January. That’s not bad until you see that health care accounted for more than half of them. Construction gained 33,000 jobs. Most other sectors were flat.

I would have expected far more job growth, considering the paucity of new jobs last year.

Artificial intelligence isn’t the culprit directly. I think employers have been cautious about hiring given all the uncertainty in the political economy, starting with Trump’s wildly-vacillating tariffs.

But many employers are assessing AI’s likely impact on their businesses, and may be holding back on some of their hiring in anticipation. After all, payrolls comprise two-thirds of a typical business’s costs.

Promoters of AI are working overtime to spin it as benefiting average people. Anyone who watched the Super Bowl ads for AI last Sunday saw how AI is being spun as a wondrous boon to humankind.

Consider the breathless front-page headline in a recent Washington Post: “These companies say AI is key to their four-day workweeks.” The subhead was as euphoric: “Some companies are giving workers back more time as artificial intelligence takes over more tasks.” As the Post explained:

“More companies may move toward a shortened workweek, several executives and researchers predict, as workers, especially those in younger generations, continue to push for better work-life balance.”

Hurray! There’s utopia at the end of the AI rainbow! A better work-life balance!

Similar articles are appearing in Fortune and the New York Times. The AI spin brigade is in full force.

Business leaders are rhapsodizing about how AI will “free” their employees to take more time off. Zoom’s Eric Yuan told the Times that “AI can make all of our lives better, why do we need to work for five days a week? Every company will support three days, four days a week. I think this ultimately frees up everyone’s time.”

Jamie Dimon, CEO of JPMorgan Chase, says advancing technology could push the workweek down to just three-and-a-half days. Microsoft cofounder Bill Gates openly wonders whether a two-day workweek could be the future.

Elon Musk pushes the idea to the extreme (as he does everything else): “In less than 20 years — but maybe even as little as 10 or 15 years — the advancements in AI and robotics will bring us to the point where working is optional.”

Even better: “There will be no poverty in the future and so no need to save money,” says Musk. “There will be universal high income.”

All of this is pure rubbish.

Even if AI produces big productivity gains — which is still an open question (an MIT study last year found that “despite $30–40 billion in enterprise investment into GenAI, 95 percent of organizations are getting zero return”) — it’s far from clear that most workers will see much, if any, of AI’s benefits.

If productivity rises, as it’s supposed to do when the workplace becomes immersed in AI, each worker will generate more value, by definition. And with more value, supposedly we’re all better off.

But worker productivity has been rising for years, yet the median wage has barely risen when adjusted for inflation.

Here’s the truth: The four-day workweek will most likely come with four days’ worth of pay. The three-day workweek, with three days’ worth. And so on.

So, as AI takes over their current work, most workers will probably get poorer or have to take additional jobs to maintain their current pay.

In his famous 1930 essay “Economic Possibilities for Our Grandchildren,” the great British economist John Maynard Keynes predicted that in a century, “the discovery of means of economizing the use of labour” would outpace our ability to “find new uses for labor.” In other words, less work.

Yet Keynes was sure that by 2030 the “standard of life” in Europe and the United States would be so improved by technology that no one would worry about making money. Productivity gains would create an age of abundance.

In fact, by 2030, he predicted, our biggest problem would be how to use all our leisure time:

“For the first time since his creation man will be faced with his real, his permanent problem — how to use his freedom from pressing economic cares, how to occupy the leisure, which science and compound interest will have won for him, to live wisely and agreeably and well.”

We’re still four years away from Keynes’s prediction, but at the rate we’re going, it seems wildly wrong.

Rather than creating an age of abundance in which most people no longer have to worry about money, new technologies have contributed to a two-tiered society comprising a relatively few with extraordinary wealth and a vast number of people barely making it.

AI is likely to further widen inequality. It already is. This week, as layoffs climbed and job openings plunged — especially for professionals exposed to AI — the Dow Jones Industrial Average closed above 50000 for the first time.

Imagine a small box — call it an iEverything — capable of producing for you everything you could possibly desire. It’s a modern-day Aladdin’s lamp. You simply tell it what you want and — presto! —the item or service suddenly appears.

Sounds wonderful until you realize that no one will be able to buy the iEverything because no one will have any means of earning money, since the iEverything will do everything.

This is obviously fanciful, but the dilemma is very real. Productivity gains are great, but the too-little-discussed question is how they’ll be distributed.

The distribution issue can’t be ignored. When more can be done by fewer people, who gets paid what?

It comes down to who has the power.

For most of the last 40 years, the jobs and wages of blue-collar Americans were eroded by globalization and computer software, and most of the benefits from productivity gains went to the richest 10 percent.

AI is now putting the jobs of millions of white-collar Americans on the line. If nothing is done, we’re likely to see white-collar jobs suffer the same erosion — with most of the benefits from the productivity gains going to the richest 0.1 percent.

Unless Americans — white collar, blue collar, pink collar — have the power to demand a share in the productivity gains, profits will go to an ever-smaller circle of owners — leaving the rest of us with less money to buy what can be produced, which is a formula for a fragile economy and an even worse politics.

If the five-day workweek with five days of pay shrinks to four days with four days of pay, and then to three, and to two, and perhaps one, AI will supplant most people’s work and drive down our take-home pay. We may see a dazzling array of products and services spawned by AI, but few of us will be able to buy them.

But this isn’t necessarily our fate. Assuming AI delivers big productivity gains, most Americans could receive the benefits of those gains if most Americans have the bargaining power to get them.

Could labor unions ever be revived to the point that they gave most Americans the bargaining power they need? (I’ll deal with that question shortly.)

Will at least one of our two dominant political parties enact laws that distribute those gains more fairly? (Think a Universal Basic Income, for example, or wealth taxes financing child care, elder care, and universal health care.)

These are not impossible outcomes. After all, as I’ve argued, the future owners of AI have a financial interest in enabling most people to buy the dazzling array of products and services AI spawns.

In the meantime, though, don’t fall for the breathless rubbish about AI allowing employers to “free up” employees’ time.

AI may deliver wondrous benefits. The real question is whether AI’s productivity gains (assuming AI delivers them) are widely shared.