AI revolution to wreak havoc on Australia’s middle class

A seismic shift in Australia’s job market looms as AI prepares to replace ‘tens of thousands’ of middle-class workers in banking, HR and call centres.

Australia’s middle class employed in the private sector service industry face major headwinds over the next 12 months.

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Vast numbers of the children of baby boomers have had a charmed life: while many fell into financial difficulties, a large number formed a prosperous Australian middle class.

They are totally unprepared for the disaster that is about to happen to a large proportion of their ranks. The “baby boomer children middle class” has acted in a totally different way to their parents, who were cautious and saved. Their children borrowed large amounts of money, arranged finances based on two incomes and, for the most part, lived well. For a long time, doomsayers have incorrectly been predicting a recession. Whether we have a recession or not is now academic.

In the next six to 12 months vast numbers of the Australian middle class employed in private sector service industries will either lose their jobs or will feel very insecure. Again, they are totally unprepared for what is ahead.

Middle-class Australians face job losses as AI is rolled out. Picture: iStock

In the past few days, I have been yarning to those preparing for the AI and enhanced computing (two separate but related forces) revolutions. The outcome will be bigger than I thought, creating greater devastion to the middle class in Australia and the region.

You might remember that last week I described how Qantas uses local and overseas data bases. As it happened, a data leak came from a call centre in Manila. The actual data was held in a local data centre. One of the first industries to be impacted by AI will be call centres both in Australia and around the region.

Many Australian companies have overseas call centres because they are substantially cheaper than Australian ones. They will all examine whether to abandon their overseas call centres and run them locally via AI and enhanced computing. Many local and regional software jobs will go the same way. This will be a global phenomenon that will cause great damage to the middle class in the region and increase regional instability.

Here in Australia much of the middle class involved in call centres will be replaced by AI and enhanced computing. Many tens of thousands will be involved.

The computer-generated call centres will speak in different languages and be able to handle most of the queries currently being received. However, there will be a series of triggers which will indicate the problem being raised is not routine so the call will be switched to a human. Of course, the middle-class job losses go much further than call centres.

Global trends show that AI is particularly suited to replacing vast numbers of people in human resources and data research. The number of people required in administration – particularly head office administration – will be slashed. Those without special skills and who demand to work at home will be particularly vulnerable.

In engineering, the output of a top engineer is trebled so unless the industry expands rapidly [which may happen] fewer engineers will be required.

At next month’s federal roundtable on productivity, the unions will blame the private sector for the lack of productivity growth. To some extent, that is true, but the biggest weight on productivity has been government hiring.

Initially, those now unnecessary government jobs will be insulated from AI by the public service unions, but they can’t hold the dam wall forever.

Stockmarkets, both here and overseas, are now beginning to price companies, like banks, that will be big cost beneficiaries from AI and enhanced computing, so buyers are pushing up share prices. Already one or two big Australian banks are trialling AI call centres, and I believe they have been stunned by its effectiveness and the cost reductions.

Meanwhile, insulated from the looming middle-class crisis are those who are “doing things” – dominated by the trades, but including nurses and paramedics and childcare workers.

AI is suited to replacing workers in human resources and data research. Picture: iStock /Getty Images

My AI friends tell me that those who are in a vulnerable position should work hard to understand how to use AI and enhanced computing. This will give them a much better chance to be among those whose jobs are not shed. Alternatively, learn how to drive a truck or heavy mover or become an electrician or plumber.

Again, the middle classes in Australia and the region are totally unprepared for this enormous change.

The jobs that are being replaced by AI and enhanced computing are not coming back as normally happens when unemployment is created by recessions. That means the up-and-coming generation will go into a labour force that does not have the jobs that were there for their parents.

Vast areas of the secondary education system aim at high Year 12 scores because the best places in universities are often only available to those who score well.

Universities are unprepared for the fact that with many courses they are set to produce graduates with a big fee bill and no prospect of jobs.

Of course, that does not apply to all university courses. Like the middle class, the universities are unprepared for this change and the likely reduction in numbers that will follow. In turn, staff in those areas of universities who believed they had lifetime tenure may be forced to retire and casuals may be shed, swelling the ranks of the impacted Australian middle class.

The winners will be the TAFE and other technical colleges creating trade positions that will, for the foreseeable future, be insulated from AI and enhanced computing.

TAFE NSW at Meadowbank in Sydney. Picture: Monique Harmer/NewsWire

There will be some community anguish when it is discovered that vast amounts of government money is being diverted to subsidise the power to drive the data centres behind this unprecedented change in the society.

Meanwhile, productivity will rise substantially in the private sector, but not in the way the ACTU has in mind. Indeed, if middle-class labour is made more expensive by any new rules following the productivity roundtable, then the carnage will be greater.

And, finally, remember that while banks will slash costs and boost productivity, they have loaned large sums to the impacted middle class. Asset values will be affected.

Originally published as AI revolution to wreak havoc on Australia’s middle class