Scary prediction about the impact AI revolution could have on Australian jobs
A scary prediction about the impact of AI on the labour market has exposed how vulnerable Australia. These are the jobs most at risk of disappearing.
As concern continues to build over the potential impact of AI and the rise of humanoid robotics on the labour market, it’s swiftly clear how vulnerable our society is to such a momentous shift if it were to be realised.
While the outlook for the potential impact remains very much unclear, with estimates varying wildly, it’s worth exploring a scenario where even a small fraction of the more serious downsides were to be realized.
The basis of today’s scenario will be 7 per cent of workforce being rendered effectively unemployable by the rise of AI in the coming years. This is a small fraction of the 21.8 per cent to 33.2 per cent of people forecast to experience unemployment in some capacity under modelling performed by the Social Policy Group (SPG).
According to Social Policy Group modelling, the impact is expected to vary dramatically by industry, with financial and insurance services, information media and telecommunications, and professional, technical and scientific services expected to be the hardest hit proportionally.
At the other end of the spectrum the least impacted industries are expected to be education and training, public administration and safety, and healthcare and social assistance.
Economy Wide Impact
If seven per cent of the current workforce was to become unemployed, approximately 1.026 million people would be added to the nation’s unemployment line.
If we were to assume that each of them was to receive a full JobSeeker payment, the additional cost to the federal budget would be in the ballpark of $20 billion a year. But far more conservatively, given the various means tests let’s assume it comes to roughly half that.
On the other side of the coin, there would be the blow to tax revenue. Based on each individual losing a job having the median employee income of $72,600 per year, the hit to the income tax take would be in the region of $14.2 billion a year.
While it’s less than 1 in 14 workers losing their employment, it would blow a hole the budget worth $25 billion per year or roughly half the nation’s defence budget.
Gary & Tammy – Above Average Couple
In order to quantify what life could look like for people impacted by unemployment if this scenario was to be realised, we’ll be looking at a number of hypothetical case studies based on households that are representative of average Australians, to see what life would be like in the unemployment line.
Gary, 42 and Tammy, 40 have two children and live in Melbourne. Since Gary lost his job as a software engineer, their household has been relying on Tammy’s salary as a high school teacher, where she earns $96,000 per year.
They have an above average $900,000 mortgage, but it was well within their means when both of them were working earning a combined $250,000 per year.
Given Tammy’s earnings, Gary does not qualify for JobSeeker or any other support payment from the government on an individual basis.
The one silver lining is that they now do qualify for support in the form of the Family Tax Benefit, given the households’ reduced earnings, netting them an average of $397 per fortnight.
After tax the household would have a total income of $84,300 per year or $3,262 per fortnight.
If they were to stretch their mortgage to a 30-year duration, the mortgage would consume 72.2 per cent of their total net income. If they were to also put their mortgage on interest only terms, it would consume 58.3 per cent of their take home income.
Assuming that they have no other debts and their children are in public school, it would be achievable to live on $1,362 per fortnight left over with their mortgage on interest only terms.
Whether that was viable in the longer term is very much in the eye of the beholder.
Heather – Single Person Mortgaged
Heather, 48, is a single administrative assistant from Brisbane earning $90,000 per year. She has a 2-bedroom apartment, which she was lucky enough to buy prior to the pandemic has a remaining mortgage of $380,000.
In a scenario where Heather became unemployed, she would receive a maximum of $781 per fortnight.
This is less than the $995 per fortnight she would be spending on her mortgage if she stretched the term to 30 years to minimize costs. If she also put her mortgage on interest only the repayments would be reduced to $802 per fortnight.
Without an additional source of income, finding a new job or significant savings, Heather would not be able to afford her mortgage, let alone the $230 per fortnight in strata fees.
Chris and Isabella – Young Renting Couple
Chris, 26 and Isabella, 27, both graduated from university in the last 5 years and are working entry-level white-collar office roles. They rent a median priced 2-bedroom unit in Sydney, which costs them $726 per week, living well within the means as a double income household.
In a scenario where both Chris and Isabella became unemployed, they would receive a maximum of $1,430 per fortnight in unemployment benefits, plus a maximum of $200 per fortnight in Rent Assistance.
Given that their rent would now consume over 89 per cent of their income, they would soon be forced to move somewhere cheaper and pay the likely costs involved with breaking their lease early.
If we assume that they managed to secure a property for $500 per week, which is 29.8 per cent below the median price of all units in the city, that would leave them $630 per fortnight to live on for all of their other expenses.
The Takeaway
While predictions of unemployment impacting 15 to 40 per cent of workers are increasingly prevalent, it would take only a fraction of that impact to flip the nation’s economy and our society on its proverbial head.
Today’s scenarios have assumed there is no knock-on effects from the job losses beyond the experience of individual household and the budgets’ bottom line.
In reality, the reduction in consumer spending from so many jobs being lost would risk a downward spiral in the economy, with further jobs at risk, as the amount of cash circulating through the economy fell significantly.
Whether or not AI will realise its claimed potential remains uncertain, but if even a fraction of the feared changes to the labour market come to pass, policymakers will need to swiftly adapt to the new world they find themselves in, lest many Australians be forced to confront scenarios like the hypothetical ones above.
Originally published as Scary prediction about the impact AI revolution could have on Australian jobs
