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This week’s announcement by Jack Dorsey that his financial tech company Block would lay off 40 per cent of its staff due to artificial intelligence saw the firm’s stock price skyrocket — an event that could signal a “tipping point” in the labour market, experts say.
While companies like Amazon have been steadily — but quietly — replacing workers with AI systems for several months now, Dorsey’s statement made the connection between the two explicit.
“Intelligence tools have changed what it means to build and run a company,” the CEO said in a letter to investors while announcing Block’s latest profit results. “We’re already seeing it internally. A significantly smaller team, using the tools we’re building, can do more and do it better.”
The co-founder of Twitter also said, “I don’t think we’re early to this realization. I think most companies are late. Within the next year, I believe the majority of companies will reach the same conclusion and make similar structural changes.”
Moshe Lander, an economics professor at Concordia University, said Dorsey’s statement is an acknowledgment that we’re now at the latest stage of a trajectory that began decades ago, with automation in manufacturing and service industries.
That trend-line is now due to accelerate rapidly as AI makes a similar impact in white-collar jobs, he said in an interview.
“Think of it as hockey stick,” he explained.
“If you work your way up the shaft, it’s kind of that slow progression until you get to that connection point between the blade and the shaft — and then it takes off.”
Lander added that the resulting stock price jump for Block shows investors are recognizing the profitability potential of that approach.
“(If I’m an employer) I don’t have to deal with all of that economic cost that comes with humans when AI is going to deliver me the same, if not greater, value at only the cost of installation,” he said in an interview.
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“So it’s very understandable then why replacing labour with capital or technology is helpful to a business’s bottom line.”
That view appears to have extended throughout Wall Street. While Block’s share price rose Friday, it fell for software companies and others whose businesses investors suspect could get supplanted by AI-powered competitors, dragging market indexes downward.
Economic researchers like Goldman Sachs and JP Morgan have been warning that AI-fueled layoffs could accelerate in the U.S. this year as more companies adopt the technology at the expense of human labour.
So far, it appears the trend has not yet moved north to Canada.
A TD Economics analysis last month found Canadian employment in industries aggressively adopting AI at the expense of workers has been more resilient than in the U.S.
Those industries — including finance, real estate and health care, among others — saw worse employment outcomes in the U.S. compared to sectors that lagged in AI adoption, the analysis found, while Canada has seen relatively little difference across all industries studied.
“U.S. employment has seen virtually no growth, led by information and professional services, versus Canada showing fewer signs of job displacement,” TD’s chief economist Beata Caranci wrote.
Both countries saw higher employment rates in industries like engineering, education, nursing and law, where AI is treated as more of a complementary tool for humans that still need to exercise human judgement.
Georgios Petropoulos, an assistant professor in data sciences at the University of Southern California Marshall School of Business, said the changes fuelled by AI should allow for more startups and innovation that can absorb the laid-off workers of today.
“If we look at the economy as a whole, we see that that also generates opportunities for more ideas, more companies to enter and use the technology together with labour to perform well in the market and get some profits,” he said.
“It is up to people that had this bad experience (of losing their job) to be able to be more relevant and find the next working route for them.”
That will require retraining opportunities from governments and private industry, Petropoulos and Lander agreed, as well as for educators to prepare students for the economy of the future.
Prime Minister Mark Carney has sought to fast-track AI adoption across Canadian industry and government in a bid to boost productivity and economic growth.
AI Minister Evan Solomon has promised to unveil a long-delayed federal AI strategy by this spring that will outline the new Liberal government’s approach. He has said the strategy will balance growing out the domestic sector with a “human-based” approach.
In September, in response to economic pressures from U.S. tariffs, Carney announced a $50-million investment over five years to help workers find jobs and retrain in digital skills such as AI. Long-tenured workers will also get extended EI benefits as they seek to retrain for new careers under the plan.
Lander said governments like Carney’s need to be more frank with its constituents about the changes coming to the labour market thanks to AI, including industries where humans may be mostly replaced in the next five to 10 years.
“It’s a bad analogy and I admit it: if you know somebody is dying, you can either try and pump them full of drugs and delay the inevitable, or you can try and help make that their last days are comfort,” he said.
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