I have a love-hate relationship with artificial intelligence. As a professor, I hate that I can no longer assign written responses to readings or papers because most students cannot resist the urge to use AI. So, to evaluate learning, I’ve reverted to using blue book exams and oral recitations. I do love AI for helping to create interactive class exercises and for being a 24/7 research assistant. But I have not yet created agentic AI helpers to increase my work efficiency.
I’ve been reading articles recently about the doom and gloom of AI replacing jobs. I’ve read that if you mainly use a computer and work from your closet (i.e. don’t interact with others), your job can be handled by AI. As an economist, I’ve been pondering how the labor market may adjust and how disruptive AI could be to our global economy. Matthew Gallagher, the founder of MEDVi, publicly admitted that he used AI to create the company without a single employee. MEDVi is on track to do $1.8 billion in sales this year. Some fear this business model will become more common.
When I talk to friends and colleagues about AI they often tell me they’re relieved they’ll soon be retiring, and so do not have to worry about the prospect of losing their job to AI. It’s hard for me to push back on their notion that AI will not directly impact them. Folks are already stressed about the state of our country, so I often avoid sharing my AI concerns. But we do need to have public discussions about our AI concerns.
Most people are likely not yet thinking about second-degree impacts of AI. After potential job loss and the inability to afford food and housing, a secondary risk is the solvency of Social Security and Medicare. Social Security and Medicare are funded, in part, from payroll taxes. Specifically, the Federal Insurance Contributions Act, or FICA tax, which is a 15.3% payroll tax split equally between employees and employers. The FICA tax consists of 12.4% for Social Security (capped at $184,500 in 2026) and 2.9% for Medicare, with an additional 0.9% Medicare tax for high earners.
Social Security and Medicare operate primarily on a pay-as-you-go basis, where payroll taxes from current workers pay for the benefits of today’s retirees. This mandatory system already faces strain from an aging population and declining worker-to-retiree ratios, threatening insolvency for Medicare Part A (hospital coverage) and Social Security. If AI replaces millions of American jobs, then FICA tax revenue falls due to fewer workers and declining contributions from employers. This could lead to significant reductions in Social Security benefits for today’s retirees and reduced revenue for Medicare coverage of hospital care. AI could literally break America’s financing of retirement and health care that we’ve had since 1935 (and since 1965 for Medicare).
In Minnesota, we use payroll taxes to fund our paid leave program, so that could be similarly under threat if employment falls.
When I ask my undergraduate students if they believe Social Security will be available when they retire, most shake their heads no. Many have lost trust in elected officials. They’ve already experienced a pandemic, gun violence, Operation Metro Surge and significant polarization. Now they are about to experience graduating with significant debt, trying to find jobs, and remaining relevant as companies adopt AI. I worry about their future.
We don’t yet know how many jobs will be lost from AI. According to a recent report released by the North Star Policy Action, more than 31% of Minnesota jobs (813,000 workers) have “high exposure” to generative AI, meaning more than half of their work tasks could be automated. If you ask those who work in the AI sector, most believe AI will increase efficiency but displace workers. Dario Amodei, CEO of Anthropic, said AI could increase unemployment to 20% and wipe out half of all entry-level white-collar jobs. The International Monetary Fund projects AI will affect 40% of all jobs worldwide. The financing for Social Security and Medicare is in jeopardy if millions of Americans become unemployed.
Economists need to quickly develop policy options to inform elected officials. Some who advocated for universal basic income may have been ahead of the curve. But is basic income the best solution? What about shorter work weeks and aggressive retraining programs? Now is the time to consider and discuss all policy ideas to address AI disruptions to jobs and earned benefits. If politicians fail to act, significant job loss will lead to the weakening of our economy, our country and our people.
Folks have little faith that corporations or the AI industry will protect their jobs. Elected officials will need to step up, seriously consider the AI threats and act. Minnesota lawmakers have introduced legislation to address some AI concerns. For instance, Rep. David Gottfried, DFL-Roseville, introduced legislation (HF4369) requiring employers to give 90-day notice before deploying technology that displaces jobs. The bill also requires employers to provide training to reskill employees.
Sen. Amy Klobuchar has introduced bills to regulate AI use in political ads, scams and price fixing. But more policies are needed to address the potential job losses from AI adoption.
Politicians are told the surest way to lose an election is to propose cutting Social Security and Medicare. Thus, it is possible that addressing AI threats to these programs could be a bipartisan effort, uniting politicians and uniting workers. As the midterm elections approach, I advise folks to question candidates on their ideas to address AI disruptions in labor markets and importantly to Social Security and Medicare.
Ask them as if our country depends on their answer, because it does.
