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Unraveling the Impact of AI on Employment: A Historical Perspective by Paul Krugman

Unraveling the Impact of AI on Employment: A Historical Perspective by Paul Krugman

Technology and Jobs: Insights from Paul Krugman on AI’s Economic Impact

By Paul Krugman – October 19, 2025

The debate over whether advanced technologies such as artificial intelligence will devastate or uplift the labor market is as old as the Industrial Revolution itself. In his recent analysis, economist Paul Krugman revisits this long-running conversation, drawing lessons from history and economic theory to unpack the complex relationship between technology and employment.

Historical Concerns About Technology and Labor

Krugman traces contemporary anxieties about automation back nearly two centuries, highlighting how worries about technology destroying jobs are far from new. He cites David Ricardo, one of the 19th century’s foremost economists, who in 1821 amended his optimistic view of technological progress. Ricardo acknowledged in the third edition of his Principles of Political Economy and Taxation that while machinery could boost societal wealth, it often inflicted harm on the working class by replacing human labor. He famously wrote, “I am convinced, that the substitution of machinery for human labour, is often very injurious to the interests of the class of labourers.”

While Ricardo’s prognosis was perhaps overly pessimistic in the very long term—19th-century workers ultimately benefited greatly from industrial advances—his concerns were not misplaced in his own era. This historical perspective shows that the fear that technology might reduce workers’ well-being and employment is a recurring theme, not a novel phenomenon.

Technology’s Uneven Impact on Jobs

Krugman underscores that technological change can destroy jobs, but typically within specific sectors or occupations. For example, factory automation displaces certain manual labor roles while creating new jobs in machine maintenance, management, or sectors fueled by greater productivity. This sectoral shift, rather than wholesale unemployment, characterizes most episodes of technological disruption historically.

Importantly, Krugman cautions against extrapolating job losses in particular industries to predict overall employment collapse. Throughout history, productivity-enhancing technology has usually generated new opportunities that offset destroyed jobs. However, this process is complex, and impacts on wages and employment can vary widely depending on the type of technology, economic context, and policy environment.

The AI Question: Disruption or Boon?

The core of Krugman’s article deals with the pressing question of whether artificial intelligence will buck historical trends and cause widespread job loss. While recognizing the significant changes AI could bring—automating cognitively complex tasks previously thought safe from mechanization—Krugman remains cautious about apocalyptic predictions.

He expresses skepticism that AI will inevitably doom jobs, but acknowledges the technology might hurt employment and wages in certain circumstances. The evolution of AI and its integration into the workforce could revive real challenges reminiscent of the early Industrial Revolution’s disruption.

AI and the Planet: A Fork in the Road

Beyond labor markets, Krugman touches on AI’s potential environmental impact. The technology’s energy demands and how we deploy AI could either exacerbate climate challenges or contribute to solutions. This "fork in the road" will not only shape the economic outcomes of AI but also its broader societal consequences.

Conclusion: A Nuanced View is Essential

Paul Krugman’s analysis invites readers to consider AI’s future impact within a broad historical and theoretical framework. While acknowledging AI’s transformative potential, he reminds us that technology’s effects on jobs are rarely straightforward.

His forthcoming detailed discussion—available through subscription—promises to delve into:

  • How technology destroys jobs in specific sectors
  • Why sectoral job loss doesn’t forecast overall unemployment
  • Circumstances under which technology can harm employment and wages
  • The specific risks and opportunities AI presents to the workforce
  • AI’s environmental implications and their significance for the planet’s future

As Krugman emphasizes, understanding these dynamics is crucial for developing informed policy responses that harness AI’s benefits while mitigating risks to workers and society at large.


To read Paul Krugman’s full analysis and access his archives, consider subscribing for a free 7-day trial.

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