🚨 TWO RESEARCHERS JUST PUBLISHED A PAPER THAT MATHEMATICALLY PROVES WHY THE AI LAYOFF WAVE COULD DESTROY THE ENTIRE ECONOMY

The paper is called “The AI Layoff Trap,” and it lays out a simple but terrifying truth in plain numbers: every time a company replaces a human worker with AI, it is also quietly firing one of its own customers.
That laid off employee used to earn a paycheck and spend it on groceries, cars, rent, streaming services, and everything else. When you fire enough of them across thousands of companies, suddenly there’s no one left with money to buy the very products those companies are selling.
The firms that automated the fastest end up going bankrupt because they destroyed the demand they needed to survive.
Think about it like this. The math is brutally obvious: fire workers to cut costs, lose customers, watch revenue collapse. Every CEO can see the crash coming. But here’s the trap they’re all stuck in: no single company can afford to hit the brakes.
If one business decides to keep its human workers while its competitor automates everything, that competitor slashes prices, steals market share, and drives the slower company out of business anyway. So everyone races ahead with AI, fully aware that they’re all running toward the same cliff together. It’s a classic Prisoner’s Dilemma: individually rational, but collectively suicidal.
The researchers call this acceleration the “Red Queen effect,” like running faster and faster on a treadmill just to stay in the same spot. Better AI doesn’t solve anything; it only makes every company automate even quicker to stay ahead, while the overall economy loses more and more purchasing power.
The real world numbers are already stacking up fast. Block just cut nearly half of its 10,000 employees this year, and CEO Jack Dorsey openly said AI made those jobs unnecessary, predicting that most companies will reach the same conclusion within the next year.
Salesforce replaced 4,000 customer support agents with AI. Goldman Sachs rolled out one AI coding tool that now lets a single senior engineer do the work of an entire five-person team.
Over 100,000 tech workers lost their jobs in 2025 alone, with AI cited as the main driver in more than half of those cases. And get this: 80 percent of all US jobs have tasks that are now ripe for automation.
The researchers didn’t stop at the problem; they tested every popular fix people keep talking about. Universal Basic Income? It might help people survive, but it doesn’t change a company’s incentive to keep automating. Higher taxes on capital? Changes the profit numbers but not the day-to-day decision to replace a human with AI.
Profit sharing or stronger unions? They narrow the gap a little, but they can’t close it because automating is still the dominant strategy that no voluntary agreement between companies can enforce.
The only thing that actually works, according to the math, is a Pigouvian automation tax, basically charging companies a fee for each task where they fire a worker and destroy the demand that the worker used to create.
At the end of the day, this isn’t some clean transfer of wealth from workers to shareholders. Both sides lose. Workers lose their income. Companies lose their customers. It’s pure deadweight loss that hurts everyone in the economy.
The AI layoff trap isn’t some distant prediction. It’s already happening right now, and the cold math in this paper shows that market forces alone will never break the cycle on their own.