GoKawiilStudy finds AI-driven layoffs trap firms in a self-defeating automation race
Economists behind a paper titled 'The AI Layoff Trap' argue that when firms automate to cut costs, each captures the savings but only bears part of the resulting drop in consumer demand caused by worker displacement, with the rest hitting competitors. This creates a competitive dynamic where rational firms keep automating even though the aggregate result is worse for both workers and firm owners than if they held back.