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  • Writer's pictureBrian Gómez

How AI and Financial Uncertainty are fast-tracking the Economy towards Change

Last fall, I discussed the anticipated increase in standoff within the economy. I predicted an impending recession, continued inflation, and the realization that businesses would resort to drastic measures to maintain profitability, such as slashing working hours, reducing benefits, and consolidating roles. Consequently, I foresaw a significant surge in unionization movements.. As a result, we would witness closures and shutdowns.

Since then, two notable shifts have occurred, which merit discussion. Firstly, the rapid increase in prices has led to a rise in the sharing economy, which, overall, is not as beneficial for GDP compared to our traditional economy that is focused on ownership.

Initially, the concept of a sharing economy focused on replacing expenditures solely related to leisure and travel. These economies were always intended to be temporary, as people predominantly did not purchase Airbnb homes for vacation purposes or buy Ubers for local transportation. This approach worked well as we left the 2008 recession and wanted a cheaper alternative.

However, what we have observed following the recession-induced withholding economy surge, where the demand for buying cars and homes skyrocketed, is a shift in the traditional sharing economy models. Uber is replacing the need for individuals to buy cars or use public transport, while Airbnb is supplanting short-term rental markets in numerous locations even as prices continue to climb. Due to this lack of affordability, they are now promoting single room rentals to guests.

Financial uncertainty has fostered the growth of the sharing economy through subscription-based models. From housing to potentially healthcare, an increasing number of innovators are entering an industry that has become prohibitively expensive and plagued by excessive inventory. Landing for example is rent-on-demand, while Misfits Market promises groceries without the excessive bill. Our economy is transitioning into one based on contractors and subscriptions. The subscription Economy is poised to grow by 1.5 Trillion by 2025. In many ways subscriptions for many represent the innovation the private sector is doing, when traditional private sector models including landlords and housing, car rentals and dealerships, and even hospitals are not affordable.

This transformation is also noticeable on the supply side. House cleaners, Uber drivers, and other sharing economy services often emphasize the promise of freedom for workers. TikTok ads for these companies market the allure of freedom and flexibility. The labor shortage is not solely about the desire to work but rather about freedom. Since 2020, there has been a significant shift towards contract-based work instead of full-time staffing due to cost considerations for employers and the desire for freedom on the part of workers. From 2020 to 2022 the amount of contractors in the U.S doubled, from 15.8 to 31.9 Million. At the same time since March 2020 1.8 Million People have left the workforce and around 10 million new businesses were created.

The second shift pertains to AI. AI is now poised to rapidly eliminate jobs, primarily in intellectual labor rather than physical labor. Goldman Sachs predicts that number to be around 25-50% of jobs in the U.S. Some of these jobs have already experienced outsourcing success to English-speaking countries. Consequently, it is unsurprising that numerous companies are turning to AI amid budgetary constraints and an uncertain economy. The interaction with unions is likely to result in fewer jobs overall but better pay. This mirrors the patterns observed during COVID within many companies.

As we transition to this new economy where we have very few well paid jobs, a huge gap in the middle of the skill market, and then a demand for physical labor that could be filled by shifts through immigration reform(but is currently under legal siege in places like Florida and Texas) we will be left with a huge economic gap.

This gap is an issue for a variety of reasons. Primarily when we have high unemployment or underemployment, we see a rise in crime. We also see this in places with high inequality, not necessarily only poverty, since much of violent and property crime is about the movement or opportunity that resources create, paired with the increasingly desperate need for resources. More people with lower wages, likely trapped in the sharing economy labor force will also be increasingly turning to innovations in the private sector as well as legal showdowns to maintain housing, food, and education. From tenant battles to union stand-offs these shifts will test not only the economy, but society itself as it seeks to maintain a system that is continuously at the fault line.



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