While the U.S. explores wealth redistribution schemes like UBI, China's initial approach makes it illegal for companies to fire employees whose roles are automated by AI. This forces firms to retain and find new tasks for workers, rather than shifting the burden to the state.

A rapid, significant (e.g., 5%) spike in unemployment over a short period (e.g., 6 months) due to AI would trigger an immediate and massive political and economic response. This would be comparable in speed and scale to the multi-trillion dollar stimulus packages passed during the COVID-19 pandemic.

Instead of controversial wealth or broad income taxes, a more politically viable solution for AI-driven job displacement is to levy a higher corporate tax rate specifically on companies whose profit margins surge after replacing workers with AI.

Instead of outright replacing entire roles, AI is more likely to cause significant wage compression. As AI makes certain skills more common, it floods the labor supply for those tasks, driving down pay for both displaced workers and incumbents in affected fields.

To handle the social unrest from AI-driven job displacement, governments are predicted to turn to a two-pronged approach. First, they will issue UBI-like payments to quell economic anxiety. Second, they will increase policing to control the inevitable fear and anger.

Faced with mass job loss from AI, governments are unlikely to seize assets from the wealthy. The politically easier path is to print massive amounts of money for social support, preserving the existing capital structure while devaluing the currency.

The correct response to AI-driven job displacement is counterintuitive: make labor markets more flexible. This allows workers to quickly reallocate to tasks where humans still hold a comparative advantage. Protecting old jobs with rigid regulations only makes firms uncompetitive, leading to worse economic outcomes.

The potential rise in unemployment from AI will not happen in a vacuum. Central banks and governments are expected to use tools like interest rate cuts, unemployment benefits, and targeted spending to stimulate the economy, thereby shortening and reducing the severity of any labor disruption.

The consensus in Congress is not to regulate AI to prevent job loss, which is seen as implausible. Instead, the focus is on proactive investments to manage the transition and ensure people have financial stability, with ideas like universal healthcare emerging as alternatives to UBI.