Wharton Study Warns AI-Driven Layoffs Could Trigger Economic Self-Destruction

A research paper from The Wharton School warns that AI-driven layoffs could create a self-destructive economic trap. Authors Gerry Tsoukalas and Brett Falk argue that while individual companies have a competitive incentive to automate and replace workers, widespread layoffs would reduce consumer demand, ultimately harming the same businesses that rely on that spending. The paper describes this as a 'dominating strategy' in economics, where firms must automate or lose to rivals. The World Economic Forum separately reports that traditional reskilling programs are failing to keep pace with AI disruption, and that over 120 million workers globally may face redundancy by 2030. Tsoukalas suggests policy interventions such as taxing companies that replace workers with AI or subsidizing those that retain employees, warning that waiting for firms to self-regulate is the worst possible approach.