The government must act now to ensure the AI transition benefits everybody

Sasjkia Otto is a senior researcher at the Fabian Society. Her research covers technology, labour markets and ageing.

Something is happening to the UK labour market. There are signals that more people are competing for fewer jobs. Since the end of 2022, unemployment has risen by nearly half a million, job vacancies have dropped by more than a third, and the redundancy rate has nearly doubled. These challenges are particularly acute at entry level, where an average of 70 graduates are competing for each role.

Many are blaming artificial intelligence for these changes. The November 2022 release of ChatGPT and subsequent generative AI models – which can create original text, images, video and software code from a user prompt – marked a turning point. The Department for Science, Innovation and Technology (DSIT) reports that one in six businesses now use AI. And research by King’s College
London found that employers with a workforce highly exposed to AI have reduced employment by 4.5% between 2021 and 2025 – with the drop almost entirely accounted for by routine entry-level roles which are easiest to automate.

In reality, the picture is unclear. A British Chamber of Commerce has survey found that just 5% of firms report reducing headcount because of AI. This is because organisations exposed to AI won’t necessarily adopt it. Moreover, AI could slow productivity if used ineffectively – circulating “AI slop” that gets the job done quickly but creates more work for colleagues down the line.

Automation can also reorganise work in ways that create extra tasks rather than fewer, with some workers in AI-exposed roles actually working longer hours. Changes in the labour market may also have other causes, such as the post-Covid economic slowdown and rising geopolitical tensions.

But this moment must be a wake-up call. AI has developed at a pace that few could foresee. Some of the world’s leading experts have warned that “artificial general intelligence” – where the technology can match or exceed human cognitive abilities at any task – could be as little as a few years away. Nobody can predict how far or fast these capabilities will develop, or how organisations will use them. But firms will always be tempted to use AI to cut labour costs. Change is coming. We must be ready – to ensure people across the country are better off because of it.

Unfortunately, the UK remains ill-prepared. For AI to benefit everybody, organisations must adopt it productively, use the gains to improve and grow, and share that growth fairly. Industry, government and workers will all have to pull together: equipping people with the skills to navigate an uncertain world of work, improving working conditions, protecting workers from new forms of exploitation, and ensuring growth is reinvested in the UK economy and the social safety net.

We remain, however, at the foothills of understanding how organisations are using AI – let alone what the implications are and how we should respond. There have been some positive developments. The government has launched an AI and the Future of Work Unit – with representatives from industry and trade unions – to provide authoritative evidence on AI’s labour market impact and ensure the transition boosts jobs and growth while helping workers to adapt. It has already published a helpful assessment of AI’s impact on the labour market.

However, critical gaps remain. There is no consensus on how employers, individuals and government should share responsibility for supporting people through change. And the UK lacks many of the policy levers needed to ensure everybody pulls their weight. This needs urgent attention.

Some of the trillion-dollar US-based companies automating large numbers of UK jobs pay very little tax here – and addressing this creates risk for the UK’s relationship with the US and any future trade deal. These companies profit from displacement, while leaving UK taxpayers to foot the bill.

Meanwhile, several US tech companies have begun trialling social security instruments – including forms of Universal Basic Income – that should be the domain of democratically elected governments.

But the challenge also lies closer to home. The apprenticeship levy is an important mechanism for helping people take their first step into work and retrain throughout their careers. But employers contribute based on their payroll costs. This means firms that use AI to deliver more with fewer workers can currently enjoy the benefits without shouldering a fair share of responsibility for supporting those displaced.

The government must act now. Reforms to tax, skills and social security systems take time – particularly if doing so also entails navigating the UK’s relationship with one of its greatest historic allies. It is dangerous to simply wait and see what happens. So the government must plan for uncertainty: this means a public conversation about what support workers need, who is responsible for delivering it, and what levers are needed to ensure everybody plays their part.

The future is hurtling towards us. We must act to shape it before it is too late.