Marx lost to Microsoft...
Cash-rich Microsoft is paying 60,000 staff, 27% of its workforce, to walk away by Christmas. Add the 7% already shown the door and 34% of the payroll will have gone, at the very company that knows best where AI is heading.
That is a lot of desks to clear in a hurry. If Microsoft judges such surgery necessary, plenty of service businesses will soon have to follow. Labour loses, capital gains: an old tune Marx would recognise. Its second-order effects are harder to hum along to, not least widespread social strife if every boardroom reaches the same conclusion at the same moment.
Students already striking from Paris to Delhi, partly over AI, may soon have company: the newly redundant.
For a first taste, we simply cut staff costs by 25% across service-heavy sectors and traced the effect through to post-tax earnings (see table). The positive impact on earnings is huge, but it assumes business carries on as before. It will not.
Our deliberately simple table concerns 9.6m of the 23.6m people employed by the 520 stocks we cover at the time of writing. If a quarter of them lose their jobs, €180bn of household income vanishes. Finance ministries will notice: that implies some €40bn less in tax receipts.
In the near term, though, European companies that trim staff costs à la Microsoft could see earnings jump by anything from 17% (Banks) to 155% (IT Services; this is clearly wrong though as cuts to body-shopping staff imply parallel cuts to revenues).
The message might well be that service based sectors may have a good ride before the reality of AI sinks in, of a darker future with no consumers left...
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