AI and Jobs: What’s the Impact?

By SBE Council at 5 November, 2025, 1:58 pm

by Raymond J. Keating –

Recent announcements of layoffs from some large corporations – such as Amazon cutting 14,000 jobs, UPS reducing 48,000 jobs, 2,600 positions at Target, at least 1,000 jobs at Paramount Skydance, and so on – have added fuel to the overheated and wrongheaded rhetoric about how artificial intelligence is going to annihilate millions of jobs.

In a free enterprise economy, a few things must be understood.

First, these job cuts are real and can be brutal for those being laid off. The realities for those affected should not be downplayed.

Second, though, workforce reductions by large businesses is nothing new. Indeed, across the economy, they are not unusual at all, whether in good times or bad times. While large businesses often shed jobs, the keys to job creation tend to be smaller businesses. That’s where the bulk of U.S. job creation comes from, with the SBA’s Office of Advocacy noting, “Small business (fewer than 500 employees) job gains have been reasonably persistent over time, accounting for 62.8 percent new private sector jobs from 2005 to the first half of 2024.”

As always has been the case and is the case now, entrepreneurship stands at the center of the U.S. economy in terms of driving innovation, and economic, income and employment growth.

Third, while each leap in technology, obviously, differs, the ultimate results are strikingly similar, as are the fears. As technology automated and vastly expanded the productivity of agriculture, what would all of those people working in agriculture – 40 percent of U.S. labor force in 1900 – possibly do for work? Today, a little over 1 percent of the labor force work on farms.

Manufacturing employment in the U.S. peaked in mid-1979 at 19.6 million, with manufacturing jobs registering 12.7 million in August 2025. At the same time, manufacturing output is notably higher, and the U.S. economy has added more than 69 million nonfarm jobs.

Concerns over job losses were raised in the 1990s as well due to the arrival and expansion of the internet. Yet, the U.S. economy has added more than 42 million jobs since the mid-1990s.

And by the way, real per capita personal disposable income (that is, personal income less personal current taxes and adjusted for inflation), which is the part of income individuals use for investing, saving and consuming, has grown dramatically throughout. (See the following chart.)

Source: Federal Reserve Bank of St. Louis, FRED

The economist Joseph Schumpeter referred to this process as “creative destruction.” In his book Capitalism, Socialism and Democracy, first published in 1942, Schumpeter wrote the following:

● “The fundamental impulse that sets and keeps the capitalist engine in motion comes from the new consumers’ goods, the new methods of production or transportation, the new markets, the new forms of industrial organization that capitalist enterprise creates.”

● “The opening up of new markets, foreign or domestic, and the organizational development from the craft shop and factory to such concerns as U.S. Steel illustrate the same process of industrial mutation – if I may use that biological term – that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one. This process of Creative Destruction is the essential fact about capitalism. It is what capitalism consists in and what every capitalist concern has got to live in.”

This is how economic growth, job creation, the alleviation of poverty, and enhanced well-being happen. In the examples cited above, this occurred with technological enhancements related to farming, manufacturing, computers and the internet, and it is and will be the case with the advancement of AI.

As conveyed within recent SBE Council surveys on AI adoption rates and the positive impact of these tools, many owners report they are using the efficiencies and savings generated by AI to hire new employees. Moreover, small business owners report they are using AI to fill workforce gaps. In an October 2025 “Small Business Check Up and Technology Use Survey,” 17% of small business owners said that they turned to AI solutions because they could not find the people they needed for certain jobs. In general, and according to the survey, business owners largely view AI as reshaping work rather than replacing work: 33% foresee both job creation and reduction, while 31% expect no impact on jobs.

A robust free enterprise system means that increased innovation and productivity provide the foundation for new (often previously unimagined) and expanded opportunities for entrepreneurs, investors and workers. In order for such opportunity-laden vibrancy to continue, government policymakers must refrain from thinking that they know best by imposing misguided and costly taxes, regulations, dictates and industrial policies. Sure, some basic regulatory guardrails will be needed as matters develop, but these must be rooted in sound economics and in market realties.

Policymakers must respond to real issues, and not act on political impulses or ideological fantasies.  And of course, pro-entrepreneurship, pro-investment, pro-innovation and pro-job-creation policies are needed, in particular, low taxes, light regulation, free trade, limited government spending, strong property rights, welcoming immigration policies, and sound money.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. He is the author of “The Weekly Economist” book series, and 10 Points from Walt Disney on Entrepreneurship.