Macro Markets and Machines_The Economic and Market Transformation Driven by AI_GWM report - Flipbook - Page 45
Macro, Markets, and Machines
November 2025
Displacement is easier to model, but job creation – often emergent and nonlinear – poses a forecasting
challenge with major policy implications. AI may generate entirely new tasks, occupations, and firms, such as
prompt engineering, AI ethics, synthetic data design, virtual production, AI-assisted drug discovery, and
autonomous logistics, alongside services not yet imagined. History urges humility: Past waves of generalpurpose technologies have consistently reshaped job landscapes in ways forecasters failed to anticipate. That is
why near-term labour effects tend to dominate models, even as longer-run occupational churn unfolds more
gradually and unpredictably.
Universal basic income is a premature prescription, in our view. First, Acemoglu cautions the economic viability
of automation likely sits well below simple exposure headcounts and diminishing marginal returns on capital
would counter-balance labour displacement over time. Practically, few countries possess the fiscal capacity or
tax architecture to sustain a broad-based universal basic income. The more immediate priority should be faster,
fairer reallocation – skills, matching, mobility, and workplace redesign – to keep workers attached and ensure
gains are widely shared. If transitions are mismanaged and participation erodes, pressure for costlier
interventions will grow, heightening fiscal tensions with higher deficits that could further erode broader gains.
Section 5.2: Revenues, Rewards, and Restraint
Fiscal policy faces a timing and composition squeeze. In most advanced economies, labour income remains the
backbone of public revenue, accounting for roughly 60% of receipts (Exhibit 39). Yet early AI adoption tends to
shift value toward capital and intangibles, often under tax-favoured treatment. This transition risks softening
revenues just as governments face rising demands to fund reskilling, re-employment, digital infrastructure,
regulatory oversight, and compute-intensive public services. The result could be widening deficits that precede
productivity gains, straining fiscal baselines before growth shows up in the tax base.
Exhibit 39 – Labour Taxes Are an Important Source of Government Revenue
U.S.
Italy
U.K.
France
Germany
Canada
0%
20%
40%
60%
80%
100%
% of total tax general government revenue
Individual income
Social security contributions
Corporate income, profits and capital gains*
Other
Payroll
Goods &services
Property
Note: *Capital gains taxes on individuals included in this category, excluded from individual tax revenue category to proxy labour
taxation burden.
Sources: Scotiabank Economics; OECD.
Scotia Wealth Management
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