Developed economies are anticipating large disruption from the emerging technology of the Artificial Intelligence sector.  New tools, particularly Large Language Models with pre-training and reinforcement learning, are increasingly capable of performing the intellectual work often associated with “white-collar” jobs, posing a new risk of automating a larger percentage of the work force’s professions.  While this is not the first industrial revolution, historical labor shifts created demand for new cognition based jobs, while cognitive automation along with robotics threatens to displace labor across both legacy and emerging sectors.  Therefore, if AI becomes capable of automating all or most tasks, it could lead to mass unemployment and a partial or total decoupling of labor and production.

This paper seeks to quantify this risk by utilizing a classical simulation model to investigate an economy with a dynamic labor market and an AI capable of automating all tasks.  The economy will be calibrated to a balanced state and then disrupted with the introduction of AI’s “free” labor.  The resilience of the system is then evaluated across various scenarios, including no intervention, minimum wages, layoff prohibitions, decreasing prices, and fiscal interventions via taxation and redistribution.  This paper is primarily interested in revealing the economic impact of AI productivity increases on consumers’ purchasing power and corporate profits.  This paper finds that in a simplistic economy, AI generally negatively impacts employment, purchasing power, and corporate profits.  Exceptions to this only occur when companies sustain demand by maintaining payrolls to employees through financial automation penalties or layoff prohibition.