There is widespread concern that AI will lead to mass unemployment in the years ahead. As I and others have pointed out, we have yet to see any evidence of this in the data on job growth or productivity. But maybe we just have to wait a bit longer.
But the idea that AI will eliminate all the jobs ignores the ways that creative entrepreneurs can develop new industries that require hundreds of thousands, or even millions of employees. These new industries may contribute nothing to well-being, but they create jobs.
The best example of this sort of waste is the financial industry. It would be hard to envision a sector where the technological developments of the last half-century should have cost more jobs than finance. Back in the 1970s we didn’t even have simple spreadsheets. People had to use adding machines for basic calculations, if they didn’t do them by hand.
The automatic teller was just coming into use in the 1970s. Few banks had them, and they certainly weren’t available in convenience stores, airports, and shopping centers. Direct deposit of paychecks was still a rarity, as were automatic payments.
All of these developments, and many others, may have been expected to cost jobs in the industry. But the opposite happened. In 1975, there were 4,047,000 workers employed in the financial sector. Fifty years later, in 2025, the number had more than doubled to 9,196,000. Employment in the sector had even increased slightly as a share of total employment, rising from 5.3% in 1975 to 5.8% in 2025.
What were all these additional workers doing? Much of the story is that banks and other financial institutions used the new technologies to develop more complicated financial instruments. For example, Fannie Mae and Freddie Mac, the two huge quasi-governmental mortgage agencies, developed mortgage-backed securities (MBS). Eventually, private investment banks got into the game. They developed complex ways to slice and dice mortgages to maximize their profit and ostensibly minimize risk, or at least they seemed to think they had until the housing bubble collapsed.
Complex financial instruments were developed in other areas. Derivatives like options and futures exploded, as did the trading volume in these assets. And more recently, we have seen the crypto boom. The value of the outstanding stock of crypto, an asset with no use other than facilitating illegal transactions, is now close to $3 trillion. And plenty of people are employed in trading and tracking crypto.
Of course, these industries also employ lawyers to both protect them from legal actions and harass competitors. And they employ lobbyists and propagandists to tell the public they actually do serve a useful purpose.
The securities and commodities sector within finance has had extraordinarily rapid growth in employment, increasing from 489,000 in 1990 (the first year for which there is consistent data) to 1,141,000 in 2025. This is the sector responsible for issuing and trading stocks, bonds, and derivatives. Much of what these workers do would not be possible without the innovations in software and computers in the last half-century. It might be difficult to see the economic benefit from the increased size of the financial sector, but it does employ lots of people.
It is reasonable to think development of AI will foster the growth of many sectors that provide no more value than the expanded financial sector. It might be difficult to identify the sectors in advance, but we should be confident that today’s crop of oligarchs will find them.
This first appeared on Dean Baker’s Beat the Press blog.
