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AI job exposure and risk of human jobs lost to AI. Image generated by IA
By Isabel Ortiz and Bill Shoulder
NEW YORK, Jun 26 2026 (IPS)
Artificial intelligence (AI) promises remarkable gains in productivity, science, medicine and education. But it is also poised to wipe out millions of jobs, hollow out the middle class, and drain the tax revenues that pay for hospitals, schools and pensions. The process has already begun, and the time to act is running out.
The International Monetary Fund (IMF) estimates that AI will affect almost 40% of jobs worldwide. In advanced economies, around 60% of jobs are exposed and as many as one in three (33%) human jobs are at high risk of being replaced by AI. In emerging markets, about 40% are exposed, with roughly one in four (24%) at high displacement risk; and in low-income countries, an estimated 26%, with close to one in five (18%) human jobs lost to AI.
Isabel Ortiz
Job losses shrink the middle classNew jobs will appear but, according to the IMF, far more are likely to vanish. The effects spread beyond the workers who lose their jobs. Wages fall, insecure work multiplies, and bargaining power collapses once employers can credibly threaten to swap workers for AI. More income flows to those who own the technology and to a handful of dominant firms, while the share reaching ordinary employees and workers shrinks.
Middle-class households are the economy’s main consumers. If their incomes fall, shops and small businesses sell less, investment slows, and closures rise. The economy can then slip into a low-growth trap of weak demand, low wages and chronic underemployment.
Falling tax revenues weaken the welfare state
The pressure then moves to public finances. Much of governments’ funding depends on the middle class: income taxes, consumption taxes and social security contributions. If wage income falls and stable employment shrinks, public revenues shrink with it. At the same time, more people need unemployment support, retraining, healthcare and income assistance. Governments then face the fiscal vise of lower revenue and higher need, a risk highlighted in the IMF’s 2026 analysis of AI, labor markets and public policy.
Bill Shoulder
Public pension systems rely on pay-as-you-go financing, where current workers fund retirees. In health, healthy people finance those who are sick. If the pool of contributors shrinks, sustainability collapses; then governments tend to cut benefits, raise charges or shift more costs onto households, as explained in the UNRISD article AI and the Future of the Social Contract.Public services and democracy come under strain
History suggests what often comes next: austerity policies. Governments under pressure raise consumption taxes, increase user fees, tighten eligibility rules and cut public spending. When revenues weaken, education, health, care services and social protection are often treated as budget lines to be “rationalized,” even though they are human rights and indispensable public services that hold societies together. The result is a two-tier world: quality private services for the wealthy few and failing public provision for everyone else.
Economic insecurity erodes democratic trust. If people feel that work no longer provides stability, that public institutions no longer protect them, and that the gains from technology flow upward to a small elite, resentment grows. Polarization intensifies. Scapegoating becomes easier, as does the appeal of surveillance, manipulation and more authoritarian forms of control, especially when AI itself can be used to shape information and public debate.
The future is ours to shape
None of this is inevitable. As Nobel laureates Acemoglu and Johnson argue, the impact of AI depends far less on the technology than on the political and economic choices we make about how to use it. Governments can tax the windfall profits and concentrated power AI creates. With these funds, they can protect demand and guarantee income security through the transition. Governments can and should expand public services and social security as fundamental human rights. States should also give workers and citizens a real say in how AI is deployed, and regulate AI to strengthen democracy, prevent disinformation and surveillance from eroding civic trust before it is damaged beyond repair.
AI is already transforming society. The decisive question is whether democracies can ensure that its enormous gains are shared widely enough to foster prosperity for all, preserving the social contract on which stable, dignified societies depend. That choice is still ours, but not for much longer.
Isabel Ortiz, Director, Global Social Justice, was Director at the International Labor Organization (ILO) and UNICEF, and a senior official at the UN and the Asian Development Bank.
Bill Shoulder is an AI software engineer and a researcher, with a background in artificial intelligence and international project management.
IPS UN Bureau
Follow @IPSNewsUNBureau
(L-R) Horacio (Luis) Carvalho, CEO of Climate Change Ventures, and Faraz Khan, MBE, at London Climate Action Week. Carvalho's firm advises on carbon mitigation and green investment projects. They signed an MOU to develop markets with Brazilian CPR Verde (green rural product certificate), a Brazilian financial credit instrument used to fund environmental preservation, forestry conservation, and carbon sequestration. The markets they are eyeing will be Saudi Arabia, Africa and Pakistan. Credit: Faraz Khan
By Zofeen Ebrahim
LONDON & KARACHI, Pakistan, Jun 26 2026 (IPS)
The 30 COP gatherings may not have done what three months of US-Israeli war against Iran did: expose the world’s vulnerability to fossil fuels.
As the world faced its biggest energy shock in a decade, the case for investing in clean energy suddenly became far more compelling.
As an intense heatwave grips Europe, with London’s Met Office issuing a “risk to life” warning and the closure of shops, offices and schools alongside disruptions to transport during the London Climate Action Week (LCAW), calls for this shift are gaining even greater momentum.
New Sense of Urgency
“The sentiment is palpable among policymakers, investors and business leaders,” conceded Faraz Khan, MBE.
A Pakistani entrepreneur and co-founder and partner of Pakistan-based Sustainadility, a technology, data and advisory firm, with over 25 years of experience in multi-stakeholder investments and in drafting environmental, sustainability and governance frameworks, is among those gathered to discuss the future of climate finance and the energy transition.
Speaking to IPS by phone on the sidelines of LCAW which closes on June 28, Khan stressed the urgency of transitioning from fossil fuels to renewable energy, saying the shift would not be possible without investors and businesses.
Khan described the mood at LCAW, as “optimistic” tempered by caution. He also welcomed the attention Pakistan was getting. “Our country was lauded for its efforts in brokering the peace deal,” referring to the Islamabad Memorandum between the United States and the Islamic Republic of Iran.
From Rule-Making to Seeking Investment
Comparing the two events, he said the annual Bonn climate talks, held from June 8 to 18, focused on diplomatic negotiations and climate rule-making, while LCAW, also an annual event held since 2019, centres on mobilising private investment in sustainability and ESG and scaling these initiatives commercially.
“LCAW is more business- and private sector-orientated,” said Khan, who is also the founder and director of SeedVentures, a Pakistan-based social impact organisation and impact investor.
Still, he said: “There are two sides to the coin. On the one hand, the US-Iran peace deal and the reopening of the Strait of Hormuz have shown the world that oil remains crucial for the world to exist; but, on the other, many countries recognise that dependence on fossil fuels is not in their national interest and even poses a national security risk.”
Geopolitical conflicts have exposed the vulnerabilities associated with oil production, trade and transportation, which is why investment in alternative energy is expected to accelerate.
At a COP31 presidential meeting with the private sector at LCAW, which Khan attended, the conversation revolved around the circular economy, electrification and climate finance with some of the biggest names in the global climate community, including BlackRock, the World Bank, UNIDO, the IFC and several trade organisations.
“It was a gathering of the who’s who of the climate world,” Khan said with a laugh. “Even we made the cut.”
What was missing, however, Khan said, were women in decision-making roles. He was, however, impressed by those in the Turkish COP team, praising their intellectual rigour and commanding presence in the room, which he found to be “truly impressive”.
Beyond the composition of the meetings, Khan said the discussions themselves reflected a growing determination to move beyond rhetoric.
There was a strong sense in the room that a new precedent was about to be set by shifting the focus from negotiations to implementation, investment and action.
“Governments can create an enabling environment and UN frameworks can provide the rules, but ultimately it is investors, bankable projects and big businesses that will drive change,” he said.
While the Bonn climate talks focused on regulatory frameworks, LCAW’s focus is on climate finance and transactions, he noted. “And at Antalya, where the COP31 will be held this November, it will be about putting money where our mouths are—deploying capital into bankable projects and creating collaborative investment vehicles to scale climate action,” said Khan.
Private Sector Takes Centre Stage
He also observed that China was frequently cited as a global leader in clean energy investment.
“Across the various meetings, I sensed a strong and growing appetite for investment in renewable energy, and I believe this momentum will only accelerate,” he said.
Large businesses and institutions, he added, would be critical to delivering a just transition because their extensive operations and community links give them the reach needed to drive meaningful change.
The emphasis on electrification and reducing dependence on fossil fuels was echoed by Türkiye’s COP31 leadership.
Earlier this month, speaking to The Guardian on the sidelines of the climate talks in Bonn, Murat Kurum, Türkiye’s environment minister, said the 35% target would be “one of the defining priorities” of the COP31 presidency.
“By electrifying daily life, from transport to buildings and industry, we can protect families and businesses from volatile energy markets,” he told the media outlet.
Khan believed Pakistan has an opportunity to position itself at the forefront of this transition.
While Pakistan is frequently showcased as a victim of climate disasters, despite contributing less than 1% of global greenhouse gas emissions, Khan said the global focus on solar should also shine a light on the country’s “silent solar revolution”, which has transformed its investment landscape.
“Pakistan has become a global example of how solar adoption can evolve rapidly, opening up substantial investment opportunities in solar manufacturing and battery production,” he said, adding that modernising the grid and scaling up utility-scale energy storage have become increasingly urgent.
Investing in Nature
Beyond renewable energy, Khan saw significant opportunities in nature-based investments.
Khan said Pakistan’s rich biodiversity—from mangroves and forests to wetlands, rangelands and mountain ecosystems—offers enormous investment potential, with private capital capable of both restoring and protecting these natural assets.
Agriculture accounts for a large share of Pakistan’s economy and is a major driver of biodiversity loss. He said private businesses could invest in regenerative agriculture, agroforestry and sustainable rice and cotton production, either to meet sustainability goals or as part of emerging biodiversity credit markets.
“Just as there are carbon credits, there are biodiversity credits, and these are directly linked to food security and agriculture,” Khan said. Given agriculture’s central role in Pakistan’s economy, he argued that the country holds enormous potential for biodiversity credits. “I think this is going to be truly phenomenal because it presents enormous investment opportunities,” he said.
But realising this potential will depend on Pakistan’s ability to attract sustained private investment.
Investment Challenges
Sadly, there are few takers.
Khan said Pakistan’s high sovereign risk remains the biggest obstacle to attracting international climate investment at scale, although recent policy reforms, including the Pakistan Green Taxonomy, green banking guidelines and ESG standards, have improved investor confidence.
He also pointed to a shortage of bankable projects, with many failing to attract global investors despite their strong fundamentals. Still, he said, the investment potential remains enormous.
Yet time may be of the essence.
If the recent turmoil in the Middle East exposed the world’s vulnerability to fossil fuels, Khan believes it also underscored the urgency of accelerating the clean energy transition. For Pakistan, he said, the opportunity is immense—but only if the country can create the conditions needed to attract the investment required to realise it.
IPS UN Bureau Report
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