The Rise of the Permanent Underclass

Is getting a good job still sufficient to build wealth? This question has become increasingly common in Silicon Valley, with a new phrase gaining traction: the “permanent underclass”. This idea describes how advances in artificial intelligence could eventually make many jobs much less valuable, which would make it harder for people to improve their financial situations with work alone. 

Although AI has significantly highlighted these concerns, the trend itself is not entirely new. Economic mobility within the United States has been declining for decades. Research from Opportunity Insights shows that around 90% of Americans born in 1940 earned more than their parents, compared to about 50% of Americans in the 1980s. Meanwhile, necessities such as housing, healthcare, and education have become more expensive relative to income. 

Many professionals in the tech industry are worried that AI could become a catalyst for these existing trends. When company tasks become automated, fewer workers will be needed to produce the same amount of output. This means that ownership of assets such as stocks, businesses, and real estate could become even more important than wages. Those who already own assets could continue building their wealth, while those who depend on income alone might struggle to keep up. 

This fear has driven the growing popularity of financial independence among tech workers. Instead of relying on employment, many workers are investing money so that they become less dependent on the future job market. Their goal is to ensure that their money continues to grow regardless of economic or technological changes. 

Recent layoffs have only added to rising concerns. This year alone, more than 101,000 tech employees have been laid off, following roughly 124,000 layoffs last year and around 150,000 in 2024. To make matters worse, entry-level hiring has also increasingly slowed down compared to previous years, making it much harder for new workers to enter the tech industry. 

No one can know for sure how AI will affect the economy in the long run. However, the growing debate around a “permanent underclass” reflects the concerns of many workers about their ability to achieve success through traditional career paths. Whether AI causes the shift or simply speeds up the trends that were already underway will remain one of the most important economic questions for the future.