Rishi Sunak has urged a fundamental reassessment of how work is taxed, warning that the accelerating adoption of artificial intelligence is reshaping hiring practices as businesses increasingly weigh the costs of human employees against automation. Writing in The Times, the former prime minister argued that the current tax system incentivizes companies to invest in AI rather than people.
Sunak highlighted the immediate financial burden placed on employers when hiring through National Insurance contributions (NICs), although the deployment of AI solutions carries no equivalent tax penalty. This disparity, he contends, will become increasingly significant as businesses integrate AI technologies into their operations. “You are far more likely to lose your job to someone using AI than to AI itself,” Sunak wrote, suggesting that the competitive advantage conferred by AI-powered productivity gains will lead to workforce restructuring.
Emerging data supports Sunak’s assessment. Research from Anthropic indicates that while AI exposure has not yet triggered widespread unemployment, it is demonstrably slowing down hiring, particularly for younger workers entering the job market. Job entry rates for those aged 22 to 25 in occupations susceptible to AI disruption have declined compared to pre-2022 levels.
Industry data further corroborates this trend. The British Standards Institution recently found that 41 percent of businesses report that AI is enabling them to reduce headcount, while nearly a third now prioritize evaluating AI solutions before considering modern hires. These shifts are occurring against a backdrop of broader labor market adjustments, with over 1.17 million jobs eliminated in the United States in 2025 as companies restructured following pandemic-era hiring surges.
Sunak’s intervention comes as policymakers grapple with the implications of AI for the future of work. He supports the proposed establishment of an AI economics institute, spearheaded by Labour’s Rachel Reeves, but emphasized the need for the institute to have access to real-time data from both job markets and technology firms to effectively monitor and analyze the evolving landscape. He stated, “The choice is whether we try to shape this change, or whether we let it swamp us.”
The existing tax structure, which generates over £100 billion annually for the Treasury through employer National Insurance contributions, is facing increasing scrutiny. Economists are questioning whether a system predicated on taxing employment remains viable in an era where automation presents a compelling alternative. Some countries, including Denmark and New Zealand, have adopted alternative approaches, placing greater reliance on income or consumption taxes rather than directly taxing jobs.
Recent increases in employer National Insurance contributions in the UK have further amplified hiring costs, coinciding with a period of heightened business interest in automation, offshoring, and alternative labor models. Surveys indicate that a number of employers have already factored these increased costs into decisions to curtail recruitment or reduce their workforce.
While proposals range from cutting taxes on employment to incentivize hiring to implementing levies on companies that replace workers with AI, ministers have, to date, rejected the latter approach. Sunak likewise underscored the importance of addressing skills gaps, noting that AI fluency is increasingly becoming a fundamental requirement for many roles, while concerns persist that the automation of routine tasks may diminish entry-level opportunities traditionally serving as pathways into the labor market.
At an AI Impact Summit in New Delhi, Sunak joked that navigating discussions on artificial intelligence would be easier than family dinners with his in-laws, whose family includes an astrophysics professor, a former engineer, and a computer scientist. The remark, reported by the Times of India, highlighted the growing technical expertise required to understand and engage with the rapidly evolving field of AI.
