Core Summary

  • As artificial intelligence rapidly reshapes the global economy, California Governor Gavin Newsom is seeking to position the state as a pioneer in addressing the technology's potential labor market risks.
  • The executive order signed by Newsom on May 21 directs California state agencies to track AI's impact on the workforce and consider a range of potential policy options, including severance pay and other forms of compensation for displaced workers.
  • "This moment demands that we reimagine the entire system—how we work, how we govern, how we cultivate talent for the future—and this work is starting in the Golden State," Newsom said in a press release.

Deep Insights

The move comes amid growing concerns and resistance to AI, including warnings from Pope Leo about AI risks, and pro-AI commencement speakers being booed and ridiculed across the United States.

California plays a unique role at a critical moment for AI. The state is both a leading hub for AI development and particularly vulnerable to automation-driven changes in hiring and employment stability, due to its concentration of large tech companies that have recently announced layoffs.

According to CNBC, Meta announced last week it would cut 10% of its workforce (about 8,000 people) to accelerate its AI efforts.

Meanwhile, Cisco Systems said earlier this month it plans to cut nearly 4,000 positions—less than 5% of its total workforce—as part of a broad restructuring aimed at focusing on AI and other high-growth areas.

Newsom's executive order is part of a wave of AI workforce initiatives sweeping the nation. Earlier this year, New York Governor Kathy Hochul launched a commission to study AI's impact on workers and economic mobility; Utah established a task force focused on workforce readiness and responsible AI deployment.

According to an analysis by Fisher Phillips, a law firm specializing in employment matters, California's order initiates a series of government reviews that could ultimately inform future legislative or regulatory initiatives.

"The governor is trying to lay the groundwork for measures that could eventually become significant new employer obligations," the report said. "Whether these obligations become reality, and in what form, will depend on the recommendations from these government reviews and how state legislators treat them."

The order requires the California Labor and Workforce Development Agency to provide the governor with a review of academic research on AI's impact on the workforce, including potential disparate effects on demographic groups and early warning signs of future workforce disruption.

The agency is also tasked with making recommendations on revising and updating California's Worker Adjustment and Retraining Notification Act to address early warning signs of AI-caused disruption, and reviewing policies and practices that provide a "safety net" for displaced workers, including severance pay and other forms of compensation.

The Employment Development Department is directed to launch a dashboard within 90 days that uses unemployment insurance data to show AI's impact on employment across industries.

"Today's order complements California's comprehensive approach to balancing the development of common-sense guardrails with fostering innovation opportunities in this growing field," Newsom's office said in the press release.