IT industry not creating new jobs, funds diverted to AI, data centre costs: Sridhar Vembu

TEXT START: Zoho Corporation Founder and Chief Scientist Sridhar Vembu on Sunday said the information technology (IT) industry is not creating many new jobs as funds are being diverted to meet the rising costs of artificial intelligence (AI) and data centre infrastructure.

1. The Dissection

The text is an early symptom report of structural labor displacement. It records capital moving from hiring toward AI and infrastructure, stagnant employment despite avoided layoffs, software-market saturation, enterprise budget diversion, and the failure of automated manufacturing to absorb displaced workers.

It also exposes the collapse of the productivity-to-employment link: AI increases output while reducing the need for additional human labor. The article identifies the distribution crisis but stops short of naming the deeper rupture—productive participation is losing its economic necessity.

2. The Core Fallacy

The text treats the crisis primarily as an income-distribution problem and assumes that AI investment must produce “massive profits” to be historically decisive. That is the wrong test. Competitive firms may be forced to fund AI even when returns are uncertain, because refusing to do so risks extinction. Labor can be displaced before the investment cycle is proven profitable.

UBI or “freebies” can preserve purchasing power and keep goods moving. They cannot restore employment, bargaining power, or ownership of the productive system. Consumption may survive while productive participation dies. The text mistakes keeping the market’s cash register operating for preserving the social order that made the market stable.

3. Hidden Assumptions

• Avoiding mass layoffs means employment remains structurally secure; hiring freezes and attrition can accomplish the same reduction more quietly.
• Software-market saturation limits displacement; in reality, weak demand for new software can accelerate labor compression because fewer workers are needed to serve a flat market.
• High server, memory, and data-centre costs are a durable defense for labor; they are only temporary friction if competition continues to reward automation.
• Poorly understood AI returns will cause firms to retreat; competitive necessity may compel continued spending regardless of near-term profitability.
• Manufacturing can be evaluated as a job-creation fallback without confronting its own automation trajectory.
• UBI can be expanded, financed, and politically stabilized at the scale required.
• Transfers can solve the crisis without changing who owns and controls AI capital, energy, logistics, and maintenance.
• Affordable goods automatically imply broad access to them, despite the income destruction the text itself describes.

4. Social Function

Classification: partial truth functioning as transition management and ideological anesthetic.

The article is not empty copium. Vembu accurately punctures the claim that AI-driven productivity will automatically create equivalent employment, and he recognizes that manufacturing cannot absorb the displaced majority. But it converts system death into a manageable policy puzzle: redirect income, expand benefits, improve quality, and wait for the market to settle.

That framing allows the underlying ownership conflict to remain unnamed. It describes the corpse’s symptoms while avoiding the question of who owns the machinery that killed the wage circuit.

5. The Verdict

This is a strategically incomplete but important admission of the Discontinuity Thesis. Within the supplied text, P1 is directly visible: AI is taking capital and work away from human labor. P3 is emerging: industries are no longer generating enough economically necessary employment, and manufacturing offers no escape. P2 appears as the coming political pressure for transfers and institutional improvisation.

The IT sector is not merely experiencing a hiring slowdown. Its economic function is being compressed from mass employer to owner-controlled automation platform. UBI may preserve consumption. It will not preserve the post-WWII bargain. The article sees the breach in the dam; it still understates how little remains behind it.