A study released by the Massachusetts Institute of Technology (MIT) on Wednesday reveals that artificial intelligence (AI) is now capable of replacing 11.7% of the US labor market, equivalent to wage impacts of up to $1.2 trillion in sectors such as finance, healthcare, and professional services.

The research utilized a labor simulation tool called the "Iceberg Index," jointly developed by MIT and Oak Ridge National Laboratory (ORNL), a Department of Energy research facility in eastern Tennessee housing the Frontier supercomputer for large-scale modeling.

The Iceberg Index simulates interactions among 151 million US workers and evaluates how they may be affected by AI and related policies. Earlier this year, the index provided a forward-looking perspective on how AI will reshape the US labor market—not just in coastal tech hubs but across all 50 states.

For US lawmakers planning multibillion-dollar retraining and upskilling investments, the Iceberg Index offers a detailed map pinpointing regions facing potential structural disruptions—down to ZIP code-level precision.

Prasanna Balaprakash, co-lead researcher and ORNL director, explained:

"In essence, we're creating a digital twin for the US labor market. This index enables population-level experiments to reveal how AI will reshape tasks, skills, and labor flows before employment changes actually occur."

As a member of Tennessee’s AI Advisory Council, Balaprakash also shared state-level findings with the governor’s team and the state AI director. He noted that Tennessee’s core industries—healthcare, nuclear energy, manufacturing, and transportation—remain heavily reliant on physical labor, making them less vulnerable to purely digital automation. The key challenge lies in leveraging new technologies like robotics and AI assistants to enhance rather than undermine these sectors.

The Iceberg Index treats 151 million workers as individual agents, each with unique skills, tasks, occupations, and geographic data. It maps over 32,000 skills to 923 occupations and 3,000 counties, then assesses which skills existing AI systems can perform.

Researchers found that the visible "tip of the iceberg"—such as layoffs and role shifts in tech, computing, and IT—accounts for just 2.2% ($211 billion) of exposed wages. Hidden beneath the surface is $1.2 trillion in wage exposure, spanning routine functions like HR, logistics, finance, and office administration—areas often overlooked by traditional automation forecasts.

The team emphasizes that the Iceberg Index is not designed to predict "when or where job losses will occur" but rather provides a "skill-based snapshot" of what today’s AI systems can already do. This helps policymakers systematically explore hypothetical scenarios before committing funds or legislation.

Several US states have partnered with researchers to run simulations. Tennessee, North Carolina, and Utah validated the model using their state-level labor data and began crafting policy scenarios based on the platform. Tennessee took the lead by citing the Iceberg Index in its official "AI Workforce Action Plan" this month, while Utah prepares to release a similar report.

North Carolina Senator DeAndrea Salvador, who collaborates closely with MIT, highlighted the study’s ability to uncover impacts traditional tools miss. One key feature is granular regional data:

"You can drill down to county or even census tract levels to see which skills are currently in play, match them with automation or enhancement probabilities, and assess their effects on local GDP and employment shifts. Such simulations are critical as states establish AI task forces and research groups."

The Iceberg Index also challenges the assumption that AI risks are concentrated in coastal tech jobs. Simulations show AI-exposed occupations span all 50 states, including inland and rural areas often excluded from AI discussions.

To address this gap, the team built an interactive simulation environment where states can test policy levers—from adjusting labor budgets and optimizing training programs to exploring how tech adoption changes could impact local jobs and GDP.

The report states: "The Iceberg Project helps policymakers and business leaders identify risk hotspots, prioritize training and infrastructure investments, and test interventions before deploying billions in implementation."

Currently, the team positions the Iceberg Index as a "sandbox" for states to prepare for AI’s labor impacts—encouraging hands-on experimentation with different scenarios.