When Stabilizers Destabilize: AGI and the Structural Vulnerability of Contribution-Based Welfare States

Contribution-based welfare systems fund unemployment benefits through payroll taxes and employment-linked social insurance. This paper analyzes the structural fiscal vulnerability of such systems to AGI-induced labor market disruption. Using Germany as a case study, three White-Collar substitution scenarios (10%, 50%, 70%) are modeled and their fiscal consequences traced through the existing welfare architecture. Even conservative estimates double current unemployment spending; moderate scenarios would consume over 60% of the federal budget. The core finding is that automatic stabilizers, mechanisms designed to cushion cyclical downturns, become destabilizers when the underlying shock is structural: rising benefit expenditure compounds with shrinking contribution revenue into a fiscal double-bind. This paper introduces the concept of stabilizer inversion to describe this phenomenon. Three policy response categories are identified: alternative financing mechanisms, universal basic income complements, and adaptive fiscal triggers. The analysis does not predict AGI timelines; it maps structural vulnerability regardless of when such capabilities emerge.