The Impact of AI on Jobs: Will History Repeat Itself?
In a recent article published by the World Economic Forum (WEF), two Boston Consulting Group economists argued that AI’s impact on jobs will follow the pattern of previous technological revolutions. They believe that while there may be significant displacement for certain individuals, overall, more jobs will be created than lost. However, this conventional wisdom might be wrong. The disruptive nature of AI, particularly its ability to outsource cognitive tasks, could lead to more significant and widespread job displacement than previous innovations.
The economists at WEF compare AI to past technological changes, such as the transition from horses to cars and the application of technology in farming. They highlight the unexpected positive job creation in related industries during these transitions, such as car manufacturing and road building. However, it is important to note that these transitions were accompanied by unique circumstances such as evolving cultural values and a progressive moment that championed efficiency and safety improvements in cities. Therefore, past technological changes cannot necessarily predict the future when circumstances are different.
Today, it is the accelerationists driving AI changes forward at a rapid pace. The absence of meaningful regulations in the US means that we are likely heading towards an uncertain future. AI represents the first instance where we are outsourcing cognition in addition to labor, introducing a layer of complexity not seen before. Roles requiring problem-solving, decision-making, and creativity could increasingly be handled by AI, potentially leading to widespread job displacement.
While the prevailing belief is that AI will augment human workers rather than replace them, this may be more about the limitations of current technology than a guarantee of the future. A survey of IT professionals found that a majority expressed worry about their skills becoming obsolete due to AI. Additionally, executives have plans to invest in AI tools and technology to eliminate unnecessary positions. The Federal Reserve Bank of Richmond also reported that firms are using automation to reduce staff, with 46% of firms planning to do the same in the next two years.
Although the impact on employment may not be evident in the numbers yet, changes are taking place. Studies have shown that new employees augmented by AI can perform as well as more experienced employees in fields like call centers and software engineering. While AI may not shift the total number of workers in these fields, it could significantly change the makeup of the workforce. This could lead to downward pressure on wages, faster turnover, underemployment, and widening skill gaps or income inequality between those who can adapt to AI-augmented roles and those who cannot.
The financial services industry is also expected to see significant impacts from AI. Citigroup predicts that 54% of jobs across banking have a high potential to be automated, with an additional 12% of roles augmented with AI technology. Examples of AI replacing entire call center departments have already emerged. Klarna, a Swedish fintech company, implemented an AI assistant that now handles the workload equivalent to 700 full-time staff members. India-based e-commerce platform Dukaan replaced its 27 customer service agents with a bot.
While AI disrupts existing roles, it also creates opportunities for new kinds of employment. Financial firms may need to hire AI managers and AI-focused compliance officers to ensure responsible use of the technology. Various industries could see the emergence of positions like AI risk managers and AI-human interface designers. The role of an “AI orchestrator” could become critical in integrating and maximizing the outputs of different AI tools.
As AI continues to advance rapidly, its impact on employment will be complex and multifaceted. While historical parallels can provide some guidance, the unique nature of AI suggests that we are entering uncharted territory. The future of work will likely involve a mix of augmentation and displacement, with new roles emerging alongside the automation of traditional jobs. The net impact on the number of jobs is still to be determined. During unprecedented change, relying solely on the past as a prediction of the future is insufficient.