While AI’s potential to perform tasks similar to humans raises concerns about job displacement, a recent report from Wells Fargo Economics suggests that this technology might not result in widespread job losses.
Instead, it could serve as a catalyst for labor market growth.
|Past technological revolutions, such as the Internet boom of the 1990s, contributed to increased employment rates rather than causing job scarcity.📈|
|AI has the capacity to handle aspects of certain roles, and in some cases, could entirely replace specific jobs. However, history demonstrates that new technology often leads to the creation of previously unimagined roles.🤖|
|Given the sluggish growth of the labor force in the United States, AI could play a pivotal role in meeting the rising demand for workers.💼|
While it’s undeniable that AI may render some industries and professions obsolete, the comprehensive report highlights that prior technological revolutions did not result in the widespread labor market disruptions that many had feared.
Analyzing the Internet revolution during the 1990s, the report underscores a significant growth in payrolls, with an average annual increase of 1.8% between July 1990 and March 2001, which translated to the addition of approximately 23 million jobs.
As Wells Fargo Chief Economist Jay Bryson and his team point out, history provides ample instances of groups opposing technological advancements due to concerns about extensive job losses.
Nevertheless, time and again, the introduction of new technology has ultimately led to higher levels of employment and income.
Is AI a Threat to ‘White-Collar’ Jobs? How Resilient is the Labor Market?
Different studies offer varying insights into the extent of tasks that could be automated by generative AI.
A recent University of Pennsylvania study, in collaboration with OpenAI and OpenResearch, suggested that 80% of workers might have at least 10% of their tasks handled by generative AI, with 19% potentially having over 50% of their job covered by AI.
Consulting firm McKinsey & Co. provides another perspective, estimating that 60% to 70% of work tasks could be automated through AI or similar technology.
The report highlights that “white-collar” jobs are particularly susceptible to AI’s influence. Notably, certain roles like telemarketers, political scientists, mediators, judges, psychologists, and postsecondary teachers in foreign languages, history, and law face higher exposure to AI impact.
On the flip side, professions like cement masons, roofers, and welders appear less threatened.
Despite early predictions, the real-world impact of automation has not unfolded as expected. Wells Fargo refers to a 2013 Oxford University paper that forecasted 47% of U.S. employment being at risk of automation over the next few decades.
This prediction contrasts with the current labor market, where the unemployment rate has consistently remained low at around 3.5%.
Can Slower Technology Adoption Safeguard Jobs?
The pace of technological development can be swift, but widespread adoption often occurs more gradually. Factors such as government regulations, hardware costs, and labor union actions can slow down technology adoption, allowing for smoother workforce transitions.
Moreover, AI could help address the labor force’s slowing growth. Projections indicate that the U.S. labor force will expand by just 0.5% annually from 2023 to 2033, half the rate of the past three decades.
This slowdown in labor supply, attributable to factors like a sluggish increase in the working-age population and modest labor force participation gains, may necessitate increased worker productivity, a role that AI can fulfill.
The report anticipates that AI will create new jobs even as it displaces others. It cites the Massachusetts Institute of Technology’s (MIT) finding that 60% of job roles performed in 2018 did not exist in 1940.
The report also advises against assuming widespread job displacement as the primary outcome, highlighting a historical pattern of alarm over surging unemployment due to innovations that appeared inconceivable at the time.
Read the Entire “Panic or Panacea?” Report here:
Part I – The Effects of Technological Revolutions on Productivity Growth
Part II – Prospects for Capital Spending
Part III – The Labor Market and Income
Part IV – Conclusions
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