AI and the labour market

Artificial Intelligence (AI) will soon become a major force in the economy, affecting nearly all aspects of production and consumption as well as the labour market. Many jobs which in the past were not exposed to technological progress are becoming more vulnerable to automation and displacement.

To get an idea of the impact of AI on the job market, it is instructive to read Arvind Krishna’s recent interview with Bloomberg. Krishna serves as chief executive officer at IBM, one of the largest U.S. companies in the IT industry (282,000 employees globally). In the interview, he announced that the company expects to pause hiring for roles that could be replaced with artificial intelligence in the coming years. As a consequence, hiring in back-office jobs will soon experience a significant slowdown and, within a maximum of five years, thirty percent of the group’s current positions for these types of jobs and skills will be cut. On a global scale, Goldman Sachs estimates that in the not too distant future about 300 million jobs at risk.

Freeing mankind from labour?

AI is a general purpose technology, and has the potential to affect multiple sectors and occupations across the economy. Moreover, its ability to self-improve (through Machine Learning) expands the set of tasks that can be automated. Some scholars think that AI’s ability to self-improve could lead to singularity, a point in time at which machine intelligence exceeds human intelligence and challenges humans’ place in the labour market.¹ Should singularity occur, human society would be clearly transformed. But how?

Singularity might produce the ultimate liberation of mankind from the slavery of labour, a curse that in ancient cultural traditions, such as the Jewish and the Christian ones, God himself imposed on humanity as a form of punishment. It is unlikely, however, that once free from material necessities, people will start living in peace and cultivate their souls. Rather, it is more likely that new elites will rise and that a large part of humanity will be excluded from enjoying the benefits of technological advance. Even if singularity does not lead to the very control of the machines over mankind, those who control the technology will perhaps be the new tyrants. Put differently, AI can indeed be a source of serious worries.

Automation and Job Displacement

AI can significantly alter the employment landscape already in the near future. Repetitive and routine tasks that rely on structured data are particularly susceptible to automation. The same applies to jobs that involve manual labour or data processing, such as assembly line work, data entry, or simple calculations. Moreover, AI algorithms can quickly analyze vast amounts of data and make complex decisions, threatening jobs that require high levels of analytical skills, such as some administrative and financial tasks.

Customer service is also an area where AI is making substantial inroads. Chatbots and virtual assistants powered by AI can handle basic customer inquiries and reduce the need for human intervention. The advent of self-driving vehicles and AI-powered logistics systems has the potential to revolutionize transport. Moreover, the rise of AI-driven supply chain management systems may reduce the demand for certain logistical roles, such as inventory management and route planning.

The advantage of being human beings

Remarkably, AI’s impact on the labour market is not limited to low-skilled or routine jobs as it was the case when technological advancements allowed automation. Table 1 presents a short list of the occupations most exposed to AI according to AI itself (we asked to Chat GPT, the chatbot developed by OpenAI and released last November).

Table 1. Short list of the occupations most exposed to AI.

Data Entry Clerks: AI can automate data entry tasks by extracting information from various sources and entering it into databases or systems.

Telemarketers: AI-powered chatbots and virtual assistants can handle customer inquiries and provide support, reducing the need for human telemarketers

Truck and Taxi Drivers: Self-driving vehicles have the potential to replace truck and taxi drivers in the future, as autonomous technology advances.

Manufacturing Workers: Robots and automation systems can perform repetitive and physically demanding tasks in manufacturing, reducing the need for human labor

Cashiers: Automated checkout systems, self-service kiosks, and mobile payment technologies are reducing the demand for traditional cashier roles

Customer Service Representatives: AI-powered chatbots and virtual assistants are increasingly used to handle customer inquiries and provide support, potentially reducing the need for human representatives

Accountants and Bookkeepers: AI can automate data analysis, financial reporting, and transaction processing tasks, affecting certain aspects of accounting and bookkeeping roles

Stock Traders: Algorithmic trading and high-frequency trading algorithms are increasingly used in financial markets, potentially reducing the role of human stock traders

Paralegals: AI-powered software can assist with legal research, document analysis, and drafting, potentially reducing the workload of paralegals

Radiologists: AI-based image analysis systems can assist radiologists in interpreting medical images, potentially impacting the demand for their services

Source: IREF query to Chat GPT (16.05.2023, 13:41).

As the Table shows, the new technology will also affect highly specialized professions. This is something new. The healthcare sector is a case in point. AI-powered diagnostic systems can analyze medical images and data with remarkable accuracy. Radiologists and pathologists, who traditionally examine such information, may be displaced. The legal professions are also concerned, since AI-powered tools can sift through vast amounts of legal documents, extracting relevant information and aiding in legal research. This reduces the time-consuming task of manual document review, potentially affecting paralegals and legal researchers, as well as the number of judges and lawyers that society needs (if any).

Being human pays

In these cases, and in many other, some role for human beings still remains, however. Human judgment, interpretation, and advocacy skills are essential in law. Similarly, radiologists, pathologists and the like might find their roles simply evolving as AI takes over some diagnostic tasks. While AI systems can enhance efficiency and accuracy, high quality care still requires a balance between human expertise and technological capabilities.

More generally, humans outperform AI in creative and social intelligence, reasoning skills and dealing with uncertainty. Even when AI eases automation of certain tasks, there are still tasks that only humans can perform. In these cases, AI can complement workers and enhance their productivity.