The Impact of Artificial Intelligence on Employment

In recent years, advancements in artificial intelligence (AI) technology have fueled new fears about large-scale job losses due to the growing ability of AI to automate many tasks, including non-routine cognitive tasks, affecting all sectors of the economy.

Image credit: PopTika/Shutterstock
Image credit: PopTika/Shutterstock

Additionally, the rising prevalence of AI in the workplace and its potential to undermine and threaten the role of humans have led to concerns regarding employee well-being and the larger work environment. This article deliberates on the diverse impacts of AI on employment.

How AI is Affecting Employment?

AI represents a technological revolution that could increase incomes, boost global growth, and spur productivity across the world. However, this technology can also replace jobs and increase inequality. Although multiple studies have predicted job replacement by AI, many cases have shown that AI could complement human work.

For instance, almost 40% of global employment has been exposed to AI. Conventionally, information technology and automation have impacted routine tasks. However, AI could impact high-skilled jobs, in addition to routine tasks. Thus, AI represents greater risks to advanced economies, with almost 60% of jobs that can be impacted by AI.

However, advanced economies also have greater opportunities to leverage AI's benefits compared to developing economies and emerging markets. For instance, half of the jobs in advanced economies that are exposed to AI can benefit from the integration of AI, improving productivity. In the rest of the exposed jobs, AI applications can execute crucial tasks performed by humans, leading to reduced hiring, lower labor demand, lower wages, and even elimination of these tasks in the most extreme cases.

Similarly, AI exposure will be 26% and 40% in low-income countries and emerging markets, respectively, which indicates that these economies will face fewer immediate disruptions from the technology. However, a large number of these countries lack the skilled workforce or infrastructure required to leverage the AI benefits, which increases the risk of higher inequality over time among nations due to AI.

Thus, developing strategies for safely leveraging the huge potential of AI is essential to ensure that the technology is used for the benefit of employees and the work environment. Specifically, the potential of AI to augment and complement human capabilities must be harnessed to realize improved job quality, higher demand for human labor, and higher productivity.

AI-affected Jobs

Insurance Underwriting: Analyzing the available data and applying it within a set of structures or formulas are the most important tasks while assessing the viability of insurance applicants. AI-powered automation can easily execute these tasks and continually adapt to perform more complicated tasks, which reduces the number of underwriters required by a company.

Retail: In the retail sphere, self-checkout stations are an example of automation that has gained prominence in big-box outlets and grocery stores. Although allowing consumers to scan their items can escalate the instances of theft, the company reduces the cost significantly by decreasing the need for employees.

Warehouse Work: The steady growth in online sales has increased the demand for automated systems and processes in warehouses. In a warehouse, the implementation of basic AI-powered automation solutions enables easy access to computerized systems to direct staff and locate packages. Moreover, future AI solutions can even perform mechanized loading and retrieval to enhance shipping capacities.

Research and Analysis: AI is already utilized in research and data analysis to streamline the entire process and identify new data without requiring human assistance. Modern computers' processing power allows efficient analysis, exploration, and sorting of data. The need for humans can be eliminated in research and data analysis with continued advancements in AI technology.

Accountants/Bookkeepers: Several companies are currently using AI and automation for their bookkeeping practices. AI-powered bookkeeping services offer an efficient accounting system with security and flexibility as they are availed as cloud-based services. AI algorithms ensure proper data collection, storage, and analysis. Moreover, the cost of implementing an AI accounting system is substantially less compared to paying salaries to human employees for the same tasks.

Receptionists: Most companies currently rely on robotics and AI for the tasks at their reception. For instance, AImeReception can listen, see, understand, and talk with customers and guests.

However, jobs like teachers, judges and lawyers, HR managers, CEOs and directors, psychiatrists, surgeons, and writers and artists will not be affected by AI as these jobs will be less prone to disruption and do not involve repetitive tasks.

Replacement and Augmentation

Previous studies based on experts' assessment of whether AI could replace replicable and routine tasks related to occupational categories showed that 47% of United States employment can be at risk from AI. However, most recent studies have concluded that AI augments tasks and jobs.

Several modern AI companies describe their products as a tool to enhance productivity by eliminating unnecessary and routine tasks within specific domains. AI is increasingly utilized to tackle narrowly scoped tasks and functions in financial and medical domains. AI is handling applications involving statistical data and other data types, including images.

Currently, AI companies are offering AI-based solutions targeting particular tasks within a workflow. For instance, Cyft primarily focuses on healthcare interventions, Uptake integrates AI and the Internet of Things (IoT) for industrial automation, and Numerai combines AI with blockchain technology. However, AI applications must incorporate domain knowledge from experts to exploit these niche markets. AI also improves the personal productivity or efficiency of workers.

Although AI will increase the existing levels of productivity, the extent of productivity increase has not been conclusively ascertained. Despite the significant progress in AI, specifically the advances in machine learning, productivity growth has been lagging in the past decade/productivity paradox. Many studies have identified the overestimation of AI potential as the primary reason for this productivity paradox.

For instance, productivity growth remained slower between 2006 and 2016 compared to the preceding decade due to the modest contribution of robotics and AI to productivity. Thus, AI will replace workers in specific jobs in the future, but such replacement will occur at a steady pace in place of a sudden upheaval. AI will complement workers in other jobs, which will result in modest productivity growth.

However, many studies have shown that AI can significantly boost productivity, and attributed the productivity paradox to the lags in AI restructuring and implementation, resulting in no substantial economic gains in the short term. OECD analysis also confirmed that uneven diffusion and uptake of digital technologies throughout the economy has led to a productivity slowdown.

Impact on Long-term Labor Demand

Although AI-facilitated automation will decouple wages from productivity gains and reduce labor demand, the creation of new labor-intensive tasks will increase the labor demand in the long run. One way AI can increase labor demand in non-automated tasks is through the 'productivity effect.' This effect refers to a rise in consumer demand due to cost savings generated by automation.

Similarly, the capital accumulation effect, which refers to the increase in the capital intensity of production due to automation, triggering capital accumulation, will increase labor demand, specifically in tasks where automation and AI are complementary to human labor. The deepening of automation, where the existing machines' productivity increases due to technological improvements with no additional labor displacement, will boost the productivity effect and further increase the labor demand.

Thus, the creation of new labor-intensive, high-productivity tasks enhances the labor share in the longer term. It also counteracts the adverse impact of automation on employment, labor demand, and wages. However, the deepening of automation, capital accumulation effect, and productivity effect cannot effectively address the displacement effect due to AI in the short term as a falling share of productivity gains is accrued to labor with the continued automation.

In the longer term, a reinstatement effect increases the labor share through new labor-intensive task creation, which eventually leads to a more balanced path, where AI enhances wages, productivity, and employment. Overall, AI is affecting employment by both replacing jobs and creating new ones. In the long term, AI is expected to create more jobs than it eliminates, but there will be a period of adjustment in the short term.

References and Further Reading

Lane, M., Saint-Martin, A. (2021). The impact of Artificial Intelligence on the labour market: What do we know so far?. OECD Social, Employment and Migration Working Papers, 256. https://doi.org/10.1787/7c895724-en.

Tschang, F. T., Almirall, E. (2021). Artificial intelligence as augmenting automation: Implications for employment. Academy of Management Perspectives, 35(4), 642-659. https://doi.org/10.5465/amp.2019.0062

Giorgieva, K. (2024). AI Will Transform the Global Economy. Let’s Make Sure It Benefits Humanity. [Online] Available at https://www.imf.org/en/Blogs/Articles/2024/01/14/ai-will-transform-the-global-economy-lets-make-sure-it-benefits-humanity (Accessed on 25 March 2024)

Talmage-Rostron, M. (2024). How Will Artificial Intelligence Affect Jobs 2024-2030. [Online] Available at https://www.nexford.edu/insights/how-will-ai-affect-jobs (Accessed on 25 March 2024)

Last Updated: Mar 25, 2024

Samudrapom Dam

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Samudrapom Dam

Samudrapom Dam is a freelance scientific and business writer based in Kolkata, India. He has been writing articles related to business and scientific topics for more than one and a half years. He has extensive experience in writing about advanced technologies, information technology, machinery, metals and metal products, clean technologies, finance and banking, automotive, household products, and the aerospace industry. He is passionate about the latest developments in advanced technologies, the ways these developments can be implemented in a real-world situation, and how these developments can positively impact common people.

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