A helping hand: A robot delivering food at the first restaurant in Kenya to use humanoid machines. Automation generally leads to productivity gains, which generate income that can be spent on new products and services. — AFP
THE release of ChatGPT in November 2022 has raised great hopes that artificial intelligence (AI) can contribute to solving problems in many fields and lift productivity, but also fears that many jobs may disappear, and that income inequality could rise further.
AI is commonly seen as a general-purpose technology, like the internal combustion engine, early electricity-based technologies, and computers.
Such technologies have the potential to disrupt large parts of the economy, displacing many workers.
Every wave of innovation in history has generated fears of “technological unemployment” but so far economies have generally succeeded in creating more jobs than those that were destroyed, even though transition phases have often been painful.
Automation generally leads to productivity gains, which generate income that can be spent on new products and services, which in turn creates demand for labour.
Employment in difficult to automate activities rises with aggregate demand and new occupations are being created.
David Autor, from the Massachusetts Institute of Technology, and co-authors find that about 60% of 2018 US jobs did not exist in 1940.
Reallocation of labour associated with technological change challenges workers, who often need reskilling and upskilling.
Structural change may also be associated with macroeconomic and financial instability if economies struggle to adapt.
The income distribution is affected, as illustrated by the polarisation of labour markets in many advanced economies over the past decades.
Will labour market developments in the AI era follow historical patterns, or will AI be a game changer?
Like many digital tools before it, AI offers large potential for deployment across a wide range of economic activities.
Until recently, mainly routine tasks could be automated.
AI offers possibilities to automate non-routine cognitive tasks, thanks to its ability to learn by itself from huge datasets and integrate tacit knowledge.
Some researchers believe that machines could ultimately outperform humans in almost all activities. Nevertheless, even if one believes such prophecies, they are probably far away in the future.
At the current juncture, AI can automate some cognitive tasks and complement humans in performing more complex ones.
Several studies have investigated different occupations’ exposure to AI, by linking some AI applications to skills used in specific professions.
This is a good starting point for thinking about the potential impact of AI on jobs, productivity, and inequality.
Research from the Organisation for Economic Co-operation and Development (OECD) Global Forum on Productivity suggests that jobs in knowledge-intensive services, such as finance, advertising, consulting, and information and communication are the most likely to be affected by AI.
Conversely, workers in industries like mining and construction, or relatively low knowledge-intensity services, such as administration and support, transportation, and water and waste, have limited exposure to AI. This has prompted fears that technological development, after automating routine tasks, which affected mainly blue-collar workers, would go on to automate even knowledge-intensive tasks, threatening the jobs of high-skilled workers.
Crucial question
A crucial question is whether AI can mainly automate tasks or whether it also has potential to augment workers’ abilities to perform their jobs.
In other words, whether AI is mostly a substitute or a complement to human labour.
According to a World Economic Forum report, both aspects are important, and their strength varies across economic sectors. Tasks are considered automatable if they do not require creatively solving ambiguous problems, working with others in real time or validating outputs.
The potential for augmentation of worker capabilities is particularly high in knowledge-intensity services.
For example, in information and technology services, nearly 32% of the time spent on all tasks could be subject to automation, but the potential for augmentation is even higher, reaching almost 37% of the time spent on all tasks.
In media and publishing, the potential for augmentation dominates that of automation even more, at 32% versus 24% of the time spent on all tasks.
Hence, while AI is likely to displace some workers, it will also boost the productivity of others.
Medical diagnosis
To give more concrete examples, while AI can improve medical diagnosis and help build legal cases, it is unlikely to replace physicians and lawyers anytime soon.
AI provides skilled professionals with new valuable tools, but in many circumstances, human intervention is still necessary, especially in high-stakes decisions, not least because AI is sometimes subject to hallucinations, producing inaccurate or misleading results.
Recent studies point to significant improvements in workers’ performance due to AI in some specific tasks, ranging from 14% in customer services to 56% in coding.
This suggests that if AI were to be widely adopted across the economy, productivity may rise substantially.
But translating micro-level performance into economy-wide productivity is challenging.
Productivity boost
Estimates of AI’s potential labour productivity boost over the next decade in advanced economies generally vary from about 0.1 to more than 2.5 percentage points per year.
To put these numbers into perspective, US non-farm labour productivity grew at an average annual rate of 2.1% between 1947 and 2023, and 1.5% since 2006.
Hence, according to the most optimistic estimates, AI would lift productivity growth well-above historical trends.
Median estimates would bring labour productivity growth close the 3% observed between 1996 and 2005, during the deployment of the Internet.
However, other studies suggest this may be too optimistic.
AI-related productivity gains are likely to vary across countries.
South Korea is well placed to be among the main beneficiaries, thanks to its high level of digital development and strong position in the global semiconductor market. — The Korea Herald/ANN
Christophe Andre is a senior economist at OECD. The views expressed here are the writer’s own.
