FOR EDUCATIONAL PURPOSES
GOLDMAN SACHS. Global Economics Analyst. The Potentially Large Effects of Artificial Intelligence on Economic Growth (Briggs/Kodnani). 26 March 2023.
- The recent emergence of generative artificial intelligence (AI) raises whether wen are on the brink of a rapid acceleration in task automation that will drive labor cost savings and raise productivity. Despite significant uncertainty around the potential of generative AI, its ability to generate content that is indistinguishable from human-created output and to break down communication barriers between humans and machines reflects a major advancement with potentially large macroeconomic effects.
- If generative AI delivers on its promised capabilities, the labor market could facen significant disruption. Using data on occupational tasks in both the US and Europe, we find that roughly two-thirds of current jobs are exposed to some degree of AI automation, and that generative AI could substitute up to one-fourth of current work. Extrapolating our estimates globally suggests that generative AI could expose the equivalent of 300mn full-time jobs to automation.
- The good news is that worker displacement from automation has historicallyn been offset by creation of new jobs, and the emergence of new occupations following technological innovations accounts for the vast majority of long-run employment growth. The combination of significant labor cost savings, new job creation, and higher productivity for non-displaced workers raises the possibility of a productivity boom that raises economic growth substantially, although the timing of such a boom is hard to predict.
- We estimate that generative AI could raise annual US labor productivity growthn by just under 1½pp over a 10-year period following widespread adoption, although the boost to labor productivity growth could be much smaller or larger depending on the difficulty level of tasks AI will be able to perform and how many jobs are ultimately automated.
- The boost to global labor productivity could also be economically significant, andn we estimate that AI could eventually increase annual global GDP by 7%. Although the impact of AI will ultimately depend on its capability and adoption timeline, this estimate highlights the enormous economic potential of generative AI if it delivers on its promise.
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If generative AI lives up to its hype, the workforce in the United States and Europe will be upended, Goldman Sachs reported this week in a sobering and alarming report about AI’s ascendance. The investment bank estimates 300 million jobs could be lost or diminished by this fast-growing technology.
Goldman contends automation creates innovation, which leads to new types of jobs. For companies, there will be cost savings thanks to AI. They can deploy their resources toward building and growing businesses, ultimately increasing annual global GDP by 7%.
In recent months, the world has witnessed the ascendency of OpenAI software ChatGPT and DALL-E. ChatGPT surpassed one million users in its first five days of launching, the fastest that any company has ever reached this benchmark.
Will AI impact Your Job?
Goldman predicts that the growth in AI will mirror the trajectory of past computer and tech products. Just as the world went from giant mainframe computers to modern-day technology, there will be a similar fast-paced growth of AI reshaping the world. AI can pass the attorney bar exam, score brilliantly on the SATs and produce unique artwork.
While the startup ecosystem has stalled due to adverse economic changes, investments in global AI projects have boomed. From 2021 to now, investments in AI totaled nearly $94 billion, according to Stanford’s AI Index Report. If AI continues this growth trajectory, it could add 1% to the U.S. GDP by 2030.
Office administrative support, legal, architecture and engineering, business and financial operations, management, sales, healthcare and art and design are some sectors that will be impacted by automation.
The combination of significant labor cost savings, new job creation, and a productivity boost for non-displaced workers raises the possibility of a labor productivity boom, like those that followed the emergence of earlier general-purpose technologies like the electric motor and personal computer.
The Downside Of AI
According to an academic research study, automation technology has been the primary driver of U.S. income inequality over the past 40 years. The report, published by the National Bureau of Economic Research, claims that 50% to 70% of changes in U.S. wages since 1980 can be attributed to wage declines among blue-collar workers replaced or degraded by automation.
Artificial intelligence, robotics and new sophisticated technologies have caused a vast chasm in wealth and income inequality. It looks like this issue will accelerate. For now, college-educated, white-collar professionals have largely been spared the same fate as non-college-educated workers. People with a postgraduate degree saw their salaries rise, while “low-education workers declined significantly.” The study states, “The real earnings of men without a high-school degree are now 15% lower than they were in 1980.”
According to NBER, many changes in the U.S. wage structure were caused by companies automating tasks that used to be done by people. This includes “numerically-controlled machinery or industrial robots replacing blue-collar workers in manufacturing or specialized software replacing clerical workers.”
Truck and cab drivers, cashiers, retail sales associates and people who work in manufacturing plants and factories have been and will continue to be replaced by robotics and technology. Driverless vehicles, kiosks in fast-food restaurants and self-help, quick-phone scans at stores will soon eliminate most minimum-wage and low-skilled jobs.
Artificial intelligence systems are ubiquitous. AI-powered digital voice assistants share everything you want to know just just +0.5% by asking it a question. Instead of a live person addressing a problem, you can engage with an online chatbot. AI can help diagnose cancer and health issues. Banks use sophisticated software to check for fraud and noncompliance. AI predominantly controls driverless automobiles, newsfeeds, social media and job applications.
What Other Companies And Organizations Are Saying About AI
The World Economic Forum (WEF) concluded in a 2020 report, “A new generation of smart machines, fueled by rapid advances in AI and robotics, could potentially replace a large proportion of existing human jobs.” Robotics and AI will cause a serious “double-disruption,” as the pandemic pushed companies to fast-track the deployment of new technologies to slash costs, enhance productivity and be less reliant on real-life people.
Management consulting giant PriceWaterhouseCoopers reported, “AI, robotics and other forms of smart automation have the potential to bring great economic benefits, contributing up to $15 trillion to global GDP by 2030.” However, it will come with a high human cost. “This extra wealth will also generate the demand for many jobs, but there are also concerns that it could displace many existing jobs.”
This brings up another critical, often-overlooked issue. AI proponents say there’s nothing to worry about, as we’ve always successfully dealt with new technologies. However, what does this mean for the quality of jobs?
The world’s most advanced cities aren’t ready for the disruptions of artificial intelligence, claims Oliver Wyman, a management consulting firm. It is believed that over 50 million Chinese workers may require retraining, as a result of AI-related deployment. The U.S. will be required to retool 11.5 million people in America with the skills needed to survive in the workforce. Millions of workers in Brazil, Japan and Germany will need assistance with the changes wrought by AI, robotics and related technology.
In a 2019 Wells Fargo WFC 0.0% study, the bank concluded that robots would eliminate 200,000 jobs in the banking industry within the next 10 years. This has already adversely impacted highly paid Wall Street professionals, including stock and bond traders. These are the people who used to work on the trading floors at investment banks and trade securities for their banks, clients and themselves. It was a very lucrative profession until algorithms, quant-trading software and programs disrupted the business and rendered their skills unnecessary—compared to the fast-acting technology.
What An AI Future May Look Like
There is no hiding from the robots. Well-trained and experienced doctors could be pushed aside by sophisticated robots that could perform delicate surgeries more precisely and read x-rays more efficiently and accurately to detect cancerous cells that the human eye can’t readily see.
The rise of artificial intelligence will make even software engineers less sought after. According to Jack Dorsey, the tech billionaire and founder of Twitter and Square, artificial intelligence will soon write its own software. That will put some beginner-level software engineers in a tough spot. When discussing how automation will replace human jobs, Dorsey told Yang on an episode of the Yang Speaks podcast, “We talk a lot about the self-driving trucks and whatnot.” He added, “[AI] is even coming for programming [jobs]. A lot of the goals of machine learning and deep learning is to write the software itself over time, so a lot of entry-level programming jobs will just not be as relevant anymore.”
When management consultants and companies that deploy AI and robotics say we don’t need to worry, we need to be concerned. Companies—whether they are McDonald’s, introducing self-serve kiosks and firing hourly workers to cut costs, or top-tier investment banks that rely on software instead of traders to make million-dollar bets on the stock market—will continue to implement technology and downsize people to enhance profits.
This trend has the potential to impact all classes of workers adversely. In light of the study’s spotlight on the dire results of AI, including lost wages and the rapid growth in income inequality, it’s time to talk seriously about how AI should be managed before it’s too late.