When CEOs talk to investors about layoffs, they usually cite economic uncertainty or business “headwinds.” Now a new term is starting to appear in these announcements: AI.
In recent months, shipping giant UPS announced plans to cut 12,000 office jobs, which CEO Carole Toomey said is unlikely to return as the company moves quickly to automate the tasks these workers perform. Using AI. Meanwhile, financial giant BlackRock said it will cut about 600 positions as it tries to prepare for changes to the asset management industry, with AI among several drivers. Then there was Google, which recently laid off ad sales staff in part because new AI tools are helping users manage ad campaigns themselves. And IBM CEO Arvind Krishna said Big Blue will stop hiring for 7,800 roles because AI can now do the work instead.
For some observers, this development is an early confirmation that long-term predictions of AI leading to massive job losses, perhaps even the beginning of an era of “mass unemployment” Is. This narrative of AI-driven job loss is so ingrained in the public consciousness that people often see evidence of it when none exists.
While the U.S. unemployment rate rose slightly to 3.9 percent in February, it remains near historic lows. Yet when executive search firm Challenger Gray & Christmas released a report saying 4,600 U.S. jobs were cut directly from AI from May to January, some observers cited the relatively small number as evidence of this. stated that firms were hiding the true extent of AI casualties because they feared a public backlash.
It is possible that one day AI will eliminate a large number of jobs. Goldman Sachs predicts that AI software could automate the equivalent of 300 million full-time roles globally by 2030. But that day has yet to come, say economists and business analysts. “This is not the moment,” notes Daniel Suskind, professor of economics at King's College London and author of several books on the impact of technology on work, including a forthcoming one. Development: A History and an Account.
Right now, the widespread deployment of AI is held back by several factors. Many companies are still just trying to figure out how to use it in ways that justify the sky-high price. Additionally, the Boston Consulting Group recently reported that most senior executives are concerned about the use of AI in their organizations with the risk of “hallucinations,” where AI software is sometimes dangerously inaccurate. Generates information.
So, why are some CEOs mentioning AI in the same breath as layoffs? Experts say some of this is just marketing spin. Erin Ling, an assistant professor specializing in AI and the future of work at the University of Surrey in the UK, said AI is often a convenient cover for layoffs that stem from poor management, struggling businesses, and worsening economic conditions. The result is For public companies, the bad news that they've had to cut jobs because of financial distress, “would have been a little better news because of AI,” says Grace Lorden, professor of economics and behavioral science at the London School of Economics. Is.” “It looks like smart cost cutting.”
This certainly seems to be the case with UPS. At the same time the company announced the layoffs and touted its growing use of AI, it delivered the dismal news to Wall Street that it had missed forecast revenue and earnings figures for the coming year. is lowering its revenue guidance for The amount of package delivery is also low. AI was pretty much the only positive thing Tom mentioned.
300 million
The number of full-time jobs that will be automated worldwide by 2030. Source: Goldman Sachs
The situation for Google and some other tech companies is more critical. They're not just trying to burnish their tech street cred here. They already have him in the litter. Instead, the layoff is about cutting costs to invest more in AI development, because computing resources and human machine learning talent are too expensive. So in these cases, AI is, indeed, linked to job loss—but not for the reasons people have long feared.
Carl Benedict Frey, an Oxford University economist who authored one of the first historical studies of the potential impact of AI on jobs, says that people are likely to lose jobs due to AI in the near term. They are overestimating the damage. “Generative AI is not a complete automation technology,” he says, noting that people still need to write the signals fed to the software and check the quality of its output. “In most cases you need a human.”
He is among those who think we could see a significant “Uber effect” from AI, where the technology allows low-skilled and less-experienced workers to perform high-level tasks. Uber allowed anyone with a driver's license and a car to potentially become a taxi driver. As a result, many people became drivers for hire.
Similarly, AI “copilots” can help many people perform legal, financial, or software coding tasks. Instead of eliminating jobs in these fields, the technology could help expand their ranks, Frey says. This is because all the evidence suggests that there is a large demand for professional services that is currently not being met, in part because such services are too expensive for many consumers to afford. can
But just as Uber was bad news for taxi drivers, who have struggled in the face of lower-cost competition, some current employees may see their wages drop or at least stagnate due to AI. On the other hand, these low wages can also be higher than what low-skilled workers can earn in other sectors today. Therefore, overall, economic inequality can be reduced.
Frey, however, is less sanguine about the long-term effects of AI. AI is currently in its “lamplighter” phase, he says: when streetlights were powered by gas, people were employed to light each lamp each evening using a torch running on a tall pole. was kept When electric bulbs were introduced, lamp lighters retained their function because each street light had to be turned on individually. But soon cities began installing switches that controlled entire city blocks, and eventually timers and light sensors meant that human intervention was not needed at all. Frey believes that AI could follow a similar path, with today's era of relatively low job displacement lulling us into a false sense of security.
Almost everyone agrees that AI is ushering in an era of uncertainty and disruption and that workers will need to be prepared to learn new skills and change roles. Many experts say governments should do more to encourage lifelong learning and retraining. And Susskind says governments should eliminate tax incentives that encourage businesses to use AI to replace rather than augment workers.
Taking these steps now may mean that AI-doomsday scenarios of mass unemployment will never materialize. At the very least, we should stop freaking out about CEO announcements on AI and layoffs — and just get back to work.
This article appears in the April/May 2024 issue. good fortune