Artificial intelligence will hit the labor market like a “tsunami,” according to International Monetary Fund managing director Kristalina Georgieva.
Since the onset of AI, experts have debated its pros and cons for the workforce. Essentially, could a tool capable of supercharging productivity by automating scores of routine tasks put millions of people out of a job? Or will technological change find a way, as it usually does, of creating new roles to replace the ones it’s rendering obsolete? Add Georgieva to the concerned camp.
“It could bring tremendous increase in productivity if we manage it well, but it can also lead to more misinformation and, of course, more inequality in our society,” Georgieva said during an event in Zurich.
In the same speech, Georgieva addressed other problems the global economy had faced, but had nonetheless weathered. “Last year there were fears that most economies would slip into recession, that didn’t happen,” Georgieva said. “Inflation that has hit us with a very strong force is on the decline, almost everywhere.” In other words, the economy could be somewhat tsunami-proof, but still, it’s coming.
AI, while still a major force that could disrupt the world economy, will likely be more permanent than inflation or recession fears. In a January IMF report about AI, authored by Georgieva, she struck a more optimistic tone about the promises of AI. “The AI era is upon us, and it is still within our power to ensure it brings prosperity for all,” she wrote.
Now, Georgieva sounds more concerned. Though that may not be entirely surprising given the same January report forecasted AI would impact vast swaths of jobs across many different industries. AI will impact about 40% of jobs across the world, according to the report. In advanced economies, that number will be even higher with an estimated 60% of jobs affected by AI.
A widely circulated Goldman Sachs research note from April 2023 said AI is expected to touch 300 million jobs in the U.S. And Europe. Goldman’s research did try to differentiate between workers who would see their entire job replaced by automation and those who would only have certain tasks replaced by AI.
The major change in AI, compared to other technological innovations, is that it looks likely to impact white-collar work more significantly than blue-collar labor. AI’s ability to replicate mundane, routine tasks makes it well-suited to performing the sort of administrative tasks that comprise certain office jobs, although the cost of undertaking a full-scale integration of AI across a company is slowing the transition.
Nonetheless, the promise of AI has kicked off a research and investment frenzy that is unlikely to slow down. “We have very little time to get people ready for it, businesses ready for it,” Georgieva said about AI.
That hasn’t stopped some companies from already trying to plan for what they see as inevitable changes to their job market. IBM froze hiring for some 7,800 roles it thought might change as a result of AI. Though the company’s CEO Arvind Krishna has said IBM still plans to hire more people, it’s just expecting to do so in different roles than it had in the past. “People mistake productivity with job displacement,” Krishna said in October at Coins2Day’s CEO Initiative conference.
None of that means that there won’t be some significant upheaval in the near term as companies work through the transition to an AI-powered world. At the start of the year, many analysts believed tech companies were already trimming their workforces as a result of AI, without always admitting the reason why. Meanwhile, financial companies have hinted at a connection between layoffs and AI, which often gets tagged with a euphemism like emerging technologies. When BlackRock laid off 3% of its employees in January, it mentioned that one of the reasons for the job cuts was because of “new technologies [that] are poised to transform our industry—and every other industry,” according to a company memo.
The mentality that labor market changes are inevitable seems to be widespread. In an April survey of 2,000 global executives, 41% said they expected the size of the workforces to shrink over the next five years as a result of AI.
There are some that see the timeline for the mass culling of employees as much further off than most expect. If it’s even going to happen at all. At the moment many of AI’s true capabilities are being overestimated because of the hype that surrounds the industry at large, Marc Warner, CEO of AI consultancy Faculty, said at Coins2Day’s Brainstorm AI conference last month. “Look at when we were promised fully autonomous cars—it’s taken a bit longer than we expected,” Warner said.
Others say that even if that were to happen there would be a slew of new, possibly better, AI jobs created further down the road. In fact, the World Economic Forum expected that artificial intelligence would create 97 million new jobs, even though it would eliminate 85 million jobs. Goldman’s chief economist Jan Hatzius touched on the inherent uncertainty of AI’s effects on the job market in a March interview. AI would “destroy employment in some areas,” but would eventually create more jobs. How exactly that balance between job creation and elimination would unfold in the short term was “difficult to say,” according to Hatzius.
In the meantime, AI experts are in hot demand in the current job market, raking in million-dollar compensation packages and getting personally recruited by top CEOs.
