AI’s Skewed Impact on The Labor Market

The emergence of artificial intelligence signals a complex dynamic change in the labor market, with the way industries operate changing and the employment landscape being reshaped. On one hand, within many fields, AI has led to the weakening or even disappearance of many jobs, especially those involving repetitive and routine tasks; on the other hand, a number of new occupations are emerging as the job market changes. This dynamic change has had varying degrees of impact on businesses and job seekers in all sectors. This trend towards AI-driven automation raises several key questions: Are we witnessing job losses faster than the market’s ability to create new jobs? Not only are jobs lost to AI-driven automation disappearing rapidly, but new jobs created by AI advances are taking longer to materialize. Compounding this issue is the question of whether the new positions created by AI are suitable for those who have lost their old jobs. There is growing concern that there is a mismatch between the skills required for these emerging positions and the capabilities of the unemployed. This mismatch exacerbates labor market imbalances, as those who lose their jobs to automation are not necessarily the beneficiaries of the new opportunities created by AI.

A close examination reveals a harsh reality: the benefits heavily favor companies, leaving workers and job seekers to deal with the consequences. Companies benefit from the integration of AI by increasing efficiency, reducing costs and even dominating the market. Meanwhile, workers face the reality of jobs being replaced and skills being eliminated; while necessity and uncertainty of adapting to a rapidly changing wage & employment landscape brings novel challenges.

Companies: Beneficiaries of AI

Businesses are the primary winners in the AI revolution. AI enables companies to streamline operations, reduce costs, and enhance productivity. From predictive analytics optimizing supply chains to chatbots improving customer service, AI’s applications are diverse and powerful. The positive impacts for companies often translate into increased profits, competitive edges, and dominance in the market.

However, the bright outlook for companies casts a shadow over workers and job seekers. While AI can enhance certain job functions, it also widens the gap in power dynamics within society. In some sectors, it fosters unfair competition as larger companies monopolize AI-driven technologies, leaving smaller competitors struggling to keep up.

One example is the financial sector, where AI traders are able to outperform their human counterparts thanks to their supercharged data analysis and prediction abilities. Especially in High-Frequency Trading, AI plays a disruptive role in the hands of powerful companies that can afford to deploy and improve on bleeding-edge AI traders to profit off of minute price discrepancies in a fraction of a second. As AI activity increases in financial markets, worries of instability intensify as well.

Moreover, in industries ripe for automation, AI threatens to replace human workers thanks to the advancement of robotics, further deepening the divide between capital and labor. The growing use of industrial robots has an even greater adverse impact on employment and wages than those of immigrants. The sectors prone to automation are expected to see stark changes in the job market structure, and the people whose jobs are completely taken over by AI will suffer the most from these changes.

Employees: Navigating AI’s Impact

The impact of disappearing jobs due to AI is resonating across the workforce and communities. Both white-collar and blue-collar jobs are at risk of becoming obsolete, albeit to varying degrees, especially in industries that rely heavily on those most affected by AI (such as the retail industry). While some jobs benefit from AI without significant negative impact (e.g. health professionals), others become redundant as automation spreads.

What follows is a surge of demand for AI skills in the labor market, which grew significantly between 2010 and 2018, with a significant increase in AI-related job opportunities. The number of job postings seeking AI skills increased rapidly during this period, growing tenfold in absolute terms and quadrupling as a proportion of total job postings. This growth was not limited to information technology and computing occupations, but spanned a wide range of industries and occupational groups, demonstrating the broader impact of AI on the economy. On average, jobs requiring AI skills pay 11% more than similar jobs without AI requirements. However, this trend has also raised concerns about job displacement and wage impacts, particularly in occupations that are at risk of being replaced by AI. This also comes at a compounding cost, with AI adoption often displacing traditional hiring for non-AI jobs, worsening unemployment and wage stagnation.

The threat of displacement by AI contributes to economic disparities, particularly affecting marginalized communities and low-skilled workers. The problem is exacerbated by a widening skills gap between jobs displaced by AI and those created by AI. Workers must acquire new skills or upgrade existing ones to adapt to the changing job market where human-AI collaboration is emphasized. Digital literacy becomes critical for adapting to changing job requirements and technological advances, calling for skills that foster efficiency and productivity in AI-augmented fields become invaluable.

What Will the Future Look Like?

Looking ahead, the emergence of human-compatible AI offers a glimmer of hope. It becomes essential to harness the power of AI, focusing on developing skills that complement rather than compete with it. While AI’s rise is not unlike the technological advancements that brought about paradigm shifts in the past, its impact on the job market unfolds gradually, allowing for adaptation and mitigation strategies.

The development of multi-modal large language models marks a new frontier in AI, raising questions about which human traits might be replaced. Besides the examples discussed above, current predictions indicate that clerical jobs, vocations involving bookkeeping and transcription, and some positions mainly involving data analysis and reporting seem to be at risk. However, amidst the uncertainty lies the opportunity for upskilling and reskilling. By cultivating skills that resist automation such as technical skills, digital skills (including AI tools), domain specialization, planning, and management, employees can secure their place in an AI-driven world.

Certain jobs remain relatively immune to AI’s encroachment, at least for the foreseeable future. Occupations requiring high levels of creativity, emotional intelligence, and human interaction provide a refuge from automation’s reach. Some examples include health practitioners, technical or managerial roles, and jobs involving deep critical thinking and/or human creativity. However, this stability heavily depends on the ongoing innovation and adaptability.

It’s crucial to foster an inclusive and equitable future as we navigate the uncharted territory of the AI revolution. Employees who actively engage in upskilling and retraining initiatives are more likely to overcome the challenges of AI displacement and capitalize on the new opportunities it presents. By harnessing AI for the collective good and prioritizing human-centric solutions, we can mitigate its adverse effects on workers and job seekers. In times of change, resilience, and adaptability emerge as our greatest assets, guiding us toward a job market that embraces the potential of AI while safeguarding the dignity and livelihoods of all participants.

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