AI and the Future of Work

Recent headlines have shown that those companies implementing Artificial Intelligence (AI) have become more efficient and more productive. This has been a net benefit for those companies, but in turn, it has led to the elimination of jobs. This decrease in workforce, but increase in productivity, has caused concerns about the future job market and the potential impact on unemployment. As we try to do in our weekly market commentary today’s email draws on history. Specifically, the attached piece shows how past technological advancements have impacted the workforce in the short term but led to a net positive gain in the long term.

The enclosed table shows select occupations throughout history. It illustrates how those professions have changed over time with either the growth or the elimination of jobs. The left-hand side of the table illustrates job destruction between the early 20th century to current day – meaning jobs that were once common that are now either uncommon or non-existent. And then the right-hand side of the table illustrates job creation between the early 20th century to current day – meaning jobs that were once either non-existent or uncommon, that are now thriving.

Starting on the left-hand side of the table with job destruction, it can be seen in the early 20th century there were over 11.5 million individual farm workers. In current times, there are around 370,000 – an astonishing decrease of over 11 million workers. There were over 2 million railroad employees in the early 20th century where now there are just a bit over 100,000. While blacksmiths, watchmakers, and carriage & harness makers were legitimate occupations in the early 20th century, they are all but extinct in present day.

Moving to the right hand-side of the table with job creation, it can be seen that in the early 20th century there were approximately 38,000 engineers. That number has ballooned to over 1.7 million in present day. There were no, or next to no, computer systems designers, truck drivers, software developers, medical technicians, nor auto mechanics in the early 20th century. In present day, between those five disciplines, there are over 13 million individual employees.

If history has shown us anything, it is that while technological advances that improve productivity can certainly be disruptive, they are not inherently evil. They may change the way in which the world and society operate, but their net impact has been positive.

As the author explains analyzing the data, “the invention of the tractor led to a significant increase in agricultural productivity. This resulted in fewer farm-related jobs, and displaced workers moved to cities and found work in manufacturing. A similar shift took place as productivity and globalization later impacted the manufacturing sector and Americas gravitated to service jobs, which now represent roughly two-thirds of U.S. employment. This dynamic reflects what economist Joseph Schumpeter called ‘creative destruction’ – the continual dismantling of old economic structures and their replacement with new, more productive ones. Critically, value and labor were not destroyed at each transition; they were reallocated.” – AOM 472

The takeaway from the piece, as stated in the close is that “prior waves of technological change suggests that AI will likely render certain jobs obsolete. In the near-term, AI disruption may favor capital over labor, underscoring the potential investment opportunity in AI enablers driving the massive buildout of data center infrastructure. Over the long-term, history has consistently shown that technological innovation creates new roles that were impossible to predict in advance. Just as the internet gave rise to e-commerce, cloud computing and social media, we believe AI may follow a similar path, creating new industries and jobs that are difficult to envision today.” – AOM 472