Artificial Intelligence: Jobs created or jobs destroyed?
By Model Portfolio Service - Investments Team
The launch of ChatGPT was an inflection point for artificial intelligence (AI) because of what it can do and the impact those activities could have on our daily lives. ChatGPT is the first public Large Language Model – a type of Generative AI. Generative AI can produce new and original content without human intervention as opposed to previous ‘rules-based’ AI which requires human input to decide the parameters for decision-making.
Consulting firm Accenture estimated that around 40% of working hours could be impacted by AI Language models.1 Earlier in the year ChatGPT even passed the bar exam! It has the ability to change the nature of jobs and economies in the years to come but there are also concerns about intellectual property, data security, plagiarism and unemployment.
When we develop the mix of investments in each portfolio, we consider how structural issues like technological advancements and changing labour markets will impact economies and how that influences different financial markets. That means considering questions like: How productive will workers be? How will new technology impact productivity? How will technology impact jobs? AI impacts the answers to these questions and following the launch of ChatGPT - what we think to be AI’s first key inflection point - we have been asking ourselves how we think AI will impact the labour market.
Productivity gains
Technological advancements, such as AI, promote economic growth and improve living standards. We think Generative AI has the potential to drive innovation and create new industries, giving opportunities for new projects. An upward shift in productivity may provide a multiplier effect for economic activity.
A repetitive task, such as answering customer questions, could be completed by AI. This could allow people to focus on higher value-add tasks and create an efficiency gain. Improved efficiencies mean earnings increase and costs decrease, leading to wealth gain. This increases discretionary spending in services leading to further labour demand. Of course this is reliant on the human being able to re-train into a higher value-add task and not being unemployed.
Jobs created or jobs destroyed?
We don’t think the adoption of AI is likely to increase unemployment. There will inevitably be jobs that become scaled down or even obsolete but there is no significant evidence to suggest that new technologies lead to enduring unemployment. This is because:
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Existing jobs are not all completely displaced but transferred through re-training.
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New technology can unlock potential for creating new jobs and even new industries. For example, the introduction of the smart phone created new jobs in application development and user interface design.
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Higher productivity can lead to wealth gains which increases spending leading to further labour demand from companies.
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And specifically with AI, its weaknesses are that it can be poor at ensuring the quality, accuracy, and originality of its output. This means generative AI should not necessarily be seen as something that will replace people in the workplace.
We think policy makers and regulators should be involved in the adoption of AI. Ensuring appropriate guardrails are in place is crucial to maximising the productivity gains and minimising the impact to those most vulnerable.
Forward looking asset allocation
Our approach to asset allocation focuses on where we see returns coming from over the next ten years. Doing this effectively means spending time understanding technological changes and how these will impact jobs and productivity. Technological advancements have helped reduce costs for business and consumers. We think AI has the potential to change the nature of our economies in the years to come and given some of the structural headwinds we face, such as low productivity growth and ageing population, a leap in technological development may offer a new source of growth.
1 “A new era of generative AI for everyone”, Accenture, 5 May 2023
