How will AI affect the future of work? In-depth interpretation from the perspective of productivity paradox

The boom in artificial intelligence has attracted attention not only because of the incredible ability of its algorithms to mimic humans, but also because of the potential for these algorithms to replace many people's jobs. The economic and social consequences could be dramatic.

The path to this economic transformation is through jobs. A widely circulated study by Goldman Sachs predicts that roughly two-thirds of current occupations could be affected over the next decade and that between a quarter and half of the jobs people do today could Will be taken over by algorithms, and as many as 30 billion jobs around the world may be affected.

Consulting firm McKinsey has released its own research predicting that an AI-driven global economy will add $4.4 trillion a year.

Such huge numbers are sobering, but how reliable are these predictions?

The author leads a research project called Digital Planet, which examines the impact of digital technologies on lives and livelihoods around the world, and how this impact has changed over time.

Insights into the potential impact of AI in the years to come can be gained by looking at how waves of digital technology, such as the personal computer and the Internet, affect workers. However, if the development of the future of work is any guide, we may need to do some mental preparation in advance.

**01.**The IT Revolution and the Productivity Paradox

A key metric tracking technology's impact on the economy is growth in worker productivity -- defined as how much work an employee can do per hour. This seemingly dry statistic is important to every working person because it directly relates to how much a worker can expect to earn for each hour worked. In other words, higher productivity is expected to lead to higher wages.

Artificial intelligence products are capable of generating written, graphic and audio content or software programs with minimal human involvement. Advertising, entertainment, creative and analytics are likely to be the first industries to feel the impact. Practitioners in these fields may worry that companies will use AI to replace jobs they once did, but economists see great potential to harness the technology to improve productivity across the workforce.

Research by Goldman Sachs predicts that productivity will grow by 1.5% per year due to the adoption of generative artificial intelligence, almost double the rate seen in 2010 and 2018. McKinsey is even more aggressive, saying this technology and other forms of automation will usher in “the next productivity frontier”, pushing it up to 3.3% per year by 2040.

This productivity boost would be close to the growth rate of previous years, and in theory, both economists and the working class would welcome it.

If we trace the history of productivity growth in the United States in the 20th century, from 1920 to 1970 it galloped by about 3% per year, boosting real wages and living standards. Interestingly, productivity growth slowed in the 1970s and 1980s with the introduction of computers and early digital technology.

This "productivity paradox" was expressed by the famous MIT economist Bob Solow: **You can see the impact of the computer age in various fields, but you can't see it in the productivity statistics. **.

Digital technology skeptics blame "ineffective" times like social media or shopping, arguing that earlier changes, such as the introduction of electricity or the internal combustion engine, played a bigger role in fundamentally changing the nature of work.

Techno-optimists disagree, arguing that new digital technologies will take time to translate into productivity gains, as other complementary changes also need to evolve at the same time. Still others worry that productivity measures don't adequately justify the computer's worth.

However, for a while, it appears that the optimists will be vindicated. In the late 1990s, just in time for the advent of the World Wide Web, productivity growth in the United States doubled, from 1.5 percent a year in the previous decade to 3 percent in the second.

Although again disagreements about what actually happened, further confusing whether this paradox has been resolved. Some argue that investments in digital technology are ultimately paying off, while another view sees management and technological innovation in certain key industries as the main drivers.

Regardless of the explanation, as mysterious as it began, the surge of the late 1990s was short-lived. So, while businesses are investing heavily in computers and the Internet, and these changes are bringing about changes in work patterns, the extent to which the overall economy and worker wages benefit from technology remains uncertain**.

**02.**Early 2000s: Recession, Hype & Hope

The dot-com bubble burst in the early 2000s, but in 2007, Apple ushered in another technological revolution with the launch of the iPhone. Consumers are buying it, and businesses are starting to use it in various ways. However, labor productivity growth stagnated again in the mid-2000s, and, while briefly rebounding during the Great Recession in 2009, it returned to sluggishness from 2010 to 2019.

In this new downturn, techno-optimists still expect new changes. Artificial intelligence and automation are hot topics around the world and are expected to transform jobs and increase worker productivity.

In addition to traditional industrial automation, drones, and advanced robotics, capital and talent are also in many potentially game-changing fields, such as self-driving cars, automated grocery store checkouts, and even pizza-making robots.

AI and automation are expected to drive productivity growth of more than 2% per year over the next decade, up from a low of 0.4% between 2010 and 2014.

Before we could assess how these new technologies impacted the workplace, however, a new unexpected event occurred: COVID-19.

**03.**Productivity promotion and technology hype during the epidemic

Despite the severity of the pandemic, worker productivity has increased significantly since the start of 2020, with global output growth per hour worked reaching 4.9%, the highest level on record.

Much of this sharp rise is thanks to technology: Larger, more knowledge-intensive companies (which are inherently more productive) are adopting remote work, enabling business continuity with the support of communication technologies such as video conferencing and Slack, Save time on your commute and focus on employee wellbeing.

While digital technologies are clearly helping to increase the productivity of knowledge workers, in many other industries there has been a larger shift to automation as workers must stay at home to keep themselves safe and comply with quarantine measures. Companies in industries ranging from meatpacking to restaurants, retail and hospitality are investing in automation, such as robotics and automating order processing and customer service, which has helped increase their productivity.

But investment in the tech sector has plunged in 2020-2021**, as hype about technologies such as self-driving cars and pizza-making robots fades. Other hot topics, such as the Metaverse revolutionizing remote work or training, also seem to fade into the background.

At the same time, new technologies of artificial intelligence are bursting onto the stage, with more immediate potential to enhance productivity and impact employment—and on a massive scale. The hype cycle for new technologies has started all over again.

**04.**Thinking about the future: Social factors of technological development

Given the many twists and turns so far, we can actually predict what problems will arise in the future. Here are four points to consider.

First, the future of work is not just about the number of workers, the technological tools they use, or the job itself. We should also consider how AI will impact diversity and social inequality in the workplace, which in turn will have profound implications for economic opportunity and workplace culture.

For example, while widespread adoption of remote working models may help foster diversity through more flexible hiring, I think the increasing use of artificial intelligence may have the opposite effect. Black and Hispanic workers are overrepresented in the 30 occupations most at risk from automation and underrepresented in the 30 lowest-risk occupations.

While AI may help workers do their jobs faster, thereby boosting wages for those employed, it could lead to severe wage losses for those whose jobs are displaced. Wage inequality is greatest in countries that already rely heavily on robots and are rapidly adopting the latest robotics technology, according to a 2021 survey.

Second, as workplaces need to strike a balance between online and offline in the wake of COVID-19, the impact on productivity and the discussion around this issue will remain uncertain and in flux.

A 2022 study shows that remote work productivity has increased as employees work from home and work environments become more comfortable. But according to another 2023 study,** managers and employees have different views on the impact of the office environment: the former believe that remote work will reduce productivity, while employees believe the opposite**.

Third, society's response to the spread of AI may greatly affect its course and ultimate outcome. Analysis shows that AI can improve employee productivity in specific jobs—for example, a 2023 study found that the alternating introduction of AI-based conversational assistants increased customer service worker productivity by 14%.

However, there have been growing calls to consider the most serious risks of AI and to take them seriously. Also, recognize that the enormous computational and environmental costs of AI may limit its development and use.

Finally, given how wrong economists and other experts have been in the past, it’s safe to say that many of today’s predictions about the impact of AI technologies on jobs and worker productivity will also turn out to be wrong.

While numbers like the 3 million jobs they affect or the $4.4 trillion annual increase in the global economy are eye-catching, I think people are more willing to give them more credit than they actually do.

Also, “Jobs affected” does not mean job losses, it could mean job additions or even transitions to new jobs. It’s best to use analytics like Goldman Sachs or McKinsey to fuel our imaginations about what the future of work and workers might look like.

In my opinion, we need to proactively brainstorm the many factors that could affect the situation, look for early warning signs and be prepared.

The history of the future of work is full of surprises. And don't be shocked if a transformative innovation pops up tomorrow.