AI could imperil salaries, not jobs; Why findings of new ECB study contrast with outcomes of previous tech waves

Using a sample of 16 European countries, the study concluded that the employment share of sectors exposed to AI increased, with low and medium-skill jobs largely unaffected and highly-skilled positions getting the biggest boost. Interestingly, these findings are in contrast to previous “technology waves,” when computerisation decreased “the relative share of employment of medium-skilled workers, resulting in “polarisation”.

This comes as industry leaders and tech stalwarts predict the advancement in large language models such as OpenAI’s GPT-4 and Google’s Bard, and their ability to write essays, code, and do maths with greater accuracy and consistency, heralding a fundamental tech shift; almost as significant as the creation of the integrated circuit, the personal computer, the web browser or the smartphone. Most analysts predict that AI models of the generative pretrained transformer type (like Chat GPT and Bard) signify a greater threat for white collar workers, as more powerful word-predicting neural networks that manage to carry out a series of operations on arrays of inputs end up producing output that is almost humanlike.

Job losses

According to Goldman Sachs economists Joseph Briggs and Devesh Kodnani, the answer to whether AI will devour jobs is sharply different from the ECB paper’s conclusion. In a March 2023 report, they predicted that as many as 300 million full-time jobs around the world could get “automated”, with workers replaced by machines or AI systems.

The Goldman Sachs economists predicted that the new wave of AI, especially large language models that include neural networks such as Microsoft-backed OpenAI’s ChatGPT, could bring “significant disruption” to the labour market, with lawyers, economists, writers, and administrative staff among those projected to be at greatest risk of becoming redundant. In a report, “The Potentially Large Effects of Artificial Intelligence on Economic Growth”, they calculated that approximately two-thirds of jobs in the US and Europe are set to be “exposed” to AI automation, to various degrees.

In general white-collar workers, and workers in advanced economies in general, are projected to be at a greater risk than blue collar workers in developing countries.

And OpenAI itself predicts that a vast majority of workers will have at least part of their jobs automated by GPT models. In an earlier study published on the ‘arXiv’ preprint server, researchers from OpenAI and the University of Pennsylvania said that 80 per cent of the US workforce could have at least 10 per cent of their tasks “affected” by the introduction of GPTs.

Central to these predictions is the way models such as ChatGPT get better with more usage – GPT stands for Generative Pre-trained Transformer and is a marker for how the platform works; being pre-trained by human developers initially and then primed to learn for itself as more and more queries are posed by users to it. The OpenAI study also said that around 19 per cent of US workers will see at least 50 per cent of their tasks impacted, with the qualifier that GPT exposure is likely greater for higher-income jobs, but spans across almost all industries. These models, the OpenAI study said, will end up as general-purpose technologies “like the steam engine or the printing press”.

The AI advantage

What are the jobs where the AI has a distinctive advantage? A January 2023 paper, by Anuj Kapoor of the Indian Institute of Management Ahmedabad and his co-authors, explored the question of whether AI tools or humans were more effective at helping people lose weight. The authors conducted the first causal evaluation of the effectiveness of human vs AI tools in helping consumers achieve their health outcomes in a real-world setting by comparing the weight loss outcomes achieved by users of a mobile app, some of whom used only an AI coach while others used a human coach as well. Interestingly, while human coaches scored higher broadly, users with a higher BMI did not fare as well with a human coach as those who weighed less.”

The new ECB study does find resonance in an earlier OECD paper on AI and employment titled ‘New Evidence from Occupations most exposed to AI’, which had asserted that the impact of these tools “would be skewed in favour of high-skilled, white-collar ones, including: business professionals; managers; science and engineering professionals; and legal, social and cultural professionals”.

This contrasts with the impact of previous automating technologies, which have tended to take over primarily routine tasks performed by lower-skilled workers. The 2021 OECD study noted that higher exposure to AI “may be a good thing for workers, as long as they have the skills to use these technologies effectively”. The research found that over the period 2012-19, greater exposure to AI was associated with higher employment in occupations where computer use is high, suggesting that workers who have strong digital skills may have a greater ability to adapt to and use AI at work and, hence, to reap the benefits that these technologies bring. By contrast, there is some indication that higher exposure to AI is associated with lower growth in average hours worked in occupations where computer use is low. On the whole, the study findings suggested that the adoption of AI “may increase labour market disparities between workers who have the skills to use AI effectively and those who do not.” Making sure that workers have the right skills to work with new technologies is therefore a key policy challenge, which policymakers in countries, including India, will increasingly have to grapple with.