AI could imperil salaries, not jobs; Why findings of new ECB study contrast with outcomes of previous tech waves
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.
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Waves of innovation in artificial intelligence have revived the debate on the impact of new technologies on employment. And while the jury is still out on how these newer innovations will play out, new research published by the Frankfurt-based European Central Bank (ECB) has said the adoption of AI could reduce wages, but so far is creating, not devouring jobs. But there are caveats: the conclusion of this latest Europe-focused study is more pronounced in the category of the young and highly-skilled workers in what is clearly a developed market setting, with the paper primarily looking at the deep learning boom of the 2010s.
The conclusion here is that occupations potentially more exposed to AI-enabled technologies actually increased their employment share in Europe and that jobs with a relatively higher proportion of younger and skilled workers gained the most. For salaries, it said that the evidence is “less clear and suggests neutral to slightly negative impacts”. “These results do not amount to an acquittal,” the paper noted. “AI-enabled technologies continue to be developed and adopted. Most of their impact on employment and wages – and therefore on growth and equality – has yet to be seen,” said the paper published by the ECB in a Research that was authored by Stefania Albanesi of the University of Pittsburgh and the NBER, and others.
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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.
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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”.
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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.
Anil Sasi is the National Business Editor at The Indian Express, where he steers the newspaper’s coverage of the Indian economy, corporate affairs, and financial policy. As a senior editor, he plays a pivotal role in shaping the narrative around India's business landscape.
Professional Experience Sasi brings extensive experience from some of India’s most respected financial dailies. Prior to his leadership role at The Indian Express, he worked with:
The Hindu Business Line
Business Standard
His career trajectory across these premier publications demonstrates a consistent track record of rigorous financial reporting and editorial oversight.
Expertise & Focus With a deep understanding of market dynamics and policy interventions, Sasi writes authoritatively on:
Macroeconomics: Analysis of fiscal policy, budgets, and economic trends.
Corporate Affairs: In-depth coverage of India's major industries and corporate governance.
Business Policy: The intersection of government regulation and private enterprise.
Education Anil Sasi is an alumnus of the prestigious Delhi University, providing a strong academic foundation to his journalistic work.
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