Generative AI: A Blessing or a Curse to the Economy?

Tuesday - June 27 2023, 07:48 UTC - 1 year ago

A new study published by McKinsey estimates that generative AI has the potential to create up to $4.4 trillion worth of annual value in the global economy. This technology can automate and accelerate work currently done by humans, allowing us to get more work done with less time. Four job categories could especially benefit from generative AI: customer operations, marketing and sales, software engineering, and research and development. However, re-skilling and investments in worker transitions will need to be managed carefully.

There’s been concern about artificial intelligence taking away jobs for years, and with the recent boom in generative AI, those fears have grown. The ability to generate realistic and accurate text, images, or audio based on a prompt could make plenty of jobs obsolete (including, ahem, journalism and writing). But a new study says the doomsday predictions are misguided, because generative AI is far more likely to do just the opposite of canceling out jobs.

Last week, McKinsey published a report called The Economic Potential of Generative AI: The Next Productivity Frontier. It’s the result of a study involving 850 different job roles and 2,100 tasks across occupations in 47 countries. Researchers considered what portion of each existing job or task can be taken over by generative AI, as well as new occupations and responsibilities likely to be created by the technology. Their conclusion? Generative AI has the potential to create up to $4.4 trillion worth of annual value in the global economy.

$4.4 trillion is the high end of a range, with the lower bound sitting at $2.6 trillion. Even if the value created were to fall on the low end, it would still approximate the GDP of the United Kingdom, which was $3.1 trillion in 2021.

How will that happen? Mostly by automating and accelerating work that’s currently done by humans, allowing humans to do more work in the same amount of time. That makes both us and AIs sound like nothing more than workhorses, but here’s an example.

A study released in April detailed how generative AI impacted the work of customer service agents at a software firm. The AI monitored agent interactions with customers in real time and gave them suggestions for what to say. The agents who used the AI resolved 13.8 percent more issues per hour than they’d been able to without it; they got through calls more quickly, resolved more complaints successfully, and could even handle multiple calls at once. The AI also cut down the time managers had to spend training new employees, enabling them to take on bigger teams—and ultimately allowing the company to hire more employees and do more business.

McKinsey’s study found that generative AI and other technologies could automate work activities that currently take up 60 to 70 percent of employees’ time. That’s a complicated projection, though; the report acknowledges that some significant reskilling will be needed, and companies and governments will have to invest in supporting worker transitions and managing the other risks that such a momentous shift will bring. "If worker transitions and other risks can be managed, generative AI could contribute substantively to economic growth and support a more sustainable, inclusive world," the authors wrote. It’s a pretty big "if," one deserving several equivalent reports of its own to contemplate exactly how it’s all going to work.

According to the report, generative AI’s value add will be mostly concentrated in four categories of jobs: customer operations, marketing and sales, software engineering, and research and development. The customer service example above illustrates the first category; AI can assist with tasks such as recommendation systems, automated responses to customer emails and queries, and handling customer inquiries in real time. The marketing and sales sector can use AI to generate ads, test them in different markets and demographics, and adjust the geo targeting of ads to ensure the most efficient return on investments. AI can also be used to empower software development teams, using them as tools to create prototypes and simulations quickly and accurately. Finally, AI will play a large role in research and development, creating a “virtuous cycle” of research, discovery, and design.

Generative AI holds great promise, but both its benefits and its risks must be managed carefully. It’s up to us to make sure that, when it comes to AI-driven economic progress, each of us gets to enjoy a piece of the pie.