The Impact of AI on the Economy: A Tale of Two Studies

Friday - February 2 2024, 11:23 UTC - 9 months ago

Two recent studies from respected institutions present differing views on the impact of AI on jobs and the economy. While the International Monetary Fund predicts that AI may worsen inequality and affect up to 40% of jobs globally, a study from MIT CSAIL suggests that the rollout of AI may be slower than expected due to the economic feasibility of replacing human tasks. It is clear that AI will have a significant impact on the global economy and job market, and it is important for policymakers, companies, and individuals to plan and adapt for these changes now.

The impact that AI could have on the economy is a hot topic following rapid advances in the technology. But two recent reports present conflicting pictures of what this could mean for jobs.Ever since a landmark 2013 study from Oxford University researchers predicted that 47 percent of US jobs were at risk of computerization, the prospect that rapidly improving AI could cause widespread unemployment has been front and center in debates around the technology .

Reports forecasting which tasks, which professions, and which countries are most at risk have been a dime a dozen. But two recent studies from prominent institutions that reach very different conclusions are worth noting.Last week, researchers at the International Monetary Fund suggested that as many as 40 percent of jobs worldwide could be impacted by AI, and the technology will most likely worsen inequality .

But today, a study from MIT CSAIL noted that just because AI can do a job doesn’t mean it makes economic sense, and therefore, the rollout is likely to be slower than many expect.The IMF analysis follows a similar approach to many previous studies by examining the "AI exposure" of various jobs. This involves breaking jobs down into a bundle of tasks and assessing which ones could potentially be replaced by AI .

The study goes a step further though, considering which jobs are likely to be shielded from AI’s effects. For instance, many of a judge’s tasks are likely to be automatable, but society is unlikely to be comfortable delegating this kind of job to AI.The study found that roughly 40 percent of jobs globally are exposed to AI. But the authors predict that advanced economies could see an even greater impact, with nearly 60 percent of jobs being upended by the technology .

While around half of affected jobs are likely to see AI enhance the work of humans, the other half could see AI replacing tasks, leading to lower wages and reduced hiring.In emerging markets and low-income countries, the figures are 40 percent and 26 percent, respectively. But while that could protect them from some of the destabilizing effects on the job market, it also means these economies are less able to reap the benefits of AI, potentially leading to increasing inequality at a global scale .

Similar dynamics are likely to play out within countries as well, according to the analysis, with some able to harness AI to boost their productivity and wages while others lose out. In particular, the researchers suggest that older workers are likely to struggle to adapt to the new AI-powered economy.While the report provides a mixture of positive and negative news, in most of the scenarios considered AI seems likely to worsen inequality, the authors say .

This means that policymakers need to start planning now for the potential impact, including by beefing up social safety nets and retraining programs.The study from MIT CSAIL paints a different picture though. The authors take issue with the standard approach of measuring AI exposure, because they say it doesn’t take account of the economic or technical feasibility of replacing tasks carried out by humans with AI .

Instead, they suggest that many tasks that can be done by AI may not make economic sense, leading to a slower rollout of the technology than initially expected.Despite these different perspectives, one thing is clear: AI will have a significant impact on the global economy and job market. It is important for policymakers, companies, and individuals to start preparing for and adapting to this change now in order to mitigate potential negative effects and maximize the benefits of AI .

From potential job displacement to changes in productivity and income inequality, the consequences of AI are far-reaching and complex. As with any major technological advancement, it is crucial for all stakeholders to carefully consider and plan for its effects.So while there may be conflicting predictions and projections, one thing is certain: the impact of AI on the economy is a topic that will continue to be hotly debated and studied for years to come .