A repeat of history or the dawn of a new era?

The Conventional Wisdom: AI's Impact on Jobs Similar to Past Technological Revolutions

In a recent World Economic Forum (WEF) article, two Boston Consulting Group economists argued that AI's impact on jobs will resemble that of previous technological revolutions. They suggest that although some individuals might face job displacement due to AI, the overall effect will result in more jobs being created than lost. However, this perspective, while widely accepted, might not hold true. AI's potential to disrupt the job market could be far greater than previous technological shifts, as it can outsource cognitive tasks, leading to more extensive and widespread job displacement than seen before.

Historical Parallels: Lessons from the Automobile Revolution

The WEF economists compare AI's impact to past technological changes, such as the transition from horses to automobiles or the widespread adoption of technology in farming. For example, Microsoft President Brad Smith once described how the shift from horse-drawn carriages to cars created unforeseen opportunities, like manufacturing cars and parts, building roads, and even advertising. Between 1910 and 1950, the U.S. auto industry created a net 6.9 million new jobs, equivalent to 11% of the workforce by 1950, as noted by the McKinsey Global Institute. This outcome was driven by more than just technological advances; evolving cultural values and the Progressive Movement's focus on efficiency, sanitation, and safety also played crucial roles.

A Unique Disruption: AI's Outsourcing of Cognition

Thus, the circumstances surrounding past technological shifts, marked by a unique mix of factors, do not necessarily predict the future, especially when dealing with AI. Unlike earlier innovations, AI represents a significant departure by outsourcing cognition, not just labor. This distinction introduces complexities not encountered before. Historically, technological disruption primarily replaced physical labor, but AI's ability to handle problem-solving, decision-making, and creativity—tasks once thought to be uniquely human—creates unprecedented challenges.

Concerns Among Professionals: AI's Impact on Skillsets

The role of AI in the workforce is already raising concerns. A recent survey found that 74% of IT professionals worry that AI will render many of their skills obsolete, and 69% believe they are at risk of being replaced by AI. While the current belief is that AI will augment rather than replace workers, this could be due to the technology's current limitations rather than a guaranteed outcome. The same survey revealed that 35% of executives plan to invest in AI to eliminate unnecessary positions.

Corporate Strategies: Automation and Workforce Reduction

These fears are echoed by the Federal Reserve Bank of Richmond, which reported that 45% of firms have adopted automation in recent years to reduce staff, with 46% planning to do so in the next two years. In contrast, the Dallas Federal Reserve Bank reported minimal impact on employment due to AI, with one financial services respondent noting that while AI improves productivity, it has not yet reached the point of replacing workers.

Early Shifts in Employment: Augmentation vs. Replacement

Even though the full effects of AI on employment are not yet reflected in the numbers, changes are happening. For instance, a study of call center workers found that new employees augmented by AI could perform as well as their more experienced counterparts. Similarly, another study showed that software engineers could code twice as fast with AI assistance. While these advancements might not immediately reduce the total number of workers, they could significantly alter the workforce's composition. Newer employees might compete more effectively with experienced professionals, potentially leading to decreased wages, faster turnover, underemployment, and increased income inequality between those who can adapt to AI-augmented roles and those who cannot.

Cross-Industry Implications: The Financial Services Example

This dynamic isn't confined to a single profession or industry. For example, Citigroup found that AI could revolutionize consumer finance, making workers more productive and automating up to 54% of banking jobs, with another 12% being augmented by AI. Already, entire departments are being replaced by AI chatbots. Klarna, a Swedish fintech company, implemented an AI assistant handling the workload of 700 full-time staff members, while India's Dukaan replaced 27 customer service agents with a bot.

New Opportunities: Emerging Roles in the AI Era

As AI disrupts existing roles, it also creates opportunities for new kinds of jobs. Citigroup noted that financial firms would likely need to hire AI managers and AI-focused compliance officers to ensure their technology use aligns with regulations. Across industries, new positions could emerge, such as AI risk managers and AI-human interface designers. One particularly intriguing new role could be that of an "AI orchestrator"—a human professional essential for understanding context, making ethical choices, and building stakeholder relationships that AI cannot fully grasp. These orchestrators would guide various AI tools, ensuring they work harmoniously and create the highest quality outputs.

The Future of Work: Navigating Uncharted Territory

As AI continues to evolve, its impact on employment will be complex and multifaceted. While historical parallels offer some insight, the unique nature of AI—especially its ability to outsource cognitive tasks—suggests we are entering uncharted territory. The future of work will likely involve a mix of augmentation and displacement, with new roles emerging unevenly alongside the automation of traditional jobs. Whether these changes will result in more jobs overall or fewer remains to be seen. However, relying solely on past experiences to predict the future of AI's impact on employment may be akin to looking in the rearview mirror while driving toward an uncertain future.