AI job worries, what the data say

AI job worries, what the data say

Last week’s Bletchley summit on artificial intelligence (AI) concluded with a prediction from Elon Musk that AI will eventually replace all forms of human labour. As Mr Musk put it, “You can have a job if you want a job… but AI will be able to do everything”.

• Concerns about new technologies have grown in recent years. Two of the leading experts in this field, MIT professors Erik Brynjolfsson and Andrew McAfee, have written that “in more and more domains, the most cost-effective source of ‘labour’ is becoming intelligent and flexible machines as opposed to low-wage humans in other countries.” In a similar vein Lawrence Summers, a former US treasury secretary and Harvard economist, has written that with regard to automation destroying jobs, “This isn’t some hypothetical future possibility. This is something that’s emerging before us right now.”

• The logic seems obvious. When machines can outperform humans, and at lower cost, humans become redundant. Except, in aggregate, they don’t. More precisely, that was not the experience of the last century.

• A period of unprecedented technological change was accompanied by a vast expansion of the number of people in work. In 1900, about 30m people worked in the US. By the year 2000, the total was more than six times higher, at 134m.

• Technology created far more jobs than it destroyed. This was partly about new industries, such as autos, aerospace and technology, requiring new workers. More subtly, technology-driven productivity growth raised US incomes and boosted demand for labour-intensive services such as retail, healthcare and entertainment. The numbers are remarkable. David Autor of MIT estimates that 60% of US workers are employed in occupations, such as software engineers, personal trainers and recreational therapists, that did not exist in 1940. (A recent assessment of the susceptibility of 702 US job categories to automation ranked recreational therapy – a role that involves using leisure activities, such as art or games, to improve physical and mental welfare – as hardest to automate.)

• One might object that the world has changed a lot since the turn of the century. Technology has become even more pervasive and capable in the last 20 years, a period that has brought us smartphones, social media, cloud computing and more capable AI. What do the data show about the effect of these, and other technologies, on jobs?

• Last year the US Bureau of Labor Statistics (BLS) examined this question, looking at how employment in occupations that economists and technologists identify as being susceptible to job losses from AI and robotics had fared. Jobs included truck drivers, fast food workers and interpreters, roles that were largely unaffected by earlier technologies and whose number therefore offers a test of the effect of recent developments in AI and robotics.

• Between 2008 and 2019, the number of people working in such supposedly vulnerable jobs increased from 13.3m to 15.1m. Remarkably, employment increased faster for these roles than it did for other, less ‘at-risk’ jobs. What particularly surprised me was that in the era of free and ubiquitous computer-based translation the number of interpreters and translators rose by 22% between 2008 and 2019.

• As the paper notes, “Part of the reason new technology does not produce sharper changes in employment is the diversity of jobs within occupations and the diversity of tasks within jobs, not all of which are equally susceptible to technological substitution. Automation of some tasks may also alter the task composition of jobs, rather than simply reducing the number of jobs”.

• Jobs in radiology are seen by technologists as being particularly vulnerable to AI. Professor Geoffrey Hinton, one of the leading figures in the development of AI, said in 2016, “We should stop training radiologists now. It’s just completely obvious that within five years, deep learning is going to do better than radiologists.” Yet the number of radiologists has risen, not gone down. Rising demand for healthcare is one factor; the work of a radiologist also involves a wide variety of complex diagnostic and related tasks that cannot be performed by AI tools.

• The BLS also finds that an array of new technologies, from robot lawn mowers to robot surgery, have failed to put a measurable dent in employment in the affected sectors in the US.

• To test whether the findings in the BLS paper were a product of US conditions we applied the same approach in the UK and produced similar results. Between 2008 and 2018, a range of occupations widely deemed to be at risk of replacement by new technologies witnessed strong job growth. The number of software professionals increased by 84%, radiographers by 43%, accountants 32%, gardeners 29% and legal professionals 28%. These increases compare to overall UK employment growth of 17% over this period.

• None of this is to argue that technology does not displace some jobs. The UK data, for instance, show that the number of telephone salespeople declined by 73% in the period 2008-18. There were significant declines too in the number of travel agents, bookkeepers, wage clerks and payroll managers.

• But such job losses were eclipsed by gains in employment in other sectors, some of them relatively new job categories, such as fitness instructor, where employment more than doubled.

• Mr Musk may be right. Perhaps AI will eventually take every job. Perhaps the previous relationship between jobs and technology will flip. It just hasn’t so far.

OUR REVIEW OF LAST WEEK’S NEWS
The UK FTSE 100 equity index closed the week up 2.7% at 7,417 after stocks were buoyed by the Bank of England’s decision to keep rates unchanged

Economics

• The BoE kept interest rates on hold at 5.25%, the highest level since 2008, but warned rates would remain elevated for an extended period
• BoE governor Andrew Bailey said UK economic growth had been slowing and the outlook was “subdued”. The Bank estimates that more than half of the impact of higher interest rates on GDP is still to come through, and it now expects zero economic growth until 2025
• The Bank forecasts inflation will fall from its current level of 6.7% to around 3% by the end of 2024 and to its 2% target by the end of 2025, though it says risks are skewed to the upside, including the potential for the conflict in the Middle East to drive energy prices higher
• Company insolvencies in England and Wales rose to the highest level since 2009 in the third quarter as businesses struggle with the rising cost of financing
• UK mortgage approvals fell in September to the lowest levels since April while net approvals for remortgaging sunk to levels not seen since 1999
• The euro area economy contracted by 0.1% in the third quarter, increasing the chances of a technical recession in the second half of the year
• German GDP fell by 0.1% (and is now in recession), the Italian economy stagnated while France and Spain continued to grow but at a slower pace
• Euro area inflation dropped sharply to 2.9% in October due to lower energy prices and a drop in food inflation
• The US Federal Reserve kept interest rates on hold at 5.25%-5.50%, a 22-year high, but noted that the recent strength of the economic data may require further monetary tightening
• Following the Fed’s meeting, data showed that US jobs growth slowed sharply in October and unemployment ticked up in a sign that higher rates are starting to cool the labour market
• US manufacturing activity contracted more than expected in October as demand softened, according to PMI data
• US oil production hit a record high of 13.05m barrels a day in August, boosting global supply at a time when Russia and Saudi Arabia are maintaining deep output cuts
• Lending to US commercial real estate has fallen to historically low levels, threatening defaults on expiring debt and a sharp fall in new projects, according to The Wall Street Journal
• Chinese manufacturing activity contracted in October, tempering hopes that the economy was gaining momentum after several positive data points 
• EU natural gas storage facilities are 99% full, above the 90% target the EU set ahead of the winter season, reducing, but not eliminating the possibility of energy shortages and further price shocks
• The number of ships allowed to cross the Panama Canal, which handles 3% of global trade, will be reduced over the coming months due to extreme droughts linked to climate change

Business

• Japanese carmaker Toyota announced a $13.9bn investment in its North Carolina battery plant, the largest by a foreign carmaker since the passing of the Biden Administration’s Inflation Reduction Act, which offers subsidies to green industries
• Ørsted, the world’s largest offshore wind developer, scrapped two key projects in the US recording a $4bn impairment in the process. The industry has been beset with supply chain problems, rising costs and higher interest rates
• BP’s head of low-carbon energy Anja-Isabel Dotzenrath said that the US offshore wind industry is “fundamentally broken” as government policies fail to keep up with the sector's growth
• US drugmaker Pfizer posted its first loss since 2019 in the third quarter due to a $5.6bn inventory write-off of its COVID-19 antivirals and vaccines
• European telecom firm Vodafone announced the sale of its Spanish arm to Zegona Communications for up to €5bn to cut costs and improve competitiveness
• Sam Bankman-Fried was convicted of fraud and money laundering while in charge of the now disgraced cryptocurrency FTX that he founded
• Sales of Ferrari cars with hybrid engines have overtaken the firm’s traditional models for the first time
• Danish shipping giant AP Møller-Maersk is to cut 10,000 jobs due to weaker demand as the pandemic-led boom in activity fades

Global and political developments

• US president Joe Biden called for a pause to hostilities to help free hostages held by Hamas, but stopped short of calling for a ceasefire
• Egypt opened the Rafah crossing to allow critically wounded Palestinians and foreign nationals to leave Gaza
• FBI director Christopher Wray said that the “ongoing war in the Middle East has raised the threat of an attack against Americans in the United States to a whole other level”
• Bolivia severed ties with Israel over “aggressive and disproportionate” military action in Gaza while Chile, Colombia and Jordan recalled their ambassadors from the country for similar reasons
• At the inaugural AI Safety Summit, 28 countries including the US, the UK and China agreed to ensure artificial intelligence is used in a “human-centric, trustworthy and responsible” way

And finally… a large pig recently spent days on the loose in Aurora, Colorado, disrupting traffic and making a nuisance of himself before eventually being captured. Fred, as he’s been named by his new home, the Aurora animal shelter, was captured by a coordinated effort between five animal services employees, three parks employees and two others – colla-boar-ation