What is the impact of AI on labour retention?
Mohammed Ahmed, Research Manager at the AI Faith and Civil Society Commission & Jeremy Peckham, Research Lead and Commissioner, AI Faith and Civil Society Commission
Whilst it is clear that seismic technological developments result in an increase in productivity, this article questions whether this productivity will truly translate into a net benefit for workers, and how different organisations predict AI will contribute to increasing job loss.
Klarna & BP
In May 2022, Klarna, a payment giant in the debt and credit industry, announced plans to downsize, laying off around 10% of its workforce, equating to approximately 700 positions. Sunset’s layoff tracker examines how companies like Klarna make these downsizing changes, arguing that “this decision came amid a frosty capital market for fast-growing tech companies and concerns over the sustainability of the sector's growth. Klarna's focus moving forward seems to be on leveraging technology like AI to maintain efficiency.”[1]
This trend is certainly not limited to Klarna, BP’s Quarterly 1 report (2024) assessed how AI can be used to provide more efficiency: “The places that we are seeing tremendous results on are coding. We need 70% less coders from third parties to code as the AI handles most of the coding, the human only needs to look at the final 30% to validate it. That's a big savings for the company moving forward.”[2]
The Global Labour Market
This trend is only set to increase. In early 2024, IMF Managing Director Kristalina Georgieva gave a holistic prediction of how AI will impact the global labour market drastically noting that it may affect up to 60% of jobs in advanced economies and 40% worldwide within two years.[3]
Particular industries and different sectors will of course be impacted differently. A recent McKinsey report indicates that all industries will reduce staff and improve productivity, with particular affected industries including high tech, advanced manufacturing, healthcare, education, banking, media and entertainment.[4]
Productivity increase: Does this translate to wage increases?
The McKinsey report also predicted how much value AI could add: “Across 63 use cases, Generative AI has the potential to generate $2.6 trillion to $4.4 trillion in value across industries”.[5] However, does productivity increase translate into actual wage increase?
According to data from the Bureau of Labour Statistics, the post-war boom led to an exponential rise in both productivity and hourly compensation for the worker.[6] However, from 1973, net productivity in the total economy continued to rise, but hourly compensation did not. Therefore, an increase in productivity is not necessarily tied to a wage increase for workers, nor does the development of technology necessarily result in wage increases. This leads one to question whether AI developments primarily help the average person, or not.
Human Values Risk Analysis:
Authentic Relationships: Medium risk
Replaces human-human relationships at work
Dignity of Work: High risk
Replaces human-led jobs
Moral Autonomy: Medium risk
AI systems increasingly responsible for accuracy of work output
Cognition & Creativity - Medium risk
Increasing use of AI for jobs will replace the need for human cognition and creativity
Privacy & Freedom: Low risk
No direct threat to privacy and freedom
Truth & Reality: Low risk
No direct threat to truth and reality
Policy Recommendations:
1. Companies must conduct a risk assessment of the impact of using AI technologies on their employees prior to implementation
2. Companies must mitigate impact on their employees by helping to assign them to other roles or supporting them to seek further employment.
3. Large companies must provide upskilling to the employees who will be impacted by labour retention threats due to AI, to ensure they have skills for a job that is not foreseeably threatened by the implementation of AI
Footnotes:
[1] Klarna Layoffs: What Happened and Why, June 2024, https://www.sunsethq.com/layoff-tracker/klarna#:~:text=In%20May%202022%2C%20Klarna%2C%20a,sustainability%20of%20the%20sector%27s%20growth
[2] BP 1Q 2024 Results: Webcast Q&A Transcript, https://www.bp.com/content/dam/bp/business-sites/en/global/corporate/pdfs/investors/bp-first-quarter-2024-results-qa-transcript.pdf
[3] AI Will Transform the Global Economy, The International Monetary Fund, https://www.imf.org/en/Blogs/Articles/2024/01/14/ai-will-transform-the-global-economy-lets-make-sure-it-benefits-humanity
[4] McKinsey & Co., The Economic Potential of Generative AI, June 2023.
[5] ibid.
[6] Wage stagnation in nine charts, US Bureau of Labor, https://www.epi.org/publication/charting-wage-stagnation/