AI and the Future of Work
History offers a useful lens: what does the track record of transformative technologies and productivity growth actually reveal about their impact on employment?
There has been much talk recently about the large productivity gains artificial intelligence (AI) could help to generate. Some believe these productivity gains will enable companies to significantly reduce their workforce, creating fears of high unemployment and resulting economic weakness. What can history tell us about how technology and productivity have impacted employment?
- In the late 19th century, the invention of the tractor led to a significant increase in agricultural productivity. This resulted in fewer farm-related jobs, and displaced workers moved to cities and found work in manufacturing. A similar shift took place as productivity and globalization later impacted the manufacturing sector and Americans gravitated to service jobs, which now represent roughly two-thirds of U.S. employment. This dynamic reflects what economist Joseph Schumpeter called “creative destruction”—the continual dismantling of old economic structures and their replacement with new, more productive ones. Critically, value and labor were not destroyed at each transition; they were reallocated (see also
AI is an Investment Opportunity, Not an Economic Catastrophe).
- More than 60% of today’s jobs did not exist prior to World War II.1 In the table above, the left segment (Job Destruction) shows that many popular occupations in the early 20th century, such as blacksmiths, carriage & harness makers, cobblers, and watchmakers, have largely disappeared. Conversely, the right segment (Job Creation) shows that entirely new occupations now employ millions of Americans, including computer systems designers, software developers, truck drivers, medical technicians, and auto mechanics.
- In our view, prior waves of technological change suggest AI will likely render certain jobs obsolete. In the near-term, AI disruption may favor capital over labor, underscoring the potential investment opportunity in AI enablers driving the massive buildout of data center infrastructure. Over the long-term, history has consistently shown that technological innovation creates new roles that were impossible to predict in advance. Just as the internet gave rise to e-commerce, cloud computing, and social media, we believe AI may follow a similar path, creating new industries and jobs that are difficult to envision today.
1Autor, David. 2022. The Labor Market Impacts of Technological Change: From Unbridled Enthusiasm to Qualified Optimism to Vast Uncertainty. NBER Working Paper No. 30074. Cambridge, MA: National Bureau of Economic Research.
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Risk Disclosures: Investing in the stock market involves risks, including the potential loss of principal. Growth stocks may be more volatile than other stocks as their prices tend to be higher in relation to their companies’ earnings and may be more sensitive to market, political, and economic developments. Past performance is not indicative of future performance. Investors whose reference currency differs from that in which the underlying assets are invested may be subject to exchange rate movements that alter the value of their investments. Companies involved in, or exposed to, AI-related businesses may have limited product lines, markets, financial resources or personnel as they face intense competition and potentially rapid product obsolescence, and many depend significantly on retaining and growing their consumer base. These companies may be substantially exposed to the market and business risks of other industries or sectors, and may be adversely affected by negative developments impacting those companies, industries or sectors, as well as by loss or impairment of intellectual property rights or misappropriation of their technology. Companies that utilize AI could face reputational harm, competitive harm, and legal liability, and/or an adverse effect on business operations as content, analyses, or recommendations that AI applications produce may be deficient, inaccurate, biased, misleading or incomplete, may lead to errors, and may be used in negligent or criminal ways. AI technology could face increasing regulatory scrutiny in the future, which may limit the development of this technology and impede the future growth. AI companies, especially smaller companies, tend to be more volatile than companies that do not rely heavily on technology.
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