The Impending Workforce Disruption

An Analysis of AI's Impact on Industries and Strategies for Adaptation

Looking at the history of technological advancement, we can see that the feat that machines will replace and steal jobs is centuries old. But so far, new technologies have always created new jobs to replace the jobs that it has destroyed.

Historically, as machines replaced humans in some tasks, it increased the demand for people doing jobs that machines cannot do. Yet, what is different this time is that historically, machines have replaced mostly manual blue-collar jobs, while today – with the emergence of advanced large language models – white collars jobs are at even higher risk of being replaced as artificial intelligence becomes increasingly capable in any task that required knowledge or language.

Besides doomsday scenarios, the most common concern of AI is the impact on employment. This makes sense from a human perspective, as AI’s capability to automate routine tasks across all major industries poses a significant risk of job displacement and thereby the risk of earning an income to live and provide for one’s family.

The Impact on Jobs

Sam Altman, CEO and co-founder of OpenAI, once said in an interview that: “all repetitive human work that doesn’t require the deep emotional connection between two people will all be done within the next decades better, cheaper, faster by AI.”

How drastic and how fast will this disruption turn out?

We believe that for the short-term future, AI is not going to replace humans entirely but rather that humans with AI will replace humans that don’t use AI. This means that AI will become a forcing function, requiring everyone to integrate it into their work to remain competitive. Within a year, those who are not actively using AI in their job functions may be viewed as falling behind. Companies are already starting to establish “Head of AI” roles to oversee the integration of AI across the organization – a trend that will continue and ultimately reach every organization.

In the short-term, while there will be some job loss, it may not be as severe as people fear, as AI is currently more about automating tasks within jobs rather than fully automating entire jobs. For many jobs, if AI automates 20-30% of the tasks, the job itself will still be relatively safe. Again, people who use AI will replace those who don’t, rather than AI fully replacing all human workers.

In the next five years, a crisis of meaning may emerge as AI begins to disrupt and automate more and a wide range of jobs that could potentially lead to significant job losses. The job losses will occur gradually at first, like boiling a frog, but will accelerate over time. There is a risk that widespread job losses could happen faster than new jobs can be created to replace them. Yet, the extent will also largely depend on the industry.

Industry Perspective

To paint a comprehensive picture of AI's impact on the workforce, it is essential to examine its effects across a spectrum of industries. On one end, we have sectors that are highly susceptible to automation, such as finance, legal, manufacturing, logistics, transportation, and data entry. These industries, characterized by repetitive and predictable tasks, are prime candidates for AI-driven disruption. As AI systems become more sophisticated, they can effectively replace human workers in these roles, leading to significant job displacement.

On the other end of the spectrum, we have industries that rely heavily on human creativity, empathy, complex problem-solving skills, and labor. While AI may augment and enhance these roles, it is unlikely to fully replace them in the near future. Professions such as healthcare, education, and creative arts will likely see a symbiotic relationship with AI, where the technology complements human expertise rather than displacing it entirely. Between these two extremes lies a vast array of industries that will experience varying degrees of disruption.

An analysis by Accenture Research indicates that current Large Language Models (LLMs) have the potential to affect 40% of working hours across diverse sectors. That is because language-related tasks currently occupy over 60% of total work time in the United States, with approximately 65% of these tasks showing high potential for automation or augmentation through the integration of LLMs into business processes.

High Automation Risk

Traditionally, labor economists have predominantly focused on the impact of automation technologies on workers with lower skill levels, as measured by educational attainment. However, with the advent of generative AI, a contrasting pattern emerges. Job roles most profoundly affected align with those involving knowledge-intensive tasks, characterized by higher wages and educational prerequisites in comparison to other occupational categories. These white-collar jobs, once considered immune to automation, are now facing the reality of AI's encroachment.

In a recent interview, Kai-Fu Lee, a prominent figure in the AI industry, emphasized that white-collar jobs will be displaced faster by AI than blue-collar jobs, as the focus shifts towards software-based job displacement. He made some startling predictions about the impact of AI and AGI on jobs in the near future. According to Kai-Fu Lee, within the next 2–3 years, AI will surpass humans in its ability to perform white-collar knowledge and language tasks, although it may still lack certain human traits such as awareness, love, empathy, and compassion. He forecasts that around 40-50% of jobs will be displaced by AI within this timeframe, a prediction that aligns with his earlier 2017 estimate of 40-50% job displacement over a 10–15-year period.

When industries are examined based on their language-related tasks, the banking, financial, and insurance sector emerges as highly susceptible to disruption by AI. Accenture's research further reveals that 54% of work time in banking, 48% in insurance, and 40% in finance holds a high potential for automation.

This will have a significant impact on jobs in the banking, insurance, and finance industries which are prime candidates for disruption. Legal tasks, constituting nearly 100% of language and knowledge-related responsibilities, are particularly susceptible to automation. Accenture Research estimates that 33% of working time is poised for automation, 9% for augmentation, and a substantial 58% exhibiting potential for either automation or augmentation across various sectors.

Even roles in software and platforms face a significant 36% potential for automation and an additional 21% potential for augmentation. Also, more creative job functions, like filmmaking, could see a drastic reduction in the number of people needed due to AI automation, with the potential for a 50:1 reduction.

In a recent interview, Jensen Huang, CEO of Nvidia, emphatically asserted that they are forging computing technology with the aim that "nobody has to program and that the programming language is human." This shows that even the realm of programming is not immune to the transformative influence of AI.

Low Automation Risk

In contrast, job functions requiring low skill levels and manual labor appear to be relatively shielded from the reach of complete automation. This aligns with common sense, as we will – for the foreseeable future – continue to live in physical homes, use real toilets, and consume real food.

Sectors like food preparation and serving, transportation, construction and extraction, installation, maintenance, repair, farming, fishing, forestry, production, building, and grounds cleaning and maintenance exemplify domains where hands-on engagement remains indispensable. These roles necessitate a physical labor component, positioning them as less vulnerable to the transformative forces of automation. Moreover, these jobs, at least for the present, are more likely to be augmented by generative AI technology rather than outright replaced.

Opportunities

Despite the potential for job displacement, AI also presents significant opportunities in various domains. The McKinsey Global Institute predicts 20 to 50 million new jobs will be created by 2030 with new roles that require a combination of technical know-how and distinctively human abilities. 

This makes reskilling and upskilling one of the most important things for white collar workers to ensure job stability and career growth in the near future. This is equally true for low-skilled and blue-collar workers. By adapting and by acquiring new skills that complement and work in harmony with emerging AI systems workers will mitigate the risk of wholesale replacement.

Whether high-skilled or low-skilled workers, executives and shareholders bear a responsibility to facilitate crucial support mechanisms for employees amidst this transition.

Being Human

Despite AI's potential to imitate human qualities, human traits such as empathy, compassion, emotions, love, and the ability to win trust are expected to remain important and uniquely human for at least the next 50 years.

AI, at least for the foreseeable future, cannot replicate the human ability to build authentic connections and trust. Therefore, cultivating EQ will be essential for success in a world where AI increasingly dominates the workplace.

Despite these challenges, kids and students should be encouraged to use and harness AI tools like ChatGPT in their work and learning and using these tools should not be considered cheating but rather a means to produce the best outputs, similar to using word processors or Photoshop.

Furthermore, by scaling human expertise, AI can enable personalized education, healthcare, content creation, and many other areas. With AI models tailored to different domains, individuals could have access to personalized AI tutors, doctors, trainers, and other services optimized for their specific needs.

The reduced cost of creation enabled by AI could lead to an explosion of new businesses, jobs, and economic value. The global south, in particular, could leapfrog ahead by adopting AI for education, healthcare, and other areas faster than the west. Additionally, AI has the potential to help solve major world problems by combining domain-specific AI models to bring together insights from various fields.

Skywert Perspective

The impact of AI and AGI on the workforce is not a distant possibility but an imminent reality. As the technology continues to advance at an exponential pace, it is imperative for decision-makers and investors to proactively address the challenges and seize the opportunities and minimize the threats that arise.

At Skywert we believe that the largest threat is the dominance of a few big AI players which will create challenges for smaller entrepreneurs, researchers, and those lacking the necessary skill sets and access to compute power, leading to an accelerated pace of difficulties for the "have-nots."

We believe open-source AI is preferable, as it provides more access and avoids being locked into proprietary platforms. While there are lobbying efforts to impose heavy regulations under the guise of safety to limit open source, more open-source AI is positive and will unlock more innovation. Furthermore, we believe that concrete regulations on specific AI applications are better than broad regulations based on vague fears about AI itself.

We believe that the AI singularity is not a threat to be feared but an opportunity to be embraced – an opportunity to redefine the very nature of work and create a future that is more prosperous, equitable, and fulfilling for all.