AI's Impact on Workforces: Amazon CEO's Warning Rings True

Amazon CEO Andy Jassy has announced that his company will reduce its workforce as artificial intelligence (AI) replaces human employees. This move is part of a broader trend in the tech industry, where many companies are grappling with the implications of AI on their workforces.

Jassy is not alone in his concerns. In May, the CEO of AI startup Anthropic told Axios that AI could eliminate half of all entry-level white-collar jobs within the next one to five years. The Wall Street Journal reported that US public companies have collectively reduced their white-collar staff by 3.5% over the past three years, with one in five S&P 500 companies shrinking in the last decade.

Tech giants like Microsoft, Hewlett Packard, and Procter & Gamble have announced significant layoffs in recent months. Retail service provider Shopify has implemented a policy where teams requesting additional staff must first prove that AI cannot perform the tasks. Duolingo, a language-learning app, plans to gradually replace its external workers with AI.

These developments have raised fears of mass unemployment. The Organization for Economic Cooperation and Development (OECD) estimates that a quarter of jobs worldwide are at high risk of being replaced by AI automation. However, AI is also expected to create new opportunities and boost productivity.

A report by the World Economic Forum forecast that technological transformation would displace about 92 million existing jobs by 2030, while creating 170 million new ones. Jobs in developed economies will likely be more affected by AI than those in developing ones. The International Monetary Fund (IMF) found that technology could affect 60% of jobs in developed economies, with half of them negatively impacted and the other half positively.

In emerging markets and low-income countries, about 40% and 26% of jobs, respectively, are expected to be hit. However, these labor markets may see a smaller initial impact from AI and are less likely to benefit from the increased productivity it promises.

During past technological breakthroughs, lower-skilled and blue-collar workers bore the brunt, such as workers on factory floors being replaced by robots. However, broad AI adoption is expected to hit higher-educated, white-collar workers hard, particularly those with tasks that AI can perform at a similar or better quality.

A study by the Pew Research Center found that occupations involving information gathering and data analysis, such as web developers, technical writers, accountants, and data entry workers, are at high risk of being replaced by AI. Labor-intensive jobs that cannot be easily automated, like construction workers, child care workers, and firefighters, are expected to remain the most resilient.

The possibility of massive job losses has drawn the attention of politicians and religious leaders, with Pope Leo XIV warning of the threat posed by AI to jobs and human dignity.

Labor market expert Enzo Weber from the Institute of Employment Research (IAB) in Nuremberg, Germany, believes that the concerns over job losses are misplaced. He argues that AI advancements open up a wide range of economic possibilities and are more likely to help workers than cause mass unemployment.

"AI primarily changes work, but it does not fundamentally eliminate it," said Weber, adding that the technology helps human workers develop new tasks and perform their tasks better rather than just replacing them.

A paper published by Harvard economists David Deming, Christopher Ong, and Lawrence H. Summers shared a similar view. They argue that the automation of individual job tasks does not necessarily reduce employment and may even lead to job gains in some sectors of the economy.

"In principle, being able to automate a previously onerous task could make workers so much more productive that the increased output offsets the fact that some of their work is now being done by a machine," they stated in the paper.

Given that AI technology is still in its early stages, its precise longer-term impact on global labor markets remains uncertain. However, the consensus is that the impact of AI will be widespread and long-lasting, and history teaches us that its effects will unfold over many decades.