AI, Productivity, and Jobs: A Balanced Perspective on Economic Transformation
As artificial intelligence (AI) continues to advance at an unprecedented pace, discussions around its impact on productivity and employment often swing between unbridled optimism and dystopian fear. However, the real story likely lies somewhere in the middle—a nuanced balance of opportunity and challenge that requires thoughtful exploration. This article delves into insights from Martin Baily, a prominent economist and senior fellow emeritus at the Brookings Institution, on how AI may reshape the global economy, productivity, and the workforce over the coming decades.
Understanding AI as a General-Purpose Technology
Martin Baily characterizes generative AI as a general-purpose technology (GPT), akin to previous transformative innovations such as the steam engine and electricity. Historically, such GPTs eventually create more jobs than they displace after widespread adoption. But the timeline for these benefits to materialize tends to stretch across many years.
“The development and diffusion of earlier GPTs like electricity took decades because businesses needed time to redesign processes and invest in complementary innovations,” Baily explains. Although AI is advancing rapidly—with significant improvements in algorithms and massive infrastructure investment—its integration in productive workflows and organizational changes will not be instantaneous but progressive.
The Impact on Employment and the Workforce
One of the most pressing questions is how AI will affect employment levels in the near and long term. Baily notes that for about fifty years, a core labor market challenge has been the diminishing demand for workers without college degrees or specialized skills, an issue exacerbated by declining factory jobs. The effect of AI remains somewhat ambiguous.
“Evidence is mixed on whether AI will disproportionately disrupt low-skill jobs or more skilled roles such as coders and paralegals,” Baily says. He references research by Deming, Ong, and Summers indicating that, despite historic structural workforce shifts, employment has remained robust through the generation of new job categories.
Baily predicts AI’s full productivity impact will likely play out over the next two decades or more, suggesting limited immediate effects on unemployment rates, though workforce dynamics may shift in other ways.
Projected Productivity Gains and Economic Growth
Recent studies suggest AI could significantly boost productivity and GDP in the long term. A tentative projection from the University of Pennsylvania’s Wharton School estimates an AI-driven productivity increase of 1.5% by 2035, almost 3% by 2055, and 3.7% by 2075. Baily puts these numbers into historical context. “Productivity growth drives economic growth and raises living standards, but recent growth rates of about 1.5% annually are lower than in past eras.” He posits that if AI delivers sustained productivity enhancements comparable to the dynamo or microscope innovations, it could rejuvenate growth and offer valuable resources to address societal challenges like poverty and climate change.
He adds, “AI might represent both a ‘dynamo,’ powering new waves of innovation, and a ‘microscope,’ revolutionizing our approach to invention itself.”
Preparing the Workforce for AI Integration
Different countries are already developing diverse policies to manage AI’s workforce impacts. Notably, countries in Northern Europe and Germany have relied on robust apprenticeship and retraining programs, though these models face pressure as manufacturing roles decline and public funding tightens.
Baily cautions that if AI leads to major employment disruptions, some governments may slow AI adoption to protect worker interests, potentially sacrificing productivity gains. He emphasizes the role of business organizations in guiding this transition effectively alongside public policy.
The Future and the Potential of Artificial General Intelligence
Looking further ahead, questions arise about how the possible advent of artificial general intelligence (AGI) might alter the economic landscape.
Baily suggests that continued innovation is essential simply to maintain current productivity growth trends. AI’s role may be to integrate into this ongoing innovation flow, potentially enhancing the skills of workers across educational backgrounds, including those without advanced degrees.
He highlights the importance of directing government research funding toward AI innovations that support workforce development and notes that most current jobs are in roles created post-1940, underscoring technology’s historical capacity to generate employment.
Conclusion
The conversation surrounding AI’s economic and social impact is complex and evolving. While AI promises substantial productivity benefits and economic growth, the timeline for widespread impact is measured in decades, not months or years. Employment effects remain uncertain but could mirror past technological shifts where job creation outpaced losses.
As Martin Baily advises, confronting AI’s complexities with careful analysis and proactive policies will be crucial. This balanced approach allows society to harness AI’s transformative potential while managing its risks, a challenge that calls for continued curiosity and engagement.
This article is sponsored content made possible by Google and published independently of The Atlantic’s editorial staff. Atlantic Re:think, the creative marketing studio at The Atlantic, developed this original content.
