An In-Depth Analysis of the AI Revolution: Economic Transformations, Workforce Dynamics, and Governmental Policies

By Max Yao

Eaglebrook School, MA

The launch of OpenAI’s ChatGPT in November 2022 ignited unprecedented technological  advancements. Companies like OpenAI, Google, academic institutions, and research teams  contribute to the advent of foundation models, which are pre-trained models that can be used  in various tasks but don’t require training from scratch, significantly broadening AI’s potential  applications (Foundation Model, n.d.). Artificial Intelligence (AI) has since become the center  of innovations, affecting societies in myriad ways. For example, for the pharmaceutical industry, which is considered among the most costly and inefficient R&D industries, AI is regarded as a game-changer and is said to have already been applied to medical drug discovery, which can  increase efficiency by 80-90% (Jayatunga et al., 2024). 

However, many are concerned about AI’s unconstrained development. One primary concern  often voiced is AI’s potential to outcompete and replace human workers. However, what doesn’t get acknowledged enough is that the adoption and impact of AI vary at various levels,  and it’s worth familiarizing oneself with these nuances when thinking of an action plan. This article attempts to discuss the future of work and argues that while it’s challenging to pinpoint a date on which most of us will become unemployable, it’s clear that different players face different challenges and opportunities. It’s thus in the best interest of individuals, employers, relevant stakeholders, and nation leaders to become more informed and prepared as we move forward.  

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WeeTech Solution. (2024, April 16). What is AI Chip? How it Works and Everything You Need to Know. WeeTech Solution Pvt Ltd. https://www.weetechsolution.com/blog/what-is-ai-chip-how-it-works-and-everything-you-need-to-know

Varied Macrotrends at the National Level 

AI affects a nation in many aspects, including economic growth, the structure of the labor  market, social governance and welfare, and even its culture and value system. AI’s impacts on  different nations are also different, depending on their economic status. According to the latest  2024 report by the International Monetary Fund (Cazzaniga et al., 2024), advanced economies with largely cognitive-intensive roles will first experience AI impacts. These countries are where many advanced AI companies are stationed; they are equipped with the talents, digital infrastructure, and capital to master technology transformation. McKinsey estimates that “those that establish themselves as AI leaders could capture an additional 20 to 25 percent in economic benefits compared with today (Bughin et al., 2018).” For these nations, it is imperative for policymakers and business leaders to formulate the correct direction for AI’s development route, including data privacy, security, and ethical codes for AI development.  

Dizikes, P. (2024, December). What do we know about the economics of AI? MIT News | Massachusetts Institute of Technology. https://news.mit.edu/2024/what-do-we-know-about-economics-ai-1206

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Take data privacy as an example. Personal data posted on social networks have allegedly been  used, without owners’ consent, in training many Large Language Models, such as Meta’s Llama,  Google’s Gemini, and OpenAI’s ChatGPT, significantly threatening personal data privacy.  Fortunately, data protection advocacy groups have taken action to complain against Meta and  other Big Tech companies over alleged breaches of the EU’s General Data Protection  Regulation (Chee, 2024).  

For developing economies that are mostly technology importers, policymakers should actively  embrace AI to upgrade the nation’s productivity. For example, business process outsourcing  (BPO) countries can use GPT-4o’s latest voice function to leapfrog the traditional call center  business. However, AI should not be seen as an automatic panacea. A nation’s inequality and  digital infrastructure levels should be considered to assess AI’s impact. Hackers and data  brokers also might shift their sights toward poorer countries due to the lack of security and  vigilance, as residents and businesses of poorer countries may be inadequately protected. The World Economic Forum states, “Citizens of emerging economies were significantly more likely than those from more economically developed countries to expect AI to significantly impact daily life (Emerging Economies More Optimistic About Artificial Intelligence, Survey Finds,  2022).”  

Varied Impacts at the Occupation Level 

In addition to the macro factors, AI’s impacts on jobs vary, depending on both the job’s  exposure and complementarity to AI. The International Monetary Fund (IMF) uses these two  measures to classify occupations into three categories to discuss AI’s impacts (Pizzinelli et al.,  2023). High exposure and high complementarity professions, such as surgeons, lawyers, and  judges, have significant potential for AI support and productivity improvements. Still, these  cognitive professions involve a high degree of responsibility and interpersonal interaction, thus  hard to be done by AI alone. On the other hand, occupations with high exposure but low complementarity to AI, such as telemarketers and economists, are more susceptive to AI substitution. Jobs with minimal or no potential for AI application, such as dancers, are low exposure jobs and thus indifferent to AI. Without the necessary skills, workers with high  complementarity jobs could still be displaced. Analytical skills can be essential for workers  with high exposure jobs. Mechanical skills like those needed in repairing and installing things  are important for workers with low exposure jobs.  

7 Entry-Level Machine Learning Jobs To Kickstart a Career. (2023, April 24). Springboard Blog. https://www.springboard.com/blog/data-science/entry-level-machine-learning-jobs/

Complications of Company Factors 

AI’s impacts on jobs are complicated further when we incorporate the varied speed of adoption  and implementation of AI technologies at different companies. Those with a high exposure and  high complementarity profession but work for companies that do not adopt new technology can  face the same fate of being displaced because of company failure. Companies that adopt AI in  the US tend to exhibit higher firm productivity and better overall performance (“AI Is Showing  ‘Very Positive’ Signs of Eventually Boosting GDP and Productivity,” 2024). Few have reported  decreased employment because of AI adoption. Some have even found that AI-adopting firms  in the US experience growth not just in employment but also in scale and product innovation (Bonney et al., 2024). However, Calvino and Fontanelli (2023) found the evidence on AI and  firm productivity in French firms to be inconclusive. Some again emphasize that we are still at  the early stage of technological diffusion, and we might witness a more drastic productivity  growth in the future.  

Admittedly, labor income inequality could appear as a result of technology adoption. AI facilitated high-productivity jobs can make a much higher income than those without. However, if productivity gains are significant, labor income inequality might not worsen since most  workers’ income levels could increase (Cazzaniga et al., 2024).  

What Should We Do? 

For advanced economies, roughly 60 percent of jobs are exposed to AI; about half of this large  group might be negatively affected. It’s imperative to discuss what we should do about  advancing technology to prevent more people from being negatively impacted. While future generations may have more time to decide how they will react as employees, the current labor force doesn’t have decades to upskill themselves. The Future of Jobs Report by the World  Economic Forum predicts that by 2027, 60% of employees will require training. Still, only half  of workers are seen to have access to adequate training opportunities today (The Future of Jobs  Report, 2023). How should we assist employees in gaining the credentials for a new job?

Firms could contribute by utilizing promising approaches such as on-the-job learning, allowing  employees not to sacrifice their free time and even receive help from colleagues. The training format should be carefully chosen to ensure its effectiveness and inclusiveness, not forgetting  more vulnerable employees like older workers who historically demonstrate less adaptability to technological changes. Human resources managers and business executives should consider  adjusting and rethinking talent strategies. One approach is skills-based talent management,  which promotes long-term thinking (Skills-based Talent Management: The Power and  Challenges, 2024). The shelf-life of different skills and capabilities will also be examined under  this management type. This approach can push employees to identify and understand the skills  they should acquire and dynamically improve their skill levels.  

CRPE Admin. (2024, May 16). AI is coming to U.S. classrooms, but who will benefit? – Center on Reinventing Public Education. Center on Reinventing Public Education. https://crpe.org/ai-is-coming-to-u-s-classrooms-but-who-will-benefit/

Schools should also train future generations to have various skills and maybe more than one  major. Of course, people aren’t limited to traditional schooling methods. They can also use  software platforms such as Coursera to prepare themselves and be ready if AI were to displace  jobs in a specific industry. Additionally, nurturing an entrepreneurial mindset and encouraging  creative and innovative thinking can prepare future generations to identify and monetize new  opportunities in the job market. By promoting adaptability, resilience, and a lifelong learning  mindset, educational institutions can help students thrive in the face of potential job  displacement, ensuring they are well-prepared to navigate the evolving world of work with  confidence, agility, and self-motivation. 

At a higher level, governments shall take more affirmative actions in policymaking and AI regulations. The European Union, for instance, attempted to promote AI transparency through  its General Data Protection Regulation, assisting people in understanding how AI systems work  and make decisions (EU AI Act: First Regulation on Artificial Intelligence | Topics | European  Parliament, 2023). It also aligns with one of the four main principles of ethical AI. These  principles are called the FATE, which stands for fairness, accountability, transparency, and  ethics. Yet, consumer understanding can be challenging to improve. Many individuals continue  to struggle to understand AI. One scholar, Inuwa-Dutse, offers a community-led strategy as one  potential solution to empower affected communities and individuals. “Future work will involve  engagement with stakeholders across various communities and disciplines to improve diversity  and equity in utilizing AI technology. The endeavor will be instrumental in empowering the  concerned community to effectively probe and police the growing application of AI-powered  systems within society (Inuwa-Dutse, 2023).” 

Most importantly, leading and newly founded AI companies should follow much stricter  guidelines in developing AI technology. While it might be tempting, big tech companies should  not be able to govern themselves. The public should have full transparency on leading AI models, including how they are trained and what they attempt to achieve. Regardless of how  complicated AI technology poses, the right of AI governance should be under an independent  government agency that understands, supervises, and advances the technology at a controlled  and steady pace. At the moment, big tech companies like OpenAI, Meta, and Google bite off  more than they can chew. Separating players from referees will allow AI technology to not  spiral out of control and “tame the dragon before one rides it.”  

To conclude, analysis of AI’s impact on the future of jobs faces high levels of uncertainty and  volatility, especially since we are still at an early stage. The Adecco Group, the world’s leading  talent advisory and solutions company, compares our time to a honeymoon phase (Navigating the AI Revolution: Takeaways from the Global Workforce of the Future Report, 2023).  Managers and workers need to understand where AI fits better. Advanced economies and more  developed emerging market economies need to improve their regulatory frameworks and assist  those inevitably affected negatively. AI’s impact on productivity and its complementarity for human workers are essential concepts in this complex discussion. 

The AI era is upon us. We have to face the inevitable integration of AI into our daily work and  life. Instead of struggling to answer a specific date when advancing technology will make most  of us unemployable, we should devote our attention to how we ensure AI brings prosperity for  all when it is still within our power to control.

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