AI, Automation and the U.S. Economy

By Irving Wladawsky-Berger

On December 20, the outgoingWhite House released Artificial Intelligence, Automation, and the Economy, a new report that investigates how AI will likely transform job markets over time, and recommends policy responses to address AI’s impact on the U.S. economy. This report is further evidence that AI is now reaching the kind of market impact that requires well thought out strategies by both business and government. It will be interesting to see how, and whether, the new adminstration addresses these pressing issues.

AI research has been around since the early days of IT — having gone through ups and downs over the past several decades. But it’s recent advances based on machine learning and related data-driven technologies are still relatively new, making it hard to predict where AI will be heading over time.

Harder still is predicting AI’s longer term economic and societal impact. Think of anticipating the impact of the emerging Internet revolution back in the mid 1990s, before the advent of e-commerce and social media, let alone smartphones, IoT and cloud computing in the 2000s. That’s roughly where we are with AI today.

But, there’s one big difference. The Internet generated a fair degree of hype, especially in the dot-com era of the late 1990s, but the overriding feelings were ones of hope and excitement. Not so with AI. Along with admiration for its considerable accomplishments — from assisting in the treatment of rare forms of cancer to self-driving cars — there are serious fears that AI advances will lead to massive job losses, economic dislocations and social unrest.

Automation anxieties are hardly new, but each time those fears arose in the past, in the long run technology innovations ended up creating more jobs than they destroyed. Such fears have understandably accelerated in recent years. For the past few decades, jobs and wages have been declining for many workers, driven by advances in technology as well as by globalization. But the concerns surrounding AI’s long-term impact may well be in a class by themselves.

Like no other technology, AI forces us to explore the very boundaries between machines and humans.

“Accelerating artificial intelligence (AI) capabilities will enable automation of some tasks that have long required human labor,” notes the White House report in its opening paragraph. “These transformations will open up new opportunities for individuals, the economy, and society, but they have the potential to disrupt the current livelihoods of millions of Americans. Whether AI leads to unemployment and increases in inequality over the long-run depends not only on the technology itself but also on the institutions and policies that are in place.”

How strongly will AI disrupt the U.S. workforce? Is this time different from past technological disruptions? How long will it take to arrive? It’s very hard to come up with precise answers to these questions. But the report recommends that policymakers should be prepared to deal with AI’s likely impact— supporting AI for its potential benefits while addressing those disruptions that might affect the livelihoods of millions.

Technology and Productivity Growth

As has been the case with past technology innovations, in the long run AI should make the economy more efficient and lead to productivity growth and higher standards of living. Such an AI productivity boost is particularly important, given that productivity has significantly slowed down over the past decade in the U.S. and other advanced economies.

How can AI boost productivity? I particularly like Kevin Kelly’s comparison to the advent of electricity a century ago in a 2014 article in Wired: AI will likely evolve as a kind of “cheap, reliable, industrial-grade digital smartness running behind everything, and almost invisible except when it blinks off… Everything that we formerly electrified we will now cognitize.” Like any other tool, this “utilitarian AI will also augment us individually as people (deepening our memory, speeding our recognition) and collectively as a species. There is almost nothing we can think of that cannot be made new, different, or interesting by infusing it with some extra IQ. In fact, the business plans of the next 10,000 startups are easy to forecast: Take X and add AI.”

Uneven Impact

It’s very hard to predict which jobs will be most affected by AI-driven automation. Like IT, AI is a collection of technologies with varying impact on different tasks.

Recent research suggests that the effects of AI in the short- and medium-term will be similar to those of IT — lower skilled workers face the biggest threats from AI-based automation, while higher-skilled workers stand to benefit most from the new kinds of jobs that AI might create.

New AI-based jobs fall into four main categories:

• Engagement. Tasks that cannot be substituted by automation are generally complemented by it, often leading to higher demand for workers. “Many industry professionals refer to a large swath of AI technologies as Augmented Intelligence, stressing the technology’s role as assisting and expanding the productivity of individuals rather than replacing human work.”
• Development. We can expect a great need for highly-skilled software developers and engineers to put AI to practical use across multiple industries. Given the central role of data in AI applications, there will be increased demand for data scientists, and other data-oriented jobs.
• Supervision. There will also be a growing number of jobs to monitor, license, maintain and repair AI systems and applications. “The capacity for AI-enabled machines to learn is one of the most exciting aspects of the technology, but it may also require supervision to ensure that AI does not diverge from originally intended uses.”
• Response to Paradigm Shifts. AI innovations will likely require major changes in the surrounding environment. Self-driving vehicles, for example, will lead to new careers in transportation engineering and urban planning. Similarly, the increased use of robotics will be accompanied by major changes in manufacturing systems.

Technology is Not Destiny

Policy plays a large role in shaping the direction and effects of technological change. “Given appropriate attention and the right policy and institutional responses, advanced automation can be compatible with productivity, high levels of employment, and more broadly shared prosperity.” The report advocates three broad strategies for addressing the impacts of AI-driven automation across the U.S. economy:

1. Invest In and Develop AI for its Many Benefits. Advances in AI promise to make important contributions to productivity growth as well as helping the US stay on the cutting edge of innovation. “AI technology itself has opened up new markets and new opportunities for progress in critical areas such as health, education, energy, economic inclusion, social welfare, transportation, and the environment. Substantial innovation in AI, robotics, and related technology areas has taken place over the last decade, but the United States will need a much faster pace of innovation in these areas to significantly advance productivity growth going forward.”

2. Educate and train Americans for jobs of the future. “As AI changes the nature of work and the skills demanded by the labor market, American workers will need to be prepared with the education and training that can help them continue to succeed. If the United States fails to improve at educating children and retraining adults with the skills needed in an increasingly AI-driven economy, the country risks leaving millions of Americans behind and losing its position as the global economic leader.”

U.S. economic leadership in the 20th century was in part due to major investments in the education of its workforce, including expanded access to public high school education, as the country shifted from a mostly agrarian economy to an industrial economy. This helped Americans adapt to a changing economic through most of the 20th century.

“Today’s AI-driven transformation will likely require similar realignments. College- and career-ready skills in math, reading, computer science, and critical thinking are likely to be among the factors in helping workers successfully navigate through unpredictable changes in the future labor market. Providing the opportunity to obtain those skills will be a critical component of preparing children for success in the future… Assisting U.S. workers in successfully navigating job transitions will also become increasingly important; this includes expanding the availability of job-driven training and opportunities for lifelong learning, as well as providing workers with improved guidance to navigate job transitions.”

3. Aid workers in the transition and empower workers to ensure broadly shared growth. Policymakers should ensure “that workers and job seekers are able to pursue the job opportunities for which they are best qualified, able to bounce back successfully from job loss, and be well-positioned to ensure they receive an appropriate return for their work in the form of rising wages.” The report specifically recommends modernizing and strengthening the social safety net to ensure that workers who lose their jobs can still make ends meet, retrain, and transition careers.

Finally, given the substantial uncertainties surrounding AI, the report recommends preparing for all contingencies. “If job displacements from AI are considerably beyond the patterns of technological change previously observed in economic history, a more aggressive policy response would likely be needed, with policymakers potentially exploring countervailing job creation strategies, new training supports, a more robust safety net, or additional strategies to combat inequality.”

In a not-so veiled message to incoming leaders, the report states: “AI raises many new policy questions, which should be continued topics for discussion and consideration by future Administrations, Congress, the private sector, and the public.”

“Continued engagement among government, industry, technical and policy experts, and the public should play an important role in moving the nation toward policies that create broadly shared prosperity, unlock the creative potential of American companies and workers, and ensure the nation’s continued leadership in the creation and use of AI.”

Dr. Irving Wladawsky-Berger retired from IBM in 2007 after 37 years with the company. As Chairman Emeritus, IBM Academy of Technology, he continues to participate in a number of IBM’s technical strategy and innovation initiatives. He is also Visiting Professor of Engineering Systems at MIT, where he is involved in multi-disciplinary research and teaching activities focused on how information technologies are helping transform business organizations and the institutions of society.

This blog first appeared Jan. 10, 2017, here.