AI is impacting the labor market, young tech workers: Goldman economist

Changes to the American labor market brought on by the arrival of generative AI are already showing up in employment data, according to a Goldman Sachs economist. Most companies have yet to deploy artificial intelligence in production cases, meaning that the overall job market hasn’t yet been significantly impacted by AI, said Joseph Briggs, senior global economist of Goldman’s research division.

Current Trends in Tech Sector Employment

But there are already signs of a hiring pullback in the technology sector, hitting younger employees there the hardest, Briggs said. If you look at the tech sector’s employment trends, they’ve been basically growing as a share of overall employment in a remarkably linear manner for the last 20 years. Over the last three years, we’ve actually seen a pullback in tech hiring that has led it to undershoot its trend.

The Rise of Generative AI

Since its November 2022 release, OpenAI’s ChatGPT has fueled the rise of the world’s most valuable company, Nvidia, and forced entire industries to contend with its implications. Generative AI models are quickly becoming adept at handling many routine tasks, and some experts say they are already on par with human software engineers, for instance. That has sparked concerns that while automation will make companies more productive and enrich shareholders, swaths of the job market could be impacted in the coming years.

Technology Executives’ Views on AI

Technology executives have recently become more candid about the impact of AI on employees. Companies including Alphabet and Microsoft have said AI is producing roughly 30% of the code on some projects, and Salesforce CEO Marc Benioff said in June that AI handles as much as 50% of the work at his company.

Impact on Young Tech Workers

Young tech workers, whose jobs are the easiest to automate, are the first concrete signs of displacement, according to Briggs. Unemployment rates among tech workers between 20 and 30 years old jumped by 3 percentage points since the start of this year, he said. Briggs recently co-authored a report titled “Quantifying the Risks of AI-Related Job Displacement” that cites labor market data from IPUMS and Goldman Sachs Global Investment Research.

Labor Substitution

The approach from tech CEOs has been to hold off on hiring junior employees as they begin to deploy AI, said George Lee, the former technology banker who co-heads the Goldman Sachs Global Institute. How do I begin to streamline my enterprise so I can be more flexible and more adaptive… yet without harming our competitive edge? Young employees for this period of time are a little bit the casualty of that.

Potential Job Losses Due to Automation

Over time, roughly 6% to 7% of all workers could lose their jobs because of automation from AI in a baseline scenario, according to Briggs. The transition could be more painful, both to workers and the U.S. economy, if adoption among companies happens faster than the roughly decade-long period he assumes, Briggs said.

The Potential for Artificial General Intelligence

If AI researchers achieve AGI, or artificial general intelligence, that equals a person’s ability to learn and adapt across domains, instead of being narrowly deployed, the impact on workers would be more profound, the Goldman economist said. Our analysis doesn’t factor in the potential for the emergence of AGI, Briggs said. It’s hard to even start thinking about the impact on the labor market, but I would guess there probably and undoubtedly is more room for labor substitution and a more disruptive impact in that world.

Conclusion

The impact of generative AI on the labor market is a significant concern, with potential job losses and changes to the way companies operate. While the full extent of the impact is still unknown, it is clear that young tech workers are already being affected, and companies are beginning to adapt to the new reality of AI-driven automation.

FAQs

Q: What is the current impact of generative AI on the labor market?
A: The current impact of generative AI on the labor market is already showing up in employment data, with a hiring pullback in the technology sector and increased unemployment rates among young tech workers.
Q: How many jobs could be lost due to automation from AI?
A: Roughly 6% to 7% of all workers could lose their jobs because of automation from AI in a baseline scenario.
Q: What is the potential impact of artificial general intelligence on the labor market?
A: If AI researchers achieve AGI, the impact on workers would be more profound, with more room for labor substitution and a more disruptive impact.
Q: How are technology executives responding to the impact of AI on employees?
A: Technology executives are becoming more candid about the impact of AI on employees, with some companies already using AI to produce a significant portion of their code.
Q: What can be done to mitigate the impact of AI on the labor market?
A: Companies can begin to adapt to the new reality of AI-driven automation by streamlining their enterprises and being more flexible and adaptive, while also considering the potential impact on their employees.