EP 267: The Impact of Generative AI on the U.S. Labor Market

This is the Everyday AI show, the everyday podcast where we simplify AI and bring its power to your fingertips. Listen daily for practical advice to boost your career, business and everyday life. Generative AI has already changed so many things, yet so many things are still going to be changed, such as the labor market. What is the economy going to look like? What are future jobs going to look like? As especially here in the US we start to go through this implementation phase of Generative AI. Sometimes I talk about this on my own and in muse about what the future of the economy and jobs will look like. But today I actually have an expert guest who's going to be answering those questions for us. So we're going to be talking about that today and more on Everyday AI. What's going on y'?

All?

My name is Jordan Wilson. I'm the host and this is for you. Everyday AI is your guide on how to learn and leverage Generative AI to grow your, your company, grow your career. So if that sounds like you, and if you are really thinking or worrying or wondering about what the labor market is going to look like, what our future job is going to look like with Generative AI, today's show is for you. But before we get into that, let's start as we do every single day, by going over the AI news. And as a reminder, if you haven't already, make sure to go to your everydayai.com Sign up for the free daily newsletter. There's going to be a lot more of not just AI news, but recapping today's conversation as well. So let's go ahead and take a look at what's going on in AI news. All right, so Apple hasn't announced their new AI, but they do have a new AI focused processor. So Apple has unveiled its newest Apple silicon chip, the M4, which features 3 nanometer chip architectures and is built specifically for AI. So this new groundbreaking chip is designed, like we said, for artificial intelligence tasks. It features a new display engine for enhanced color brightness, specifically kind of made for the iPad Pro, which was just announced at the Apple event yesterday as well. So this is kind of the new chip. We didn't get a lot else from Apple out of their big event yesterday, but we will presumably know Apple's big plans for Generative AI at their WWDC conference next month. So we should be hearing, hey, what model is Apple going to be using in all of their devices? But we didn't get that that yesterday. All right, we did get some big news from Microsoft. So Microsoft has invested $3.3 billion in an AI hub in Wisconsin. So Microsoft is investing $3.3 billion in building a data hub in Wisconsin to train employees and manufacturers in artificial intelligence. The new center aims to create 2, 300 union construction jobs and 2,000 permanent jobs over time. Microsoft also plans to train about 10,000 workers in the AI center and open a lab at the University of Wisconsin, Milwaukee to assist companies in integrating AI into their business. President Joe Biden will visit the site to showcase the administration's focus on job growth and highlight achievements like the Bipartisan Infrastructure law and the Chips act that supports semiconductor chip manufacturing in the U.S. so, yeah, Microsoft's had that center or had that area there in Wisconsin for a long time. So finally announcing some plans that obviously have to do with AI. And our last kind of piece of AI news for the day, a new study is showing the majority of US workers are using AI even when it's not allowed. So this study is the 2000, the 2024 Work Trend Index on the state of AI at work by LinkedIn and Microsoft. The study shows that 75% of knowledge workers globally are using generative AI. We with many of them hiding it from their employers. Sorry, 53% of users worry that their employer knowing about their AI use may signal replaceability. Also, the Studies show that 66% of leaders wouldn't hire someone without AI skills, yet employees feel unsupported in acquiring those skills. So interesting kind of results from the study there and that actually leads us a perfect segue into the conversation for today about generative AIs impact on the US labor market. So I'm very excited to have our guest on for today. So please help me. Welcome to the show. We have Gad Lebanon, the chief economist at the Burning Glass Institute. Gad, thank you so much for joining the Everyday AI Show.

Thank you, Jordan, for having me. It's a pleasure.

Absolutely. And hey, this is one of those for for our live stream audience. Whether you're Brian joining us from Minnesot or Douglas from joining us wherever Douglas is from or Tara, this is one. I highly encourage you to get your questions in for gad, because this is something I think we always think about, you know, the future of the economy, jobs, AI. I can't wait for today's conversation. But gad, maybe could you first start us off with a little bit about what is the Burning Glass Institute and what do you do there in your role as chief economist.

Sure. So we are relatively a new organization. Together with our president, Matt Sigelman, we Founded it a little over two years ago. At the beginning it was just the two of us and now we're 40 people. It's a think tank that does research on topics like labor markets and higher education and things in between like skills and the topic of AI and the impact it has on the economy, on the labor market is, is an important topic for us. And as a chief economist I, I lead the, the research team here and before that I worked for, for many years in a place called the, the Conference World.

So you know, I'm curious Gad, maybe we can just skip to the end. And I know this is the, you know, the million dollar or billion dollar or trillion dollar question, but you know, and we're going to dive into this. But big picture, what will the impact of generative AI be, you know, specifically when we look at the medium and the long term impact here on the US labor market?

So I think the biggest impact is that workers will become more productive in not every worker, but in many occupations and types of jobs they'll become more productive. So teams will be able to do more with the same amount of workers and that is likely to lead to some over capacity. And so I think that the biggest impact is that a lot of workers will not be needed at some point because they could be improved, their work could be improved or replaced by technology. This will lead to a lot of reductions in workforce in many companies. But I think in the long run it's not like we're going to have massive unemployment because someone will gain from these improvements and they will have more money to spend and the additional spending will create more jobs. So in the long run we will have the same level of unemployment rates but just a different mix of jobs.

And you know, I'm curious Gad, because I think a lot of people when they're Talking about generative AI's impact, you know, they, they refer back to, you know, some other recent tech, you know, innovation, you know, they say, oh, you know, this might be like the Internet, it might be like, you know, going to the cloud, etc. Is there specifically when we talk about generative AIs impact on the labor market, on jobs, on the economy? Are those good comparisons, are they fair comparisons? Or you know, might generative AI be a little different than these other big shifts that we've seen over the past decades?

Well, I, I think it's going to be quite different from. So, so what were the biggest automations or technological improvements that impacted the labor market in recent decades? So probably the biggest one was the automation of production in manufacturing. There was also the shift to online retail that led to a lot of retail jobs eliminated. I think what we are seeing now, maybe the best way to describe it is in relation to. So there has been AI automation of a lot of office support and clerical jobs for already a couple of decades. Of that, but raising the level of jobs that will be impacted. So it's no longer just clerical and routine jobs, but it's also more professional jobs. Jobs that require, typically require a bachelor degree, require more skills. So we'll see a lot of business and financial related and tech related jobs that are going to be significantly more productive because of generative AI and would lead to some replacement of those workers.

Yeah, and you bring up a good point there, Gad. When we talk about, you know, even the history of AI, right? Like AI is not new. You know, automation obviously isn't new new. Generally, at least early on the thought was always this would be going after, you know, quote unquote, going after or impacting blue collar jobs first and foremost. But then when we have generative AI, right, which, which has already shown, you know, an ability to, you know, help automate or to really help supplement kind of knowledge work, right. Which is generally white collar jobs, is this something that we fully understand the impact yet on how this might impact those, those higher paying jobs, the white collar jobs? Do we understand the level that generative AI might be able to quote unquote, help or supplement in those jobs yet? Or do we think that maybe we still are learning what generative AI is ultimately capable of?

I think nobody knows exactly the extent to which it will have an impact. And also, you know, generative AI today is very different than what it will be 10, 20 years from now. I think that the magnitude of tasks and skills it can replace will improve over time. So there'll kind of be a race between how, how many jobs will be impacted by generative AI and the creation of new jobs. You know, so far in history, this race never really led to massive unemployment for long periods of time. I suspect that will not happen this time as well. But there will be periods of transition and certain jobs, certain workers will be heavily impacted from kind of the negative side.

Yeah. And you know, one thing, and I'm going to try to see if I can share my screen here. But you know, Gad, I, I love that you are putting out some great information there at the Burning Glass Institute and different studies. But you know, I'd love to. Let's, let's see. Normally I Don't share my screen here live, but I think this is, you know, worth it for our, our live stream audience. But I'm wondering if you can just talk us a little bit through about some of the, the different research that you're put that, that you're putting out. So maybe if you could walk us through a little bit here. But you know, this is looking at, you know, how generative AI is leading to a decline in hiring. Can you talk us through kind of some of the findings and we'll obviously be linking to this in our newsletter today as well.

Yeah, so that's a chart I created a few months ago and essentially there are several studies that look at which occupations are more likely to be exposed to generative AI. Now if an occupation is heavily impacted by generative AI, you'd expect that the companies would not hire for those jobs so much because they don't need to increase the workforce in those jobs. So kind of we looked at, you see here, 10 deciles in terms of how exposed jobs are to generative AI and the change in online job ads between 2022 and 2023 and you see that the more exposed occupations indeed experienced a bigger decline in online job ads. I would say this is supportive evidence. It's not a proof, but I think there is growing evidence that more and more companies are finding use cases and are starting to use generative AI to, to automate jobs. You know, there has been in, in the last three, four months a new increase in, in layoffs which are pretty broad based at this point. And one has to wonder whether some of those layoffs are related to, to this topic. Again that some companies don't think that they would need as many workers in certain occupations and then they are laying them off. I would say that layoffs are not the only solution. In case you want to lower workforce, you can just stop hiring and let attrition do its work. In fact, in previous periods of automation we saw that many exposed jobs actually became older. So the average worker, the average age of workers became higher because companies stopped hiring for the, for those new jobs or for those new positions. And so new younger workforce did not enter those occupations and they gradually became older over time.

And you know, you mentioned something there gad that I wanted to, to pull out. So talking about tech jobs, right. One thing I've, you know, always follow closely every day because I'm covering the AI news here on Everyday AI. But you, you know, you have these, you know, the Magnificent seven, you know, these big companies, your, your Apple, your, Microsoft, your, you know, Google, you know, parent company Alphabet. Right. So all these companies are, you know, showing, you know, record profit, you know, all time high, you know, stock prices, market caps, you know, in the trillions with an S, trillions of dollars. Yet so many of these big companies at the same time are laying off thousands of employees and also at the same time investing, you know, hundreds of millions or billions of dollars into generative AI. So how do you, as an economist interpret, you know, some of the moves that the biggest companies in the world are making and what that ultimately means for other companies that may or may not be following their lead?

Yeah, So I can think of two reasons, and pessimism about the future is actually not my explanation. I think those companies are not pessimistic, but I think even if they are optimistic, there could be two reasons for why they would want to lay off a lot of workers. First, those companies are probably the leaders in terms of using generative AI to automate jobs, like more like back office routine, automatable jobs in their own companies. So I would expect to see that happening first in tech companies and maybe in finance and finance related companies more than or earlier than you would see it in other industries. So that could be one reason. The second is that kind of the generative AI made a lot of companies stop and think about what their structure is going to be in the future, what are the areas they want to invest in, and that means new areas to invest in. But that also means probably a period where more operations and projects were stopped because they were no longer a priority. So I think that could also be a reason why some of those companies laid off a lot of workers from projects that no longer are a priority.

You know, you've, you've talked a little bit gad about how, you know, companies are going to be needing to, to reskill people and, you know, talking about how there still could very well be the same number of jobs, but just very different jobs. So I want to tackle this from a couple of different angles. But first, you know, what are some of the generative AI skills that you're seeing that employers are either needing the most or those types of skills that maybe if someone's listening out there and they're like, oh man, you know, I want to be prepared. What are those specific skill sets that people should be focusing on when it comes to kind of the next phase or the next era of the labor market? Are you still running in circles trying to figure out how to actually grow your business with AI? Maybe Your company has been tinkering with large language models for a year or more, but can't really get traction to find ROI on gen AI. Hey, this is Jordan Wilson, host of this very podcast. Companies like Adobe, Microsoft and Nvidia have partnered with us because they trust our expertise in educating the masses around generative AI to get ahead. And some of the most innovative companies in the country hire us to help with their AI strategy and to train hundreds of their employees on how to use Gen AI. So whether you're looking for ChatGPT training for thousands or just need help building your front end AI strategy, you can partner with us too. Just like some of the biggest companies in the world do. Go to your everyday AI.com partner to get in contact with our team or you can just click on the partner section of our website. We'll help you stop running in those AI circles and help get your team ahead and build a straight path to ROI on gen AI.

Yeah, I think, you know, some of the skills that are getting a boost are, I would say, in different parts of the generative AI world. Some of them are related to kind of the generative AI engines or kind of core models, large language models. So anything related to that is obviously booming. Then there are things that are related to implementing AI in other kind of regular companies. So, you know, chatbot infrastructure and applications for example. And then there are skills that are related to just kind of the large increase in computing power that is needed and the fact that more and more of our work is done in networks or things related to cyber security and cloud computing. So I think in all of those kind of stages we are going to see a lot of demand in different companies and many companies are not prepared for that and they would need to either find talent or I think in many cases move some of the work to vendors. That's another trend that we are seeing right now, a big increase in the share of consulting and business services. I guess a lot of companies realize that they cannot do it themselves, so they go outside to get this expertise. I think that the other part of reskilling is a lot of the jobs that will be eliminated. You know, you have a lot of good workers in those jobs, so it's a shame to, to let them go. Can you keep them in the company in some other types of jobs? And if so, what do those, what skills do those workers need to get to move to those other jobs?

You know, and, and speaking of those skills, so we've talked, you know, you, you just mentioned a couple things Right. Like skills around using large language models, you know, AI bots, like, like whatever you want to call them, you know. So one thing I'm always focused on and confused about, right. There seems to be no contradiction there in terms of the types of skills that companies are going to need and they're going to need a lot of these people in these roles. So then you talked about gad, like, okay, how can you maybe keep some of these people who their, their position or their type of work maybe becomes replaceable because of AI. Yet, you know, we need a new wave of skilled workers yet a lot of us colleges and universities are banning generative AI and they still are. Yet it is very, you know, it's very well known that these skills are the most, you know, high, highly demand and in demand skills that the workforce has needed and I don't know, years, maybe decades, maybe ever. I don't know, how do you explain that dichotomy and what is that ultimately going to mean when we presumably have, you know, millions of new jobs or new roles open up, yet not a lot of people maybe with the skill sets, the experience and the education to fully fulfill them and take them on?

Yeah, well, you know, the higher education system in the US is not the most nimble part of this country. Although I do have some good news on that. If you look at how college major choices have been changing in the last decade, there has definitely been a shift to computer science. So that is a positive trend. Like students and to some degree universities are reacting to the market. But I would say that there has been a growth of higher education outside universities and those are kind of the short term credentials and certifications that are booming. For example, if like a decade ago only I would say 2% of computer related workers in the US had a short term credential, now it's more like 8%. So there has definitely been a very large growth in that people are finding ways to learn what they need to learn, even if they don't use universities. And, and on top of that, we have talent from the rest of the world that US is probably making more use of than any other country. Yeah.

And you know, one, one thing also that I'd love to get your thoughts on, you know, as it comes to the future of the labor force. Right. Kind of when this generative AI wave I could say started. Right. Like you can argue when that is. But a lot of people point to chat GPT. You know, OpenAI's CEO Sam Altman said right around its release, you know, that One of the things that he was most worried about was an, I quote, economic shock. I'm wondering, you know, as an economist, are, are you seeing the potential for. For something like economic shock? And if so, do you think that that means in a bad way, in a good way? And how might you see generative AI playing into whatever an economic shock could be?

Well, I think, you know, even though a lot of the benefits from generative AI are probably going to occur in the future, perhaps even in the more than five, ten years from now, through the stock market, we already had a positive shock. You know, investors think that those, especially tech companies, are going to benefit a lot from that and gain a lot. And that's why stock prices went up a lot. Since chat GPT. When stock prices are higher, people who own those stocks, either directly or through mutual funds or other ways, feel richer, and then they spend more. And I think that definitely happened in the last year or two. I think some of the strengths of the US Economy is exactly because people had a higher net worth and they kind of the wealth effect impacted us. Now, he probably was talking more about the negative shock of kind of workers being replaced by technology that may happen one day. At the moment, the unemployment rates are still very low. I think there are kind of reasons to, you know, together with the generative AI, there is another very important trend in the economy, which is the retirement of the baby boomers, which makes the labor force grow more slowly and labor markets being tighter than they otherwise would have been. I think that probably in the next five, 10 years will be a bigger force in terms of impacting the labor market than the generative AI layoffs. But there are some, in some sense, they are happening in the same time, which are kind of, those two forces are offsetting each other, which may be a, maybe a good thing.

Yeah, that's something I've never thought about how, you know, the, the baby boomers, you know, kind of retirement might, you know, align with that. You know, what's. Gad. We have time for maybe one or two more questions here for me, right? This is one of those where it's just like, know, I have so many thoughts and things, you know, in my brain. But, you know, I'm curious, you, you spend your days studying the economy and, you know, generative AI obviously has a lot, you know, to do with, with what's happening in the labor force, but what are the things that not, like, keep you up at night, per se, but what are those big pieces of generative AI that, that keep you Thinking, right. That keep you researching. What are you looking at?

Well, I think at the beginning when ChatGPT just came up or just launched, a lot of the research was about predicting the future, like which occupations will be most impacted, how much I think now that kind of we are a year and a half away from this. I think that the research should shift to what are we seeing on the ground already, what are the use cases, how many workers are being impacted. So that's where I think my and I think others are shifting to kind of see, find evidence and documenting what is actually happening in terms of hiring, in terms of layoffs, in terms of use cases, in terms of reskilling. So it's shouldn't be about the future anymore. It should be about what are we detecting right now. So that's my focus and I think should be the focus of others who are trying to understand the impact of generative AI.

And so we've talked about a lot here Gad, but as we kind of wrap up today's show, what is the one thing that you hope whether it's, you know, people who may be worried about what future jobs look like or maybe small, small, medium sized business owners. What is kind of your one takeaway when it comes to best preparing for whatever that impact of generative AI might be?

I would say that what the kind of it's going to become a skill and there will be people who are good at working with generative AI and people who are not good at it and a lot of it will be kind of a skill that you can learn. So I think this is no matter what age you're at and what and as long as you're a knowledge worker, it's probably going to be somewhat of a determinant of your success for the rest of your career. So I think that's a skill that is worth acquiring. I could also say on kind of in the spirit of ending on a positive note, I would say probably Jordan, most of your listeners are US workers and citizens and I should say that US is probably benefiting from this more than any other country. Most of the companies that operate or successfully operate in generative AI are US companies. Many of the holders or owners of stocks in those companies are U.S. citizens. So I think kind of from that perspective, U.S. workers and investors are benefiting much more than other countries. So. So that's a good thing.

It's great. That's great to always end on a positive note, right? Especially when we're talking about the future of jobs in the U.S. economy. So thank you very much. Gad Lebanon, the chief economist at the Burning Glass Institute. Gad, thank you for your time and for joining the show.

Thank you, Jordan. It was a pleasure.

And hey, as a reminder, y', all, we covered a lot and there's always more. So make sure if you haven't already, please go to your everydayai.com Sign up for the free daily newsletter. We will be recapping today's show, putting in a lot of, you know, some of these studies that we talked about, other resources. So thank you for joining us today. We hope to see you back tomorrow and every day for more Everyday AI. Thanks, y'.

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