Scholars' views

Will the Rise of Artificial Intelligence Threaten Employment?

The concern of machine replacing human has been long-standing. Its impact on the labor market is increasingly apparent especially after the rapid development of artificial intelligence.

I. Development of artificial intelligence

During the industrial revolution, when large-scale machine production gradually replaced small-scale manual workshop production, the machine took the jobs of humans, which undermined the rights and interests of workers and, provoked workers' dissatisfaction with machines, leading to Luddism -- destroying machines to vent their discontent with the new technology. By the 1930s, the renowned economist John Maynard Keynes predicted that the world would experience a period of rapid technological progress in the next 90 years and speculated that: We are going to suffer from a new disease which, though many may not have heard of it by name, will frequently appear in the days to come -- namely, technological unemployment.

Although the concern has lasted for a long time, the predicted mass unemployment had not arrived in the past number of years. The reason is that although technological progress has destroyed the original labor market and replaced some traditional and routine labor, it also brings huge growth potential, improves production efficiency, optimizes industrial structure, and yields new growth engines and constant new employment opportunities for the improvement of the economic level.

As the core of the new round of scientific and technological revolution, artificial intelligence has been rapidly boosted along with technological progress, again arousing social concerns about machine replacing human. The rapid development of AI has expanded its influence on the labor market, from merely conventional, structured and repetitive work tasks in the past to unconventional work tasks nowadays, including simple cognitive works. About 75 million and 375 million workers will need to switch occupations as automation technology advances, the McKinsey Global Institute indicated in its report. The application of AI has gradually extended to machine learning, computer vision, voice recognition, image recognition, machine translation, automatic driving and other aspects. The development direction of AI and its impact on employment are also increasingly important.

II. Impact of artificial intelligence on employment

1. Destructive effects and creative effects

The relationship between AI and labor employment includes the following three aspects: First, the application of AI will directly replace the corresponding labor positions. If the cost of AI is lower than the wage level of labor, and the added value of products is inadequate to make up for the wage level of labor, enterprises will decide to use AI to replace labor jobs with artificial intelligence in making cost decisions.

Secondly, the application of AI can directly fill the positions that workers are incompetent for. On the one hand, the application of AI can increase the production precision, reduce the work error rate, and improve the quality of products. On the other hand, AI can be directly applied to work that endangers human health and personal safety under high-pressure activities.

Thirdly, the AI application can create new jobs. For one thing, the AI application will improve the enterprise production efficiency, reduce the production cost and production price, and increase the real income of workers, thus increasing the demand for other goods, and ultimately adding the demand for labor. For another thing, enterprises will apply the fund saved by the reduction of production costs for reinvestment, to expand the production scale and increase the number of jobs.

When the AI application directly replaces the corresponding labor positions, as shown in the first aspect, it will impact the labor market, resulting in the reduction of employment positions and forming a destructive effect. When the economy manifests as the second and third aspects, the AI application will increase the number of corresponding jobs, drive employment in the labor market, and form a creative effect.

The three aspects usually exist in the real economy simultaneously. In a well-functioning economic entity, if the AI application both replaces jobs and creates additional jobs to achieve stable economic development, as a relatively stable equilibrium development path, there will be no considerable reduction in posts in the labor market.

2. Polarization effect

Artificial intelligence has a directivity influence on employment, which may lead to a polarization trend in the labor force employment structure. In other words, the employment of high-skilled cognitive jobs and low-skilled manual jobs keeps increasing, while middle-skilled routine jobs dwindle constantly, and the middle-skilled labor force faces greater risks of job replacement.

It is mainly caused by the difference in job categories. Artificial intelligence generally replaces repetitive and routine work tasks that are concentrated in middle-skilled jobs. Companies will also conduct a cost-benefit analysis, and medium-skilled jobs are likely to be replaced first because they are more profitable and technically feasible, but the creative and non-routine work tasks are not easily replaceable in the short term. The substitution of middle-skilled jobs by artificial intelligence has squeezed the middle-skilled workers and the middle-skilled workers have shifted to high-skilled jobs and low-skilled jobs, leading to the increased number of high and low-skilled workers.

3. Long-term and short-term effects

In the short term, the influence of AI on employment is more volatile. The job nature of workers is changing. Routine work tasks are constantly replaced by AI, and non-routine work tasks might be substituted too. Technological unemployment is inevitable, and substitution effects may prevail in the short term.

However, in the long run, AI will bring a positive impact to society. On the one hand, the AI application can improve enterprise productivity, increase the capital return share, and enhance the economic development level. On the other hand, with the creation effect working continuously, the AI application will create new jobs to absorb the labor force, drive employment growth, and improve employment quality.

4. Differences in industry and occupation

The differentiated impact of AI on employment is also reflected in industry sectors. The AI application in the agricultural sector will render more efficient agricultural production and change the farmers' backward production mode. However, artificial intelligence shows relatively low popularity in the agricultural sector. The AI application has signaled an apparent substitution effect on labor employment in the manufacturing sector that contains many routine and repetitive jobs and is, therefore, subject to be replaced. There are both conventional work tasks and unconventional cognitive tasks in the service sector. As a result, certain substitution effects may occur in the service sector in the short term, but in the long term, the creation effect in the service sector will continue to dominate given the increasing number of cognitive and creative jobs.

The impact of AI on employment varies across different occupations. Table 1 lists the ranking of the probability of occupations being replaced by AI in China. It can be seen that the occupations with a lower probability of being replaced are mostly concentrated in cognitive and creative jobs; while the occupations with a high replacement probability are mainly concentrated in conventional and repetitive jobs.

III. How to respond to the rise of artificial intelligence

How should we respond to the rise of AI?

First, we shall establish a sound social security system. On the one hand, we shall perfect the existing social security system and unemployment insurance system, maintain the employment stability of the labor market and alleviate the unemployment problem caused by AI application for the labor force engaged in routinely, structured and repetitive work tasks. On the other hand, we shall give play to the security function of the social security system. In consideration of the different impacts of AI in different regions and industries, it is necessary to achieve the regional overall planning for the social security system, expand the coverage of unemployment insurance, equalize the social insurance system, and coordinate the employment level of labor forces in each region.

Second, we shall play the role of education and training in the workforce. For one part, the education structure should be adjusted and optimized to develop skills and knowledge of perception, creation and social competence through education, and train the work skills to perform complex jobs that cannot be replaced by artificial intelligence in the future. For another part, training workers helps them to adapt to new jobs. For those who are in the high-risk category of being replaced by AI, their on-job and job transfer vocational training should be strengthened to constantly enhance the competitive advantage, reduce the unemployment rate and unemployment cycle, thus lowering the employment fluctuation in the labor market.

Finally, man-machine cooperation should be put into good use to maximize the value of the labor force. With the wide application of AI in voice recognition, machine learning, unmanned driving and other application scenarios, the penetration application of AI will constantly deepen. The training of intelligent robots by the labor force shall be achieved to play the advantages of the labor force in creative and flexible jobs. While helping humans complete routine tasks, the intelligent robots that conduct deep learning with the help of algorithms and big data, further support humans to complete unconventional tasks that endanger the safety and health of workers, thus realizing efficient cooperation and complementation between humans and machines.

Source: China Business News, June 22, 2021, page A11