Fears over AI killing labor demand are ‘probably overblown,’ researcher argues in new Google report

Andrew McAfee, the inaugural visiting fellow for technology and society at Google and a principal research scientist at MIT, discusses the concept in a report, “Generally Faster: The economic impact of Generative AI,” released on April 25 by Google. It’s based on his research on AI, which he says can positively transform economies and societies.

I first met McAfee in November at a Fortune CFO Collaborative dinner, held in collaboration with our founding partner Workday and sponsor Deloitte, where he talked about generative AI. “This stuff is going to diffuse throughout the economy,” he told the audience of CFOs. “It’s going to separate winners from losers, and it’s going to turbocharge the winners faster than you and I have been expecting based on the past 25 years of technology.”

His advice to them? “Risk tolerance needs to shift. Not being agile is a deep, deep risk.”

In his new report, McAfee explores the implications of generative AI in economic growth, looking at everything from its possible effects on job skills and wages to how it may transform entires industries to its potential risks and pitfalls.

“Previous general-purpose technologies have taken decades to boost entire economies,” McAfee writes. “The electric motor, for example, was patented in the U.S. in 1837 and Edison’s first power station began operating in 1881. However, electrification only began to have a significant positive effect on American factories’ productivity in the 1920s. Change was slow because these technologies diffused slowly, often requiring new infrastructure such as roads and electrical transmission networks.”

But when it comes to generative AI, most of the required infrastructure already exists. “Once new generative AI systems are developed,” he writes, “they can be deployed around the world as quickly as web pages and apps can.”

Goldman Sachs Research forecasts AI will start having a measurable impact on U.S. GDP in 2027, with other nations feeling those effects in subsequent years. AI could ultimately automate around 25% of labor tasks in advanced economies and 10% to 20% of work in emerging economies, according to the firm’s economists.

But fears over such a steep drop in labor demand are “probably overblown,” McAfee writes. “The history of general-purpose technologies shows that the growth they bring is accompanied by strong demand for labor.”

This is reflected in number of new jobs created: Over 85% of total U.S. employment growth since 1940 has come in entirely new occupations. Generative AI is already delivering large productivity gains, and while it will reduce demand for some skills, it also will increase demand for others and, McAfee notes, it will create demand for entirely new ones.

Sheryl Estrada
sheryl.estrada@fortune.com

María Soledad Davila Calero curated the Leaderboard and Overheard sections of today’s newsletter.

Leaderboard

Craig Felenstein will assume the role CFO at the sports data and technology company Sportradar (Nasdaq: SRAD) on June 1. Most recently, Felenstein served as CFO at Lindblad Expeditions.
He previously held various management roles at Discovery Communications before taking over as SVP of investor relations and strategic finance at Shutterstock.

Thomas Timko was appointed as CFO at Diebold Nixdorf (NYSE: DBD) effective May 17, succeeding current CFO Jim Barna. Timko has served as chief accounting officer and controller at General Motors, GE, and Delphi Corporation. He was also chief accounting officer at Applied Materials. 

Big deal

Thomson Reuters Institute's 2024 generative AI in professional services report gauges the perceptions and usage of the technology in the workplace. 

A key finding is that many of the executives surveyed think the use cases for generative AI are not only evident but more than half (54%) said they believe the technology should be applied to their work, while just 16% said it should not. 

Corporate legal departments, corporate risk departments, and corporate tax departments each topped at least 60% of respondents answering yes. Government law agencies and courts were more skeptical—just 40% and 47% respectively, answered affirmatively that generative AI should be applied to their work.

With more than a year since ChatGPT's public introduction and the beginnings of this research, many different types of professional services organizations have already begun to explore generative AI use cases, evaluate and test tools, according to the report. The most successful companies will be the ones that use generative AI to augment, not fully replace, what professionals do, the report states. 

The findings are based on a survey of 1,128 professionals in legal, tax and accounting, risk and fraud, and government. 

Courtesy of Thomson Reuters Institute

Going deeper

AICPA & CIMA have released their “Re-defining finance for a sustainable world” white paper, the latest iteration of their Future of Finance research program. 

It highlights that accounting and finance are moving away from traditional rules-based approaches and toward a more inclusive, expansive, and value-creation mindset. Sixty percent of accounting and finance professionals surveyed say they identify as finance business partners, and 84% of those are optimistic about the future of the profession. In comparison, of the 40% who say they don't identify as finance business partners, just 15% say they are optimistic about the future of the profession.

However, when it comes to automation, 92% of respondents in non-business partnering roles fear being automated out of existence compared to 67% of those in business partnering roles.

Overheard

“I’ve talked to everyone at Boeing that I can possibly address, and the message is the same: Get your act together.”

—American Airlines CEO Robert Isom told investors during the company's Q1 earnings call. While Boeing delays did not drastically affect American, Isom made it clear he was frustrated with the airplane manufacturer.