Depending on what you believe, automation and artificial intelligence technologies will either completely eliminate millions of jobs across the globe or lead to the creation of millions of new, better jobs. Experienced investor Daniel Calugar says that the reality is likely somewhere in between those two extreme predictions.
It's true that these technologies are likely to make some jobs -- or at least some parts of jobs -- no longer necessary. That will likely lead to job displacement.
No matter what you think the outcome of these new and emerging technologies will be, there's no arguing the fact that they have the power to completely change the future of work. In fact, automation and AI are already impacting jobs in transformative ways.
AI from a Consumer Standpoint
Thirty years ago, if you had asked people what AI is, they'd likely have described some combination of "The Jetsons" and "The Terminator."
One conjures up thoughts of flying cars, pneumatic tubes, and friendly robot maids. The other is a scarier version of AI, with technology becoming self-aware and taking over the world.
Luckily, neither of those far-out visions of the future has become reality today.
However, one thing that those two fictional stories got right was that AI is omnipresent in society today. There may not be flying cars -- yet -- or computers trying to put an end to humanity, but AI is changing everyone's lives in multiple ways.
AI has become an entire industry all to itself, and it's also completely changing how education, politics, content creation, health care and other industries operate.
While consumers are seeing the results of AI from a front-end perspective, the real magic is happening in the background, helping companies in every industry simplify their processes and improve productivity.
Daniel Calugar highlights some examples of how AI and automation are improving the consumer experience on the front end and outlines how it's benefitting the entities providing the products or services.
AI personalizes learning for students, which results in improved outcomes. Some examples include chatbots powered by AI that answer questions that students may have, providing them with real-time feedback. Algorithms can also analyze data from students to help individuals address areas in which they need more help.
From an institutional standpoint, the schools that provide these AI-based services become more attractive to students, which results in them being more attractive to prospective applicants. It also attracts better teachers, administrators, and staff to the school as they become better supported.
AI is helping healthcare companies develop new therapies and drugs, formulate treatments that are personalized based on a patient's clinical and genetic data, and more accurately diagnose diseases. Medical analysis and imaging have also been improved thanks to AI, allowing medical professionals to better predict patient outcomes.
In the back end, the medical administrative backbone of these companies benefits from the automation of important yet mundane tasks such as scheduling appointments and billing.
Companies can dramatically improve the customer experience through various AI tools. They can provide personalized product recommendations based on a customer's previous purchases, what pages they visited on their website or their general demographic data.
Retail companies can utilize AI-powered robots in their warehouses to help them optimize the management of inventory and improve their order fulfillment at the same time. This is obviously a huge benefit to the companies, but it benefits the consumer as well.
So many financial transactions happen digitally today -- whether through online payments, debit/credit cards or mobile wallets -- making paying for goods and services or sending and receiving money easier than ever. At the same time, it also puts people's money more at risk.
One of the most beneficial use cases of AI and automation in today's society is fraud detection and prevention. AI has been used by financial institutions for years to identify transactions that could potentially be fraudulent. Generative AI is taking that one step further, helping to prevent fraud from even happening in the first place.
What's more, AI-based technologies are helping financial institutions assess consumer creditworthiness more quickly, effectively, and efficiently. This improves the customer experience for people applying for a loan, for instance, while also improving the performance and reducing risk for the financial institution itself.
The Role of AI in Work
All of the use cases provided above outline the effects AI and automation have already had on the consumer-business relationship. While all of those are positive outcomes, there's a potential real cost of adopting these technologies -- the future of work is going to change.
The real question is just how much AI and automation will change the way work is done and how that will affect the workers themselves. At this point, the answer is not so straightforward.
A March 2023 report from Goldman Sachs said that two-thirds of all jobs in Europe and the United States could, to some degree, be automated. Specifically in America, the report said that 25 to 50 percent of the workload of the jobs in question could be replaced.
Worldwide, Goldman Sachs researchers said that AI and automation could affect up to 300 million jobs across the globe.
The McKinsey Global Institute published a July 2023 report on AI and its effects on work in the U.S. It predicted that as much as 30 percent of all hours that are worked in the U.S. economy might be automated by 2030. The company also pointed out that this trend is likely to be accelerated even further by the development and emergence of generative AI.
Jobs Most Affected by AI and Automation
The impact of AI and automation on work will likely not be felt evenly across all industries and all jobs. Instead, AI and automation are likely to have an outsized effect on certain jobs while not substantially changing others.
According to Dan Calugar, the Goldman Sachs report pointed out that administrative support and office jobs in the U.S. have the "highest proportion of tasks that could be automated." As much as 46 percent of tasks currently handled by these roles could be automated by AI technologies.
Next in line in that regard is legal work (44 percent), followed by some jobs in the engineering and architecture fields (37 percent); the sector of life, physical and social sciences (36 percent); and financial and business operations (35 percent).
On the flip side, only one percent of all tasks currently handled by human workers in maintenance, grounds and building cleaning are likely to be directly affected by automation. Repair, maintenance, and installation work follows next at only four percent, with extraction and construction coming in third place at only six percent.
It is clear from the data that the impact of AI and automation on individual jobs varies greatly depending on the specific job in question.
The Future Structure of Organizations
Darrell West, a senior fellow of governance studies at the Brookings Institution, offered an interesting, poignant, and high-level prediction -- that the structure of organizations is very likely to change.
Because of what AI can do, organizations are likely to become "flatter" than they are today. In other words, the traditional organizational chart structure that looks more like an upside-down funnel will change the shape of the org chart to look like more of a straight line.
Today, workers occupy entry-level positions to handle routine tasks. Mid-level employees sit above them on the org chart and are responsible for, among other things, supervising the entry-level employees. At the top of the chart are the executives who are responsible for setting the goals and overall direction for the organization at large.
With AI being able to automate many of the tasks that these entry-level employees are handling today, West says that it's possible many of those jobs will be eliminated altogether.
Because those tasks would be handled by AI, human oversight wouldn't be as necessary as it is today. Mid-level employees won't be required to spend as much time supervising entry-level employees, giving them direction, building them up and performing ongoing assessments.
West predicts that AI will not only eliminate jobs on the lowest rung, but it will eliminate the need for as many management-level positions as most organizations require today.
Generative AI Adds New Dynamic
AI is often associated with automating dull, mundane, and repetitive tasks. In the past, this was true. The "AI of old" was really good at handling very repetitive tasks and ones that followed strict rules or instructions to complete. What it wasn't really good at was handling tasks that require flexibility and adaptability.
Some of these tools -- which are available to the general public -- support work that typically requires a lot of knowledge, i.e., the generation of text, video, images and even product designs.
Modern chatbots built on generative AI have the ability to provide customer service interactions that feel a lot more like you're talking to a person than a computer. This makes replacing low-level customer support jobs with chatbots more likely now with generative AI than with older versions of the technology.
While this is what is often brought up when discussing the power of generative AI, its highest-level applications might come in research and development. Some recent experiments that have used generative AI for writing computer code for software programs, for instance, have resulted in significantly increased productivity.
Plenty of Opportunities Abound with AI
Daniel Calugar says that it's not all doom and gloom when it comes to AI and work. In fact, for all of the potential negative effects that AI and automation might have on current jobs, there are plenty of potential positive benefits of the technologies that could outweigh the negatives.
A 2020 report from the World Economic Forum predicted that by the end of 2025, technological progress could actually create 12 million more jobs than will be displaced by the technology. So, while a lot of attention on AI and automation has been placed on what jobs it will replace, there are many possibilities for new, bigger and better jobs as a result of the technologies.
Not only that, but AI and automation are predicted to support many current jobs, not displace them -- making workers more efficient and productive in the process. In other words, these technologies can be looked at as complements to work rather than replacements for it.
AI as a Complementary Tool
In 2022, Alexander Konovalov, the founder and CEO of Swiss startup vidby -- a company that provides video translation powered by AI -- wrote an opinion piece for Forbes that outlined his personal experiences with the implementation of AI throughout his career.
From 2000 through 2003, he was responsible for 19 factories while serving as the financial director for a corporation. In that role, he wrote that he decided to implement automation for some of the company's accounting processes. Many of the accountants who occupied the roles that were going to be affected expressed disappointment, as they were afraid their positions would be eliminated.
That fear was actually shared by many accountants worldwide, who were afraid that their entire profession would disappear since computers could handle all aspects of their jobs.
In his article, Konovalov points out, though, that the exact opposite has happened. The U.S. employment growth rate for accountants is projected to be six percent from 2021 through 2031.
So, while the initial reaction to the implementation of automation was fear, accountants have come to embrace the powerful complementary tool that it is, helping them make their jobs simpler and more accurate.
In fact, accounting firm Sage recently reported that 56 percent of professionals in the accounting profession believe that technology actually helps to increase their productivity.
Occupational Transitions on the Horizon
In addition to complementing and improving some professions, AI and automation are likely to alter where the demand for labor lies. The U.S. workforce may lose a large number of entry-level customer service representatives, for instance, but it will likely require more workers in higher-level positions, according to Dan Calugar.
The McKinsey report predicts that roughly 12 million occupational transitions could be required by 2030 in the U.S. alone. The economy as a whole will "reweight" itself toward jobs that pay more and require more specialized skills.
The report also points out that people who work in jobs on the lower end of the wage scale are 14 times more likely to have to change their current occupations in the future to adjust to the overall effects of AI and automation.
This will also affect how employers approach recruiting and hiring. Instead of focusing so much on a candidate's credentials, McKinsey says that companies will have to hire based on competencies and skills. They'll also need to create a more diverse, equitable, and inclusive environment that supports workers and provides them with ongoing training and education to keep pace with the advancement of technology.
For those who are anxious about what the future looks like in this regard, Daniel Calugar reminds them of one thing -- similar occupational transitions have happened in the past and are happening today for other reasons, too.
For example, when computers first hit offices, workers had to gain new knowledge and skills so they could become computer-literate.
Another more current example is the U.S. federal government’s current heavy investment in alternative energy to address climate change. The transition to "net-zero," in effect, could eventually shift a lot of jobs away from industries such as oil and gas and traditional car manufacturing to green industries.
McKinsey says that this shift in jobs could actually result in a net gain in overall employment, even if that gain is only modest.
Some Jobs in High Demand
Future generations of workers are also likely to be drawn to studies that prepare them for how to use AI tools. In fact, some colleges and universities are already integrating AI studies into traditional degrees such as computer science.
This is important, as completely new jobs will be in high demand in the near future, specifically because they revolve around AI, automation and complementary tools.
Such jobs could include AI research scientists; AI software developers and project managers; engineers who work on robotics, natural language processing, and computer vision; and data scientists.
So, while a lot of the focus on the future of work and the impact of automation and AI on the labor market is on the negative outcomes, there are many positive potential outcomes to consider.
About Daniel Calugar
Daniel Calugar is a versatile and experienced investor with a background in computer science, business, and law. He developed a passion for investing while working as a pension lawyer and leveraged his technical capabilities to write computer programs that helped him identify more profitable investment strategies. When Dan Calugar is not working, he enjoys spending time working out, being with friends and family, and volunteering with Angel Flight.