Generative AI technology is still in its infancy, and advancements that can be built based on this technology remain unknown. Even so, based on our understanding of generative AI as it currently exists and what some researchers predict could happen with this technology in the near term, we can assess how it might affect labor markets.
Understanding the historical impact of innovation on the labor market
Understanding why innovation has had a more limited productivity effect over the last 40 years acts as a useful starting point. At least part of the reason why post-1980 innovation had a weaker productivity effect was likely due to the types of workers that were displaced—automation over this period largely focused on low- and middle-wage workers.1
This is unlikely to be the case for generative AI, however. Research that matches generative AI skills with those of workers finds that higher-wage workers are the most at risk of losing their jobs to this technology.2 Although the exact occupations that are at risk differ across research methods, there is widespread agreement that the share of tasks that could be done by generative AI rises with income.3 Some of the occupations that have been deemed most at risk of automation from generative AI include postsecondary educators, mathematicians, and survey researchers. The industries with the greatest exposure often include legal, financial, and professional services.4
Most of these occupations and industries involve high wages, suggesting that the cost savings of this technology could be substantial. Assuming the costs saved are indeed proportional to the productivity effect, then we should see stronger—rather than weaker—aggregate labor demand.