How Will the Rise of AI Impact White-Collar Jobs?

We speak with Christos A. Makridis, CTO of www.LivingOpera.org about why Artificial Intelligence AI and other emerging technologies have the potential to complement existing white-collar jobs, and how businesses and investors can best prepare for the rise of AI.

There is growing fear that AI and other new emerging technologies will destabilize white-collar jobs. What are your thoughts?

While it is true that generative AI can displace many tasks — and that's true for any technology — the big question is what new tasks and workflows does it enable? Recently released research that I've conducted introduces an occupational measure of how much coordination is required within a job and how that relates with exposure to ChatGPT based on a new index that OpenAI came out with.

Occupations requiring more coordination have higher wages and are actually less exposed to generative AI, suggesting that generative AI might actually play an important role in breaking down barriers and easing the completion of complex work.

I've also published research looking at how the expansion of AI jobs within cities has impacted the average well-being, and found the effect has been positive particularly in cities with more professional services. The reason? Increases in productivity, such as real GDP and income.

But ultimately how these new technologies will affect employment and wages is a policy design choice. If governments impose heavy regulation and high taxes on labor, that encourages companies to substitute away from human labor towards capital to save on costs. And that's what we see in many European countries — high labor tax rates are correlated with higher capital to labor ratios, and that in turn leads to lower labor productivity growth and less of the total surplus in an economy going towards labor.

How will these technologies transform or impact white-collar jobs?

There is an open question about how generative AI will affect productivity, and whether it may accelerate income inequality and polarization in the labor market. Preliminary evidence from OpenAI indicates that 80% of the U.S. workforce could have at least 10% of their work tasks affected by the introduction of large language models LLMs), and 19% of workers may see at least 50% of their tasks impacted.

However, my research offers an optimistic view of generative AI by showing that occupations requiring greater degrees of coordination over complex work are less – not more – exposed to displacement by generative AI. In other words, generative AI might actually end up serving as a complement to labor in occupations requiring greater degrees of coordination. Since so much work requires tacit information that is not easy to formalize and systematize, large language models can digest vast quantities of information and convert it into actionable recommendations and instructions for other team members to review and act upon.

How can consumers and business best prepare for the rise of AI technology? What are some advantages and what are some risks?

My research has highlighted the importance of intellectual tenacity as a personality trait in becoming resilient to technological change. That requires perseverance and curiosity to thrive amid challenges and continue learning even after formal schooling ends. We have so many tools at our disposal for living more effectively and productively, but sometimes inertia keeps us doing things business as usual. A practical suggestion is to allocate some time every week to evaluating the inventory of work and strategizing internally — or even with ChatGPT as a sparring partner — about how to work smarter.

As demand and use cases around generative AI grows, what should investors keep in mind?

Investors should think about breakthrough innovations, rather than the marginal ones. The highest value companies, ranging from Tesla to Apple, were the companies that did things people thought were impossible. That means having a great understanding of pain points among consumers and an eye for solutions that are just crazy enough to work.

Investors should also place a premium on companies that have versatile and experienced management: startups and young founders can be great, and there are certainly many who succeed, but there are also many more who fail due to lack of experience and hubris that should prompt investors to be prudent when evaluating a team's likelihood of success in execution (and not just the novelty of the idea).

How will these new technologies impact different sectors?

Each sector has its own challenges and pain points. On one hand, healthcare is fraught with an insurance sector that charges high premiums and delivers low customer service, coupled with pharmaceutical companies that have a tendency to over medicate rather than encourage preventative behavior. In this sense, AI has the potential to personalize behavioral recommendations that are likely to improve health and well-being, as well as automate otherwise mundane and time intensive activities among insurers that would allow them to pass cost savings onto their customers.

On the other hand, education has been increasingly failing to deliver for students, as evidence by K12 math and reading test scores reaching their lowest levels in 2022 to a flattened college wage premium over the past 15 years.

AI has the potential to transform the delivery of educational services by personalizing learning to each person's unique learning styles. AI can also help break down barriers that may have traditionally discouraged an individual from continuing education. In short, AI is a general- purpose technology, and it will affect each sector differently.

This interview originally appeared in our TradeTalks newsletter. Sign up here to access exclusive market analysis by a new industry expert each week. We also spotlight must-see TradeTalks videos from the past week.