Ep 267: The Impact of Generative AI on the U.S. Labor Market

AI's Impact on the U.S. Labor Market

In a fast-paced digitized world, generative artificial intelligence (AI) related skills are rapidly growing in demand. Competencies around AI engines, chatbot infrastructure, computing, cybersecurity, and cloud computing are experiencing unprecedented growth. This surge is leaving many companies unprepared, often struggling to find experienced candidates within these specialist areas, or resorting to outsourcing work to external vendors.

The Educational Disconnect

At the heart of this scramble for talent lies an educational disconnect. Despite the fast-rising demand for these generative AI skills, our higher education institutions seem to lag behind. Universities across the US are accused of not teaching these in-demand skills, which has created a noticeable skill gap in the labor market.

In response to this, a rise in short-term credentials and certifications in computer-related fields outside traditional university settings is being reported. This has instigated a new, adaptive pathway of learning and career progression within the tech industry.

The Economic Impact

It's not all doom and gloom. There is optimism within this reality. The positive shock delivered to the stock market by the growth of generative AI has been a boon for the US economy. Furthermore, as the baby boomer generation moves into retirement, new opportunities arise that could offset the impact of potential layoffs due to AI advancements.

Managing the AI Revolution

The focus for researchers now should be on understanding the tangible impacts of generative AI on hiring, layoffs, use cases, and reskilling. Predicting future impacts can often be misleading and counter-productive.

Possessing and harnessing generative AI skills are becoming increasingly valuable. Those who demonstrate proficiency in these areas stand to hold competitive advantages in an ever-evolving job market. Irrespective of age, these skills could determine one's success as a knowledge worker.

The Bigger Picture

It’s also important to consider the broader impact of generative AI on a larger scale. The United States, being home to numerous tech giants, stands to gain more from the rise of generative AI than other nations. This dominance presents a unique advantage, with potential benefits for American workers and citizens at large.

The Bottom Line: Opportunity in Disruption

The advent of generative AI ushers in a period of significant transition, filled with opportunities and potential disruptions. While it's paramount for businesses to track the micro effects of these changes, understanding the macro picture will be instrumental for long-term success. Navigating this AI revolution demands a two-pronged approach: Educate and prepare the workforce for an AI-driven labour market, while simultaneously adapting business strategies to leverage these emerging technologies. During this period of change, success will favor those who are prepared to adapt, evolve and innovate.

Topics Covered in This Episode

1. AI's current impact on jobs
2. Generative AI and higher education
3. Skills demand related to generative AI
4. Future for workers and generative AI
5. Generative AI and retirement

Podcast Transcript

Jordan Wilson [00:00:16]:
Generative AI has already changed so many things, yet so many things are still going to be changed, such as the labor market. What is the economy gonna look like? What are future jobs going to look like as, especially here in the US, we start to go through this implementation phase of generative AI. Sometimes I talk about this on my own and and muse about what the future of the, the economy and jobs will look like. But today, I actually have an expert guest who's going to be answering those questions for us. So we're gonna be talking about that today and more on everyday AI. What's going on y'all? My name is George Wilson. I'm the host, and this is for you. Everyday AI is your guide on how to learn and leverage generative AI to grow your company, grow your career.

Jordan Wilson [00:01:03]:
So if that sounds like you and if you are really thinking or worrying or wondering about what the labor market is gonna like, what our future job's gonna look like with generative AI. Today's show is for you. But before we get into that, let's start as we do every single day by going over the AI news. And as a reminder, if you haven't already, make sure to go to your everyday ai.com. Sign up for the free daily newsletter. There's gonna be a lot more of not just AI news, but recapping today's conversation as well. So let's go ahead and take a look at what's going on in AI news. Alright.

Jordan Wilson [00:01:36]:
So Apple hasn't announced their new AI, but they do have a new AI focused processor. So Apple has unveiled its newest Apple silicon chip, the m 4, which features 3 nanometer chip architectures and is built specifically for AI. So this new groundbreaking chip is designed, like we said, for artificial intelligence task. It features a new display engine for enhanced color brightness, specifically kinda made for the iPad Pro, which was just announced at the Apple event yesterday as well. So, this is kind of the the the new chip. We didn't get a lot else from Apple out of their, big event yesterday, but we will presumably know Apple's big plans for generative AI at their WWDC conference next month. So we should be hearing, hey. What model is, Apple gonna be using in all of their devices? But we didn't get that yesterday.

Jordan Wilson [00:02:24]:
Alright. We did get some big news from Microsoft. So Microsoft has invested $3,300,000,000 in an AI hub in Wisconsin. So Microsoft is investing $3,300,000,000 in building a data hub in Wisconsin to train employees and manufacturers in artificial intelligence. The new center aims to create 23 100 union construction jobs and 2,000 permanent jobs over time. Microsoft also plans to train about 10,000 workers in the AI center and open a lab at the University of Wisconsin Milwaukee to assist companies in integrating AI into their business. President Joe Biden will visit the site to showcase the administration's focus on job growth and highlight achievements like the bipartisan infrastructure law and the CHIPS Act that supports semiconductor chip manufacturing in the US. So, yeah, Microsoft's had that center, or had that area there in Wisconsin for a long time.

Jordan Wilson [00:03:18]:
So finally announcing, some plans that obviously have to do with AI. And our last, kind of piece of AI news for the day, a new study is showing the majority of US workers are using a AI even when it's not allowed. So this study is the 2,000, the 2024 work trend index on the state of AI at work by LinkedIn and Microsoft. The study shows that 75% of knowledge workers globally are using generative AI with many of them hiding it from their employers, accord in 43 percent or sorry. 53 percent of users worry that their employer knowing about their AI use may signal replaceability. Also, the study showed that 66% of leaders wouldn't hire someone without AI skills, yet employees feel unsupported in acquiring those skills. So interesting kind of, results from the study there, and that actually leads us, a perfect segue into the conversation for today, about, generative AI's impact on the US labor market. So, I'm very excited, to have our guests on for today.

Jordan Wilson [00:04:25]:
So please help me welcome to the show. We have Gad Levanon, the chief economist at the Burning Glass Institute. Gad, thank you so much for joining the Everyday AI Show.

Gad Levanon [00:04:35]:
Thank you, Jordan, for having me. It's a pleasure.

Jordan Wilson [00:04:38]:
Absolutely. And, hey, this is one of those for for our livestream audience, whether you're Brian joining us from Minnesota or Douglas from, joining us, wherever Douglas is from or Tara. This is one I highly encourage you to get your questions in for Gad because this is something I think we always think about, you know, the future of the economy, jobs, AI. I can't wait for today's conversation. But, again, maybe could you first start us off with a little bit about what is the Burning Glass Institute, and what do you do there, in your role as chief economist?

Gad Levanon [00:05:07]:
Sure. So we are relatively a new organization, together with our president, Matt Sigelman. I I found we founded it, a little over 2 years ago. At the beginning, it was just the 2 of us, and now we're 40 people. It's a think tank that, does research on topics, like, labor markets and higher education and things in between, like skills. And and the topic of AI and the impact it has on the economy, on the labor market is a is an important topic for us. And as a chief economist, I I lead the the research team here. And before that, I worked for for many years in a place called the the conference board.

Jordan Wilson [00:05:54]:
So, you know, I'm curious, Gad. Maybe we can just skip to the end. And I know this is the, you know, the the $1,000,000,000 or $1,000,000,000,000 or $1,000,000,000,000 question. But, you know, and we're gonna dive into this, but big picture, what will the impact of generative AI be, you know, specifically when we look at the medium and the long term impact here on on the US labor market?

Gad Levanon [00:06:17]:
So I think the biggest impact is that, workers will become more productive. In not every worker, but in many occupations and types of jobs, they'll become more productive. So teams will be able to do more, with with the same amount of, workers, and that is likely to lead to some, overcapacity. And and so I think that the biggest impact is, that a lot of workers will not be needed at some point because they could be, improve their work could be improved or replaced by technology. This will lead to, a lot of reductions in, in in workforce in many companies. But I think, in the long run, it's not like we're gonna have massive unemployment because, someone will gain from, these improvements, and they would have more money to spend. And the additional spending will create more jobs. So in the long run, we will have, like, the same level of unemployment rates, but just a different mix of jobs.

Gad Levanon [00:07:30]:

Jordan Wilson [00:07:31]:
you know, I'm curious, Geb, because I think a lot of people when they're talking about generative AI's impact, you know, they they refer back to, you know, some other recent tech, you know, innovation. You know, they say, oh, you know, this might be like the Internet. It might be like, you know, going to the cloud, etcetera. Is there specifically when we talk about, generative AI's impact on the labor market, on jobs, on the economy, are those good comparisons? Are they fair comparisons? Or, you know, might generative AI be a little different than these other big shifts that we've seen over the past decades?

Gad Levanon [00:08:09]:
Well, I I think it's gonna be quite different for so so what were the biggest automations or technological improvements, that impacted the labor market in recent decades? So probably the biggest one was the automation of of production in manufacturing. There was also the shift to online retail that led to a lot of retail jobs eliminated. I think what we're seeing now, the maybe the best way to describe it is in relation to so there has been AI automation of a lot of office support and clerical jobs for already a couple of decade. Of that, but raising the level of jobs that will be impacted. So it's no longer just clerical and routine jobs, but it's also more professional jobs, jobs that require typically require a bachelor degree, require more skills. So we'll see a lot of business and financial related and tech related jobs that are going to be significantly more productive because of generative AI and would lead to some replacement of of those workers.

Jordan Wilson [00:09:37]:
Yeah. And you bring up a good point there, Gad, when we talk about, you know, even the history of AI. Right? Like, AI is not new. You know, automation obviously isn't new. Generally, at least early on, the thought was always this would be going after, you know, quote, unquote, going after or impacting blue collar jobs first and foremost. But then when we have generative AI, right, which which has already shown, you know, an ability to, you know, help automate or to really help supplement, kind of knowledge work, right, which is generally white collar jobs, Is this something that we fully understand the impact yet on how this might impact those those higher paying jobs, the white collar jobs? Do we understand the the the level that generative AI might be able to quote unquote, help or supplement in those jobs yet? Or do we think that maybe we still are learning, what generative AI is ultimately capable of?

Gad Levanon [00:10:33]:
Oh, I I think nobody knows exactly the extent to which, it will have an impact. And, also, you know, generative AI today is very different than what it will be 10, 20 years from now. I think that the magnitude of of tasks and skills it can replace will improve over time. So there'll kind of be a race between, how how many jobs will be impacted by generative AI and the creation of new jobs. You know, so far in history, this race never really led to massive unemployment for long periods of time. I suspect that would not happen this time, as well, but there will be periods of transition and certain jobs, certain workers will be heavily impacted, from kind of the the negative side.

Jordan Wilson [00:11:29]:
Yeah. And, you you know, one thing and I'm gonna try to, see see if I can share my screen here. But, you know, again, I I love that you are putting out some great information, there at the Burning Glass Institute in different studies. But, you know, I'd I'd love to let's let's see. Normally, I don't share my screen here live, but I think this is, you know, worth it for our our livestream audience. But, I'm wondering if you can just talk us a little bit through, about some of the the the different research that you're put, that that you're putting out. So maybe if you could walk us through a little bit here, but, you know, this is looking at, you know, how generative AI is leading to a decline in hiring. Can you talk us through kind of some of the findings, and and we'll obviously, you know, be linking to this in our newsletter today as well.

Gad Levanon [00:12:13]:
Yeah. So so that's a chart I created a few months ago, and, essentially, you know, there are several studies that look at which occupations are more likely to be exposed to, to generative AI. Now if, if an occupation is heavily impacted by generative AI, you'd expect that the companies would not hire for those jobs so much, because, they don't need to increase the the the workforce in in those jobs. So kind of we looked at you see here 10 deciles, of, in terms of the how exposed jobs are to generative AI and the change in in, online job ads, between 2022 and 2023. And and you see that the more exposed, occupations indeed see experienced a bigger decline in, in online job ads. I I would say this is supportive evidence. It's not a proof, but, you know, I I think, there is a growing evidence that more and more companies are finding use cases and are starting to use generative AI to, to to, automate, jobs. You know, there has been, in in the last 3, 4 months, a new increase in in layoffs, which are pretty broad based at this point.

Gad Levanon [00:13:45]:
And and one has to wonder whether some of those layoffs are related to to this topic again that some companies don't think that they would need as many, workers in certain occupations, and, and then they're laying them off. I I would say that, layoffs are not the only solution in case you wanna lower workforce. You can just stop hiring and let attrition do its, its work. In fact, in in previous periods of automation, we saw that many exposed jobs actually became older. So the average worker the average age of workers became higher because the company stopped hiring for the for those new jobs, or for for those new positions. And, so new younger workforce did not enter those occupations, and they gradually became older over time.

Jordan Wilson [00:14:52]:
And, you know, you mentioned something there, Gav, that I wanted to to pull out. So talking about tech jobs. Right?

Gad Levanon [00:14:58]:

Jordan Wilson [00:14:58]:
One thing I've, you know, always follow closely every day because I'm I'm covering the AI news here on everyday AI, but, you you know, you have these, you know, the magnificent seven, you you know, these big companies, your your Apple, your Microsoft, your, you know, Google, you know, parent company Alphabet. Right? So all these companies are, you know, showing, you know, record profit, you know, all time high, you know, stock prices, market caps, you know, in the trillions with an s, 1,000,000,000,000 of dollars, yet so many of these big companies at the same time are laying off 1,000 of employees and and also at the same time investing, you know, 100 of 1,000,000 or 1,000,000,000 of dollars into generative AI. So how do you, as an economist, interpret, you know, some of the moves that the biggest companies in the world are making and what that ultimately means for other companies that may or may not be following their lead.

Gad Levanon [00:15:51]:
Yeah. So I I can think of of two reasons. And pessimism about the future is actually not my, my explanation. I think, those companies are not pessimistic. But I think they're even if they are optimistic, there could be two reasons for why they would wanna lay off a lot of work. First, those companies are probably the leaders in terms of using generative AI to automate jobs, like, more like back office, routine, automatable jobs in their own companies. So I would expect to see that happening first in tech companies, and maybe in in finance and finance related companies more than or earlier than you would see it in other industries. So so that could be one reason.

Gad Levanon [00:16:46]:
The second is that kind of the generative AI made a lot of companies stop and think about, what their structure is going to be in the future, what what are the areas they want to invest in. And that means new areas to invest in, but that also means probably a period where more operations and projects were stopped because they were no longer a priority. Mhmm. So I think that could also, be a reason why some of those companies, laid off a lot of workers from projects that no longer are a priority.

Jordan Wilson [00:17:27]:
You know, you've you've you've talked a little bit, Gad, about how, you know, companies are going to be needing to to reskill, people and, you know, talking about how there still could very well be the same number of jobs, but just very different jobs. So, I wanna tackle this from a couple of different angles, but first, you know, what are some of the generative AI skills that you're seeing that employers are either needing the most or those types of skills that maybe if if someone's listening out there and they're like, oh, man, you know, I wanna be prepared. What are those specific skill sets, that people should be focusing on when it comes to, kind of the next phase or the next era of of the labor market? Hey. This is Jordan, the host of Everyday AI. I've spent more than a 1000 hours inside Chat GPT, and I'm sharing all of my secrets in our free prime prompt publish chat gpt course that's only available to loyal listeners like you. Here's what Lindy, who works as an educational consultant, said about the PPP course.

AI [00:18:34]:
I couldn't figure out why I wasn't getting the results from chat GPT that I needed and wanted. And after taking the PPP course, I now realized that I was not priming correctly. So I will be heading back into chat GPT right now to practice my priming, prompting, and polishing.

Jordan Wilson [00:18:53]:
Everyone's prompting wrong, and the PPP course fixes that. If you want access, go to podpp.com. Again, that's podpp.com. Sign up for the free course and start putting ChatGPT to work for you.

Gad Levanon [00:19:11]:
Yeah. I think, you know, some of the skills that are getting a boost are are, I would say, in different, parts of of the generative AI world. Some of them are related to, kind of the generative AI engines, or kind of core models, large language models. So any anything related to that is is obviously booming. Then there are things that are related to implementing AI in in other in kind of regular companies. So, you know, chatbot infrastructure and and applications, for example. And and then there are skills that, are related to just kind of the the large increase in in computing power that is needed, and the fact that more and more of our work is, done, in in network, so things related to cybersecurity and cloud computing. So I think in all of those kind of stages, we are going to see a, a lot of demand in in different companies.

Gad Levanon [00:20:27]:
But but there so so and many companies are not prepared for for that, and they would need to either, find the talent or, I think in many cases, move some of their work to to vendors. I I see that's another trend that we are seeing right now, a big increase in the in the share of consulting and business services. I guess a lot of companies realize that they cannot do it themselves, so so they go to outside to to get this expertise. I I I think that the other part of killing, is a lot of the jobs that will be eliminated. You know, you have a a lot of good workers in those jobs, so it's a shame to to let them go. Can you keep them, in the company in some other types of jobs? And if so, what do those what skills do those workers need to get to move to those other jobs?

Jordan Wilson [00:21:28]:
You know, and and speaking of those skills, so we've talked, you know, you you just mentioned a couple of things. Right? Like skills around using large language models, you know, AI chatbots, like like whatever you wanna call them. You know, so one thing I'm always focused on and confused about, right, there seems to be, no contradiction there in terms of the types of skills, that companies are going to need, and they're gonna need a lot of these people in these roles. So then you talked about GAD, like, okay. How can you maybe keep, some of these people who their their position or their type of work maybe, becomes replaceable because of AI, yet, you know, we need a new wave of of skilled workers, yet a lot of US colleges and universities are banning generative AI, and they still are, yet it is very, you know, it's very well known that these skills are the most, you know, high highly demand and in demand skills that the workforce is needed in, I don't know, years, maybe decades, maybe ever. I don't know. How do you explain that dichotomy, and what is that ultimately going to mean when we presumably have, you know, millions of new jobs or new roles open up, yet not a lot of people may be with the skill sets, the experience, and the education to fully fulfill them and take them on.

Gad Levanon [00:22:45]:
Yeah. Well, you know, the higher education system in the US is not the most, nimble, part of this country, although I I I do have some good news on that. If if you look at how, may college major choices have been changing in in the last decade. There has definitely been a shift to computer science. So that is a positive trend. Like, the students, and to some degree, universities are reacting to to the market. But I would say there there has been a, a growth of a of higher education outside the outside universities, and those are kind of the short term credentials and certifications that, are booming. For example, if, like, a decade ago, only, I would say, 2% of of computer related workers in the US had a short term credential.

Gad Levanon [00:23:48]:
Now it's more like 8%. So there's definitely been a a very, large growth in that. People are finding ways to learn what they need to learn even if they don't use, universities. And and on top of that, we have talent from the rest of the world that US is probably making more use of than any other country.

Jordan Wilson [00:24:14]:
Yeah. And, you know, one one thing, also that I'd I'd love to get your thoughts on, you know, as it comes to, the future of the labor force. Right? Kind of when this generative AI wave I could say started. Right? Like you can argue when that is, but a lot of people point to chat g p t. You know, OpenAI's, CEO Sam Altman said right around its release, you know, that one of the things that he was most worried about was, and I quote, economic shock. I'm wondering, you know, as an economist, are are are you seeing the potential for something like economic shock? And if so, do you think that that means in a bad way, in a good way, and and how might you see generative AI playing into whatever an economic shock could be?

Gad Levanon [00:25:06]:
Well, I I think, you know, even though, a lot of the benefits from generative AI are are probably going to occur in the future, perhaps even in the more than 5, 10 years from now. Through the stock market, we already had a positive shock. You know, investors think that those, especially tech companies, are going to benefit a lot from that and gain a lot, and that's why stock prices went up a lot since Chargept. When stock prices are higher, people who own those stocks, either directly or through mutual funds, or other ways, feel richer, and, then they spend more. And I think, that definitely happened in the last year or 2. I think some of the strengths of the US economy is exactly because people had a a higher net worth, and they kind of the wealth effect impacted us. Now I he probably, was talking more about the the negative shock of, kind of workers being replaced by technology, that may happen, one day. At the moment, the unemployment rates are still very low.

Gad Levanon [00:26:32]:
I I think there are kind of reasons to to, you know, the together with the generative AI, there is another very important trend in the economy, which is the retirement of the baby boomers, which makes, the labor force grow more slowly and labor markets being tight tighter than they otherwise would have been. I think that probably in the next 5, 10 years will be a bigger force in terms of impacting the the labor market than the generative AI layoffs. But there are some in some sense, they are happening in the same time, which are kind of those two forces are offsetting each other, which may be a may be a good thing.

Jordan Wilson [00:27:16]:
Yeah. That's that's something I've never thought about how, you know, the the the baby boomers, you know, kind of retirement might, you know, align with that. You know, what's, Gad, we, have time for maybe 1 or 2 more questions here for me. Right? This is one of those where it's just like, you know, I have so many thoughts and and and things, you know, in my brain, but, you know, I'm curious. You you spend your days, studying, the economy and, you know, generative AI obviously has a lot, you know, to do with with what's happening, in the labor force. But what are the things that not like keep you up at night per se, but what are those big pieces of generative AI that that keep you thinking, right, that keep you researching? What are you looking at?

Gad Levanon [00:28:00]:
Well, I I think at the beginning when CheggiPT just came up, or just launched, a lot of the research was about predicting the future, like which occupations will be most impacted, how much. I think now that kind of we are a year and a half away from this, I I think that the research should focus shift to what are we seeing on the ground already. What are the use cases? How many workers are, being impacted? So so that's where I think my, and I think others are are shifting to to kind of see find evidence and and, documenting what is actually happening, in terms of hiring, in terms of layoffs, in terms of use cases, in terms of, risk killing, what's so it shouldn't be about the future anymore. It should be about what are we detecting, right now. So so that's I that's I think that's my focus and I think should be the focus of adults who are, trying to understand the impact of generative AI.

Jordan Wilson [00:29:11]:
And so we've we've talked about a lot here, Gad, but as we, kind of wrap up today's show, what is the one thing that you hope whether it's it's, you know, people who may be worried, about what future jobs look like or maybe small small, medium sized business owners? What is kind of your one takeaway, when it comes to best preparing for whatever that impact of generative AI might be?

Gad Levanon [00:29:37]:
I I I would say that, what that kind of it's going to become a skill. There will be people who are good at working with generative AI and people who are not good at it. And a lot of it will be a a kind of a skill that you can learn. So I think, this is no matter what age you're at and what and as long as you're a knowledge worker, it's probably going to be somewhat of a determinant of your success for the rest of your career. So I think that's a skill that is worth worth acquiring. I I could also say on on kind of in the spirit of ending on a positive note, I I I would say probably, Jordan, most of your listeners are are US workers and citizens, and I I should say that US is probably benefiting from this more than any other country. Most of the companies that operate or or successfully operate in generative AI are US companies. Many of the holders or owners of stocks in those companies are US citizens.

Gad Levanon [00:30:55]:
So I I think, kind of from that perspective, US workers and and investors are benefiting much more than other countries. So, so that's a good thing.

Jordan Wilson [00:31:12]:
It's great. That's great to always end on a positive note. Right? Especially when we're talking about the future of jobs in the US economy. So, thank you very much, Gad Lebanon, the chief economist at the Burning Glass Institute. Gad, thank you for your time and for joining the show.

Gad Levanon [00:31:27]:
Thank you, Jordan. It was a pleasure.

Jordan Wilson [00:31:29]:
And, hey, as a reminder, y'all, we covered a lot and there's always more. So make sure if you haven't already, please go to your everydayai.com. Sign up for the free daily newsletter. We'll be we we will be recapping, today's show, putting in a lot of, you know, some of these studies that we talked about, other resources. So thank you for joining us today. We hope to see you back tomorrow and every day for more everyday AI. Thanks y'all.

Gain Extra Insights With Our Newsletter

Sign up for our newsletter to get more in-depth content on AI