As the promise of a future defined by AI increasingly fills the airwaves and the debates within the halls of power around the globe, it is striking how different the perspectives are on what this future will look like, even just a few short years from now.
At one end of the spectrum, there is the hopeful view that AI will help to dramatically improve productivity and act to kickstart broad-based growth in living standards.
At the other, there is concern that AI could be the catalyst for one of the most challenging shifts for societies and economies in modern history.
One of the figures taking the latter view is Ford CEO Jim Farley. ‘AI is going to replace literally half of all white collar workers,’ Mr Farley said in a recent conference address.
‘I believe that AI and new technology have an asymmetric impact on our economy. That means a lot of things are helped a lot, and a lot of things are hurt,’ Farley said.
However, the Albanese government has spoken in positive terms about the potential impact of AI on the economy.
In an address to the ‘Australia’s Economic Outlook 2025’ conference in Sydney last week, the Prime Minister said artificial intelligence will deliver ‘secure and fulfilling jobs’ – not threaten them.
That follows comments by Treasurer Jim Chalmers backing the minimal regulation of AI, arguing that the Albanese government’s focus was on how technological progress can boost productivity, rather than implementing limits on its use.
AI poses both a risk and an opportunity for Generation Z
New data reveals which industries are likely to be impacted most by the rise of AI
Aussie industries exposed to AI
When it comes to the impact of AI by industry, it can vary considerably. According to an analysis by investment bank Goldman Sachs, over the next decade, 46 per cent of jobs in office and administrative support are exposed to AI.
At the other end of the spectrum, in one of Australia’s largest industries, the construction and resource extraction sector, just six per cent of jobs are exposed to AI.
The rest of industries fall somewhere in the middle, with hands-on, blue collar roles significantly less likely to be impacted by the rise of AI.
Overall, Goldman Sachs estimates that 300 million jobs could be diminished or lost over the next decade.
Comparison with the Industrial Revolution
As concern continues to build over the impact of AI on jobs and our society more broadly, parallels have been drawn with the impact of the Industrial Revolution – considered the period from the 19th century onwards where technologies such as mass production brought massive growth.
Blue collar jobs are significantly less likely to be impacted by AI
Unfortunately, when one assesses the history of the Industrial Revolution and contrasts it with the promise of AI, it is clear they are two very different developments.
The major difference between the Industrial Revolution and the promise of the AI is that one is hardware, the other is software.
During that era, replacing a human with a machine was an expensive and time-consuming process.
For example, to replace the farm workers separating grain from the husks and stems of crops with a steam powered threshing machine in the mid-19th century, it cost the equivalent of between five and ten times an average farmer’s annual wage.
Given the availability of loans and business finance more broadly in that era, the capital-intensive nature of the shift towards mechanised operations was gradual.
This is illustrated in the relatively gradual shift in the proportion of people employed in agriculture over time.
In 1820, 73 per cent of the American workforce was employed in agriculture. By 1855, the figure had fallen to 53 per cent of the workforce and to 40 per cent by the turn of the 20th century.
Meanwhile, the cost of implementing an AI like ChatGPT in a business setting is as little as $46 per user per month.
For a small fraction of an office’s monthly budget for takeaway coffees, tools could be implemented that could have a transformative effect on the way we work and the way our labour is demanded.
This could scarcely be more different to the world of the Industrial Revolution, where implementing new technologies was an extremely expensive and time consuming endeavour.
AI’s impact on Australia’s property market
The impact of AI on the nation’s property market will likely be directly proportional to the impact on the labour market.
If a sizeable proportion of people are left effectively unemployable by the rapid evolution of technology in the workplace, then it’s challenging to see how property prices don’t take a hit without some form of policymaker intervention.
But it’s not the early 1990s anymore. Back then, banks were far less forgiving of mortgage holders in difficulty and thousands of people lost their homes.
During the pandemic the banks, government and RBA adopted a strategy called ‘Extend and Pretend’.
AI could lead to a spike in unemployment – which would have a run-on effect on Australia’s highly leveraged property market
It allowed mortgage holders to defer their payments. The normal rules were effectively suspended, rather than the usual arrears process being pursued.
It’s therefore not hard to imagine an equally unprecedented strategy being pursued to prevent people from losing their homes and the housing market from crashing, if the downside scenarios for the labour market were to be realised.
Joke proposals about policies such as YouTube personality Florian Heisse’s ‘Mortgage Keeper’ – which entails the federal government paying your mortgage, similar to JobKeeper – may switch from the realm of the somewhat amusing to that of reality.
To what degree an intervention could be successful depends very much on the scale of the impact of AI on the ranks of the nation’s workers and how businesses collectively adapt to that.
AI revolution’s effect on Gen Z
There are some signs that the impact on the labour market has already begun to be felt in the United States, as the unemployment rate for recent college graduates rises.
A recent report from research firm Oxford Economics concluded: ‘There are signs that entry-level positions are being displaced by artificial intelligence at higher rates.’
Molly Kinder, a fellow at the Brookings Institution, which studies the impact of AI, said: ‘Employers are saying, ‘These tools are so good that I no longer need marketing analysts, finance analysts and research assistants’.’
The early reports from within US industry suggest that the immediate impact will be felt by Gen Z, as employers seek to automate largely entry level tasks that don’t require a great deal of in-depth training.
If the downside scenario were to be realised, this leaves the impacted members of Gen Z at something of an impasse.
If they can’t get their foot in the door because businesses are focused on entry level jobs being performed by AI, how can they get the work experience needed in order to get a more senior level role?
On the potential upside for Gen Z, of all the generations, they are the most accustomed to the usage of AI and may have an advantage in adapting to the new employment roles of managing, refining and directing AI software.
The impact on other generations and even older members of Gen Z who are more established in their careers is more uncertain, with a great deal more variation depending on what sort of role they are employed in.
The positive scenario for workers
The upside scenario of the proliferation of AI in the workplace hinges on the idea that it will either have a minimal net impact on overall employment, or will end up creating more jobs than it eliminates in net terms.
The theory is that the impact on the labour market will be a net positive, due to the combination of new jobs focused on the burgeoning AI sector and the productivity increases that are expected to come with the widespread adoption of AI.
At an individual business level, it is hoped that this will allow workers to focus on higher value and more vital tasks, while routine work is largely automated and allowed to run in the background.
Regardless, while the outlook for the impact of AI remains highly uncertain, the world may soon be finding itself at a major crossroads, the type of shift that only comes up maybe once a generation.
If AI fulfils even half its promised capabilities, it will be a turning point in history, for better or for worse.
If AI fulfils even half its promised capabilities, it will be a turning point in history, writes commentator Tarric Brooker (above)
On the other hand, it’s possible that AI’s impact may be more limited than anticipated in the remaining years of this decade. Business owners will soon determine whether or not the level of capability and accuracy provided by these new tools is right for their businesses.
Despite the parallels that have been drawn with all manner of other technological leaps in the modern history of humanity, this could mark a rapid evolution in our history.
Steam engines, flight, the personal computer and the internet all found a place in our societies and our lives gradually over time, with each one seeing a faster adoption than the last.
But this time is different. This time, the overwhelming majority of us already hold the necessary hardware to use an AI agent in the palm of our hands.
Tarric Brooker is an economic analyst