Scenario of AI-driven jobless economic growth need not scare investors and society

[SINGAPORE] Artificial intelligence is quickly becoming ubiquitous. AI tools are now widely deployed across many functions in diverse sectors.

Planning an overseas trip? Doing research on an investment idea? Seeking help on a health issue? AI can help individuals in all these areas and more.

As AI grows more powerful and AI adoption increases, diverse businesses that use AI effectively will reap productivity gains and higher profits.

This trend can help explain why investors are embracing equities despite geopolitical tensions, trade protectionism and societies fragmenting.

Think of how AI simplifies grunt work in diverse sectors. Or how AI sharpens marketing efforts, improves data analysis, speeds up due diligence work, and helps in writing reports, among others.

The flip side

However, could AI be powering companies to higher profits and driving economic growth while not creating jobs and possibly shedding jobs instead?

Already, AI may be contributing to fresh graduates finding it harder to secure jobs in many places.

Of course, equities investors could be buoyed initially, as AI drives companies to grow faster without expanding headcount. Keeping lean staffing levels can also result in savings on workspace rental costs, among others.

Still, over time, should jobless growth ensue, this will hurt not just office property landlords, but also possibly a wide range of businesses.

Many businesses rely on consumer spending to drive revenue. Sure, some people may have abundant liquidity, and companies in an AI-driven age might employ well-remunerated management as well as technical staff.

But if insufficient jobs are created, consumption could feel the heat. For example, when people are jobless, they may not spend on dining out, buying a home, shopping for groceries and apparel, and so forth.

Worse, should AI adoption push unemployment and underemployment significantly higher, social unrest could ensue. Imagine people taking to the streets, turning hostile to businesses and losing faith in governments.

Equities investors could face a nightmare scenario where the AI-driven profit growth of corporates is quickly wiped out by plunging revenue due to weak consumption and regulatory overkill, as governments react to the public’s growing hostility to business.

Uncertain impact

Certainly it is still early days to judge AI’s impact on jobs.

Perhaps, AI adoption will be gradual in some areas. After all, workers may resist using AI tools that threaten to replace them. Also, as the risk of AI providing wrong information is real, companies might still prefer to hire humans for a wide array of tasks.

Moreover, the possibility exists that AI adoption could create new jobs for humans that as yet do not exist. New businesses and sectors could emerge as entrepreneurs harness AI.

Throughout history, new technologies have often created more and better jobs to replace those that they destroyed.

Nonetheless, the possibility of AI enabling the private and public sectors in general to be able to do more work with less staff cannot be discounted.

And the reality is that, a company will chase efficiency gains to ensure long-term sustainability by using more AI and fewer people, if that makes sense.

Managing jobless growth

However, upon reflection, even if a scenario of AI driving jobless economic growth plays out, this should not scare investors and society at large, provided governments roll out effective policies.

For one, work places could be re-imagined such that full-time staff work substantially fewer hours, say a three-day week instead of five days a week. 

Pay need not be slashed to reflect fewer hours worked, as labour productivity could rise due to the use of AI. At the same time, when all full-time staff work shorter hours, a company may need to grow headcount.

Indeed, when people hold good jobs while working shorter hours, the economy might be boosted by individuals using their greater amount of leisure hours to spend more on goods and services. 

Reducing the working hours of full-time employees can also do wonders in boosting the fertility rate, giving parents time to bond with young children, enabling individuals to look after elderly family members, and improving mental well-being.

Sure, there is dignity to work. Having been in continuous full-time employment for more than three decades, I still look forward to work most days.

Nevertheless, with AI, could the people who find dignity in work be replaced by those who derive purpose from pursuing non-economic interests while the state provides for their living needs?

Think of the tax revenue collected from much higher AI-boosted corporate profits, and from individuals who prosper from AI’s emergence being used to fund the living needs of jobless individuals.

Will jobless individuals who receive meaningful financial support from the state lead wasteful lives? Not necessarily. Many people might use the abundant available time to pursue interests that could benefit the wider community.

For one, jobless individuals could create new businesses, pursue artistic interests, set up social enterprises or launch community initiatives.  

Many well-educated individuals could seek purpose by reaching out to help others at home and abroad in creative and impactful ways. 

Harnessing AI effectively is likely non-negotiable for businesses and countries seeking economic prosperity. Put simply, businesses and countries that do not use AI effectively will fall behind.

In an increasingly unpredictable world, Singapore equities can be buoyed by the nation’s growing safe-haven premium. The Republic enjoys political stability and social cohesion, and has a strong fiscal position as well. Huge resources are also invested in education and training, including equipping people with AI skills.

Indeed, could AI help free Singapore’s economy from labour market woes due to an ageing population?

Should the government excel in helping the public and private sectors here embrace AI while managing AI-adoption risks, including that of job displacements, this will further drive investor support for local equities.

The potential and risks associated with AI’s growing power are huge. Count on Singapore, with its focus on long-term planning and pragmatic policies, to emerge a winner in the age of AI, even if AI-powered economic growth fares poorly in creating jobs.