Artificial Intelligence Has Caused a 50% to 70% Decrease in Wages

Artificial intelligence, robotics and new sophisticated technologies have caused a wide chasm in ... [+] wealth and income inequality.

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The middle and working classes have seen a steady decline in their fortunes. Sending jobs to foreign countries, the hollowing out of the manufacturing sector, pivoting toward a service economy and the weakening of unions have been blamed for the challenges faced by a majority of Americans. 

There’s an interesting, compelling and alternative explanation. According to a new academic research study, automation technology has been the primary driver in U.S. income inequality over the past 40 years. The report, published by the National Bureau of Economic Research, claims that 50% to 70% of changes in U.S. wages, since 1980, can be attributed to wage declines among blue-collar workers who were replaced or degraded by automation. 

Artificial intelligence, robotics and new sophisticated technologies have caused a wide chasm in wealth and income inequality. It looks like this issue will accelerate. For now, college-educated, white-collar professionals have largely been spared the fate of degreeless workers. People with a postgraduate degree saw their salaries rise, while “low-education workers declined significantly.” According to the study, “The real earnings of men without a high-school degree are now 15% lower than they were in 1980.” 

Much of the changes in U.S. wage structure, according to the paper, were caused by companies automating tasks that used to be done by people. This includes “numerically-controlled machinery or industrial robots replacing blue-collar workers in manufacturing or specialized software replacing clerical workers.”

Artificial intelligence systems are ubiquitous. AI-powered digital voice assistants share everything you want to know just by asking it a question. Instead of a live person addressing a problem, a corporate chatbot forces you to engage with it. The technology is remarkable. It helps diagnose cancer and health issues. Banks use sophisticated software to check for fraud and bad behaviors. Driverless automobiles, newsfeeds, social media and job applications are all controlled by AI.

The World Economic Forum (WEF) concluded in a recent report, “A new generation of smart machines, fueled by rapid advances in AI and robotics, could potentially replace a large proportion of existing human jobs.” Robotics and AI will cause a serious “double-disruption,” as the pandemic pushed companies to fast-track the deployment of new technologies to slash costs, enhance productivity and be less reliant on real-life people. The WEF asserts automation will slash about 85 million jobs by 2025. In a dire prediction, WEF said, “While some new jobs would be created as in the past, the concern is there may not be enough of these to go round, particularly as the cost of smart machines falls over time and their capabilities increase.”

Management consulting giant PriceWaterhouseCoopers reported, “AI, robotics and other forms of smart automation have the potential to bring great economic benefits, contributing up to $15 trillion to global GDP by 2030.” However, it will come with a high human cost. “This extra wealth will also generate the demand for many jobs, but there are also concerns that it could displace many existing jobs.”  

Concerns of new technologies disrupting the workforce and causing job losses have been around for a long time. On one side, the argument is automation will create new and better jobs and erase the need for physical labor. The counterclaim is that people without the appropriate skills will be displaced and not have a home in the new environment. 

Amazon, Google, Microsoft, Apple, Zoom and other tech giants greatly benefited financially during the pandemic. The virus outbreak accelerated trends, including choosing technology over people. There’s still a need for humans. For example, although Amazon invested heavily in automation for its warehouses, the online retail giant still needed to hire over 300,000 workers during the pandemic. This brings up another important overlooked  issue: the quality of a job. Proponents of AI say that there’s nothing to worry about, as we’ve always successfully dealt with new technologies. You may have a job, but what is the quality of it?  

To remain relevant, you will have to learn new skills to stay ahead of the curve. Bloomberg reported, “More than 120 million workers globally will need retraining in the next three years due to artificial intelligence’s impact on jobs, according to an IBM survey.” The amount of individuals who will be impacted is immense. 

The world’s most advanced cities aren’t ready for the disruptions of artificial intelligence, claims Oliver Wyman, a management consulting firm. It is believed that over 50 million Chinese workers may require retraining, as a result of AI-related deployment. The U.S. will be required to retool 11.5 million people in America with skills needed to survive in the workforce. Millions of workers in Brazil, Japan and Germany will need assistance with the changes wrought by AI, robotics and related technology.

For those who may be left behind, there’s a call for offering a universal basic income (UBI). This idea gained national attention when it became a major part of Democratic candidate Andrew Yang’s 2020 presidential campaign. Yang’s policy was to lift people out of poverty or help them through rough patches with a guaranteed monthly income. Supporters say it gives people needed financial security to find good jobs and avoid debt. Critics have argued free money would be a disincentive to work, creating a society dependent on the state.

According to a Wells Fargo research report, robots will eliminate 200,000 jobs in the banking industry within the next 10 years. This has already adversely impacted highly paid Wall Street professionals, including stock and bond traders. These are the people who used to work on the trading floors at investment banks and trade securities for their banks, clients and themselves. It was a very lucrative profession until algorithms, quant-trading software and programs disrupted the business and rendered their skills unnecessary—compared to the fast-acting technology. 

There is no hiding from the robots. Well-trained and experienced doctors will be pushed aside by sophisticated robots that can perform delicate surgeries more precisely and read x-rays more efficiently and accurately to detect cancerous cells that can’t be readily seen by the human eye. 

Truck and cab drivers, cashiers, retail sales associates and people who work in manufacturing plants and factories have and will continue to be replaced by robotics and technology. Driverless vehicles, kiosks in fast-food restaurants and self-help, quick-phone scans at stores will soon eliminate most minimum-wage and low-skilled jobs.

The rise of artificial intelligence will make even software engineers less sought after. That’s because artificial intelligence will soon write its own software, according to Jack Dorsey, the tech billionaire boss of Twitter and Square. That will put some beginner-level software engineers in a tough spot. When discussing how automation will replace jobs held by humans, Dorsey told Yang on an episode of the Yang Speaks podcast, “We talk a lot about the self-driving trucks and whatnot.” He added, “[AI] is even coming for programming [jobs]. A lot of the goals of machine learning and deep learning is to write the software itself over time, so a lot of entry-level programming jobs will just not be as relevant anymore.”  

 When management consultants and companies that deploy AI and robotics say we don’t need to worry, we need to be concerned. Companies—whether they are McDonald’s, introducing self-serve kiosks and firing hourly workers to cut costs, or top-tier investment banks that rely on software instead of traders to make million-dollar bets on the stock market—will continue to implement technology and downsize people, in an effort to enhance profits. 

This trend has the potential to adversely impact all classes of workers. In light of the study’s spotlight on the dire results of AI, including lost wages and the rapid growth in income inequality, it's time to seriously talk about how AI should be managed before it's too late.

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