Tenon

You don’t have to browse recent technology or human capital news stories for long before finding some mention of the inevitable impact of AI on jobs.  We are frequently asked by executives for our opinion on the future of work and what these developments mean for people at an earlier stage in their career, or who have yet to enter the workforce.  It appears some areas are more at risk than others, and it stands to reason that the usefulness and effectiveness of AI agents and assistants will improve to the point at which many roles will be augmented, theoretically freeing up time for many workers.  This is time that could usefully be applied to wellness or social endeavours, reducing burnout and improving working life although that’s a separate topic for discussion.

Existing evidence on the effect of new technologies on employment is mixed, and the European Central Bank published a working paper on “New technologies and jobs in Europe”, examining the link between labour market developments and technologies such as AI and software in a collection of European countries.  The study was published in December 2024 and focused on pre-Covid data – there has been a marked increase in accessibility and adoption of GenAI and related tools since, but the findings are interesting nonetheless.

On a basic level, technology impacts jobs in three ways:

• the displacement effect: destroying jobs through automation of tasks.
• the productivity effect: complementing human labour and increasing productivity, which in turn may result in more jobs due to an increase in demand for certain products/services.
• the reinstatement effect: a combination of the above, with some tasks and jobs being replaced but new ones being created through innovation.

Recent analysis that focused on the US market suggested that automation has a positive net effect on the total number of jobs but tends to reduce the number of low-skill jobs.  Contradicting this, a separate study in France in 2023 indicated the introduction of automation also had a positive effect on the employment of unskilled industrial workers, driven by aggregate productivity gains.

There is an increasing body of evidence to support the theory of “routinisation” which shows that a “rise in automation leads to a decline in the demand for routine tasks performed by medium-skilled workers, and an increase in the demand for non-routine tasks, performed by workers at the top and the bottom of the wage distribution.”  When coupled with findings from other research it raises some interesting questions about the impact this technology will have as Gen Z and Gen Alpha start to comprise a larger proportion of the workforce.  It’s not too much of a stretch to assume that “GenAI natives” and early adopters may well reimagine ways of working in many industries.

The takeaway here though should be one of optimism.  The study indicates a mildly positive impact of AI on the labour market, and the “negative effect on employment is far less sizable than the most pessimistic outlook for AI driven job destruction.”  The obvious caveat being that the technology is advancing so rapidly it’s premature to assume this will always be the case.

If you are looking to hire AI talent or plan for adoption in the future, please get in touch.