AI-driven job losses may not only complicate the immediate employment prospects for affected workers but could also result in prolonged “scarring,” characterized by diminished income, postponed homeownership, and a reduced likelihood of marriage, as indicated by a recent research report. Economists noted on Monday that those outcomes are exacerbated during a recession. The most recent examination arises as economists, policymakers, scholars, and laborers across various sectors endeavor to evaluate the potential impacts of rapidly advancing artificial intelligence technologies on individuals, industries, and society as a whole. Goldman Sachs previously estimated that 6% to 7% of US workers (approximately 11 million individuals) could face job displacement due to AI.
Monday’s note examined the possible long-term implications of job displacement associated with AI. To achieve this, economists examined historical trends: They pinpointed jobs displaced by diverse technological advancements since 1980, subsequently analyzing the labor market results for workers by utilizing data from the National Longitudinal Surveys, a federal initiative aimed at collecting information over various periods in individuals’ lives.
The economists arrived at four conclusions through this process:
- Short-run impacts: Technology-displaced workers may require an additional month to secure new employment, and their inflation-adjusted earnings experience more significant declines (exceeding 3%) compared to their counterparts (who face negligible effects).
- Enduring consequences: A decade following a job loss, the real earnings of workers displaced by technology were 10 percentage points lower than those of their non-displaced counterparts. Workers displaced by technology experienced a slower pace of wealth accumulation, postponed homeownership, and a delay in household formation.
- The income impacts exhibit significant variation: younger individuals, those with college degrees, and residents of urban areas experience less severe effects; similarly, workers with shorter tenures and those who engaged in retraining opportunities demonstrate comparatively better outcomes than their counterparts.
- Recessions exacerbate outcomes: The consequences of technology-related displacements are intensified, resulting in an additional three weeks of unemployment and a 5-percentage-point increase in the likelihood of subsequent joblessness.
- “Overall, these patterns suggest that AI-driven displacement could impose lasting costs on affected workers, with substantially larger effects when job losses coincide with a recession,” wrote economists Pierfrancesco Mei and Jessica Rindels.
However, it was noted that, while considerable attention has been directed towards the potential adverse effects of AI on new graduates, previous research indicates that younger workers who transitioned between jobs or enhanced their skills experienced more favorable outcomes. Mei and Rindels emphasized retraining programs as a viable approach to alleviating the adverse impacts of technological displacement. “Retrained workers tend to ascend the occupational hierarchy into roles characterized by higher abstract content – positions necessitating advanced skills and greater complementarity with information and communication technology – thereby diminishing their vulnerability to future automation,” they wrote.