According to Goldman Sachs, losing your job to AI could be more costly than employees anticipate.
Based on the report released on Monday, the Wall Street bank reviewed 40 years of labor market data and discovered that workers who lost their employment due to technology disruption continue to pay the price years later.Our analysis implies that, like earlier waves of technological development, AI-driven displacement may impose long-term costs on affected workers, lowering labor market outcomes for several years. When displacement occurs during a recession, the effects may be far greater,” economists noted.
Workers displaced from “technology-disrupted occupations” have historically lost an average of 3% of their real incomes as compared to those displaced from “more stable occupations,” according to Goldman, citing an examination of longitudinal survey data that tracked the outcomes of over 20,000 workers since 1980.
Also, the salary reductions persisted for some time. Compared to workers who never lost their jobs, technology-displaced workers’ actual incomes grew by an average of 10 percentage points less in the ten years after losing their positions. Additionally, compared to people who lost their employment for other causes, their real incomes increased by five percentage points less.
The experts also noted that it took around a month longer for tech-displaced workers to obtain new employment than for those who lost their jobs in “more stable” professions. According to the bank, a worker’s chance of going through another “unemployment spell” remained high for the following ten years after being replaced by a new technology.
The bank suggested, tech-displaced workers were also likely to accumulate wealth more slowly over the course of their lives, citing things like delayed homeownership.
“Occupational downgrading is a major factor contributing to these bad results. Because the same technological changes that removed their jobs also diminished the value of their prior talents, workers displaced by technology are more likely to transition into more mundane jobs requiring fewer analytical and interpersonal skills, according to the analysts.They continued, “The damaging effects also have wider economic repercussions.
As businesses seek to boost efficiency and reduce expenses, AI-related job cutbacks are already affecting some segments of the labor market.
In a different analysis, Goldman calculated that in the past year, AI augmentation and substitution in the labor market had reduced the growth of new jobs by about 16,000 payrolls each month.
In previous years, the bank projected that over the next ten years, AI might replace up to 7% of all US workers.
But there is good news.
Employees who are laid off as a result of a technology disruption are not doomed. Over the following ten years, the total real salary growth increased by an average of 2 percentage points for those who retrained following a tech-related job loss. According to Goldman, their likelihood of being unemployed also decreased by about 10 percentage points throughout that time.
Analysts said, “Our analysis shows that retraining programs could help mitigate some of the negative effects of AI-related job displacement, enabling displaced workers to achieve more stable employment and earn slightly higher wages.”
