I cans see how AI might change parts of the economy for the better, but much of the hype is over blown.
Resume writers are in the front line but all I’ve seen so far is the garbage AI produces when it tries to write a resume or cover letter. Recruiters are busy hitting the delete button.
What really matters to our living standards is productivity – the economy’s output from its labour and capital. But we’re not there yet.
As economist Robert Solow, a Nobel Prize winner, famously said in 1987: “You can see the computer age everywhere but in the productivity statistics.”
An ever-increasing proportion of content on the open internet is produced by AI, with no real human intervention. Much of this is “AI slop” — low-quality content often riddled with inaccuracies.
Large language models are trained on online data. So any rubbish in the quality of data on the internet will trigger rubbish in the results.
Businesses are very uncertain about how to use AI, apart from using ChatGPT to write emails.
A recent RBA survey found that businesses’ adoption of AI is still in its very early stages.
Nearly 40 per cent of firms said they had “minimal” adoption of AI tools, and in these cases, it was typically in the form of “digital assistants” such as Microsoft Copilot or ChatGPT.
These AI tools can summarise your emails or help with research (often with dubious regard for facts), but they’re not productivity game-changers.
Some of the firms surveyed by the RBA said they were using AI more heavily, but these were generally larger businesses, and the economists said that for most firms “adoption has been shallow to date”.
“Overall, many surveyed firms indicated that their adoption of AI tools to date has been relatively piecemeal, with adoption often being employee-led rather than employer-led,” the RBA economists said.
The survey and other evidence suggest AI has had a pretty modest impact on staffing so far. Firms surveyed said “most” workers displaced by technology (including AI) had been moved to other jobs with the same employer.
About half the surveyed firms expected AI would lead to a “slight” reduction in their total staff over the next three years, due to factors such as natural attrition, hiring fewer new workers, redundancies, or a combination of all three.
It’s one thing for companies to say they plan to cut costs thanks to new technology, but another to do it without creating a gap in their operations.
The Commonwealth Bank infamously said it was cutting 45 jobs earlier this year because the roles were being replaced with AI-powered chatbots only to later backflip.
The wider economic point is that big technological changes in the past have created new jobs and businesses, as well as wiping some out. That may well happen with AI but no one knows for sure and it’s likely to be debated for years to come.
If AI is going to transform our economies, businesses are going to have to make major changes to how they operate and that won’t happen quickly.
To get big productivity gains from AI, companies will have to re-examine all their processes. That takes time, it costs money and will require lot of re-training of staff and potentially hiring more people.
One thing we can be more confident about is that we won’t get a productivity surge from ChatGPT summarising emails for us. The changes will have to be a lot more profound.