Fears over AI killing labor demand are ‘probably overblown,’ researcher argues in new Google report

Good morning. Economists use the label “general-purpose technology” to describe innovations that can affect an entire economy, such as the electric motor in the 1800s—or generative AI today.

Andrew McAfee, the inaugural visiting fellow for technology and society at Google and a principal research scientist at MIT, discusses the concept in a report, “Generally Faster: The economic impact of Generative AI,” released on April 25 by Google. It’s based on his research on AI, which he says can positively transform economies and societies.

I first met McAfee in November at a Fortune CFO Collaborative dinner, held in collaboration with our founding partner Workday and sponsor Deloitte, where he talked about generative AI. “This stuff is going to diffuse throughout the economy,” he told the audience of CFOs. “It’s going to separate winners from losers, and it’s going to turbocharge the winners faster than you and I have been expecting based on the past 25 years of technology.”

His advice to them? “Risk tolerance needs to shift. Not being agile is a deep, deep risk."

In his new report, McAfee explores the implications of generative AI in economic growth, looking at everything from its possible effects on job skills and wages to how it may transform entires industries to its potential risks and pitfalls.

“Previous general-purpose technologies have taken decades to boost entire economies,” McAfee writes. “The electric motor, for example, was patented in the U.S. in 1837 and Edison’s first power station began operating in 1881. However, electrification only began to have a significant positive effect on American factories’ productivity in the 1920s. Change was slow because these technologies diffused slowly, often requiring new infrastructure such as roads and electrical transmission networks.”

But when it comes to generative AI, most of the required infrastructure already exists. “Once new generative AI systems are developed," he writes, "they can be deployed around the world as quickly as web pages and apps can.”

Goldman Sachs Research forecasts AI will start having a measurable impact on U.S. GDP in 2027, with other nations feeling those effects in subsequent years. AI could ultimately automate around 25% of labor tasks in advanced economies and 10% to 20% of work in emerging economies, according to the firm’s economists.

But fears over such a steep drop in labor demand are "probably overblown," McAfee writes. "The history of general-purpose technologies shows that the growth they bring is accompanied by strong demand for labor.”

This is reflected in number of new jobs created: Over 85% of total U.S. employment growth since 1940 has come in entirely new occupations. Generative AI is already delivering large productivity gains, and while it will reduce demand for some skills, it also will increase demand for others and, McAfee notes, it will create demand for entirely new ones.

Sheryl Estrada
sheryl.estrada@fortune.com

María Soledad Davila Calero curated the Leaderboard and Overheard sections of today’s newsletter.

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