Credits
Nathan Gardels is the editor-in-chief of Noema Magazine. He is also the co-founder of and a senior adviser to the Berggruen Institute.
Among the job doomsayers of the AI revolution, David Autor is a bit of an outlier. As the MIT economist has written in Noema, the capacity of mid-level professions such as nursing, design or production management to access greater expertise and knowledge once available only to doctors or specialists will boost the “applicable” value of their labor, and thus the wages and salaries that can sustain a middle class.
Unlike rote, low-level clerical work, cognitive labor of this sort is more likely to be augmented by decision-support information afforded by AI than displaced by intelligent machines.
By contrast, “inexpert” tasks, such as those performed by retirement home orderlies, child-care providers, security guards, janitors or food service workers, will be poorly remunerated even as they remain socially valuable. Since these jobs cannot be automated or enhanced by further knowledge, those who labor in them are a “bottleneck” to improved productivity that would lead to higher wages. Since there will be a vast pool of people without skills who can take those jobs, the value of their labor will be driven down even further.
This is problematic from the perspective of economic disparity because four out of every five jobs created in the U.S. are in this service sector.
So, when looking to the future of the labor market in an AI economy, we can’t talk about “job loss vs. gains” in any general sense. The key issue is not the quantity of jobs, but the value of labor, which really means the value of human expertise and the extent to which AI can enhance it, or not.
I discussed this and other issues with Autor at a recent gathering at the Vatican’s Pontifical Academy in Rome, convened to help address Pope Leo XIV’s concern over the fate of labor in the age of AI. We spoke amid the splendor of the Vatican gardens behind St. Peter’s Basilica.
The populist movements that have risen to power across the West today, particularly in the U.S., did so largely on the coattails of the backlash against globalization. Over the course of the U.S.-led free-trade policies during the post-Cold War decades, the rise of China as a cheap-labor manufacturing power with export access to the markets of advanced economies hollowed out the industrial base across large swaths of America and Europe — and the jobs it provided.
Some worry the AI shock will be even more devastating. Autor sees the similarity and the distinctions. What makes them the same is “it’s a big change that can happen quickly,” he says. But there are three ways in which they are different.
First, “the China trade shock was very localized. It was in manufacturing-intensive communities that made labor-intensive products such as furniture, textiles, clothing, plastic dolls and assembly of low-end hardware.”
AI’s effects will be much more geographically diffuse. “We’ve already lost millions of clerical worker jobs, but no one talks about ‘clerical shock.’ There is no clerical capital of America to see it disappear.”
Second, “the China trade shock didn’t just eliminate certain types of jobs. It eliminated entire industries all at once.” AI will shift the nature of jobs and tasks and change the way people work, but it “will not put industries out of business. … It will open new things and will close others, but it will not be an existential elimination, a great extinction.”
Third, “unless you were a very big multinational, what was experienced by U.S. firms during globalization was basically a shock to competition. All of a sudden, prices fell to a lower level than you could afford to produce.”
AI will be more of a productivity change that will be positive for many businesses. “That doesn’t mean it’s good for workers necessarily, because a lot of workers could be displaced. But business won’t be like, ‘Oh God, the AI shock. We hate this.’ They’ll be, like, ‘Oh great. We can do our stuff with fewer inputs.” In short, tech-driven productivity is the route to great profitability.
As we have often discussed in Noema, it is precisely this dynamic where productivity growth and wealth creation are being divorced from jobs and income that is the central social challenge. Increasingly, the gains will flow to capital — those who own the robots — and decreasingly to labor. The gap will inexorably grow, even with those who can earn higher wages and salaries through work augmented by AI.
Is the idea of “universal basic capital” (UBC), in which everyone has an ownership share in the AI economy through investment of their savings, a promising response?
Autor believes that what UBC offers is a “hedge” against the displacement or demotion of labor. Most of us are “unhedged,” he says, because “human capital is all we have and we are out of luck if that becomes devalued. So at least we would have a balanced portfolio.”
If the government seeds a UBC account, such as “baby bonds,” at the outset, Autor notes, it will grow in value over time through compounded investment returns. The problem with the alternative idea of “universal basic income” is that you are “creating a continual system of transfers where you are basically saying ‘Hey, you rich people over there, you pay for the leisure of everybody else over here.’ And that is not politically viable. ‘How do they get the right to our stuff?’”
Autor compares the idea of “universal basic income” (UBI) to the “resource curse” of unstable countries with vast oil and mineral resources, where it appears that “money is just coming out of a hole in the ground.”
The related reason that UBC is important for Autor is that “the people who have a voice in democracies are those who are seen as economic contributors. If the ownership of capital is more diffuse, then everyone is a contributor,” and everyone has a greater voice, which they will use since they have a stake in the system.
The closer we get to widespread integration of AI into the broader economy, the clearer the patterns Autor describes will become. On that basis, responsible policymakers can formulate remedial responses that fit the new economic times we have entered, rather than relying on outmoded policies geared to conditions that no longer exist.
