With recent strides in artificial intelligence (AI) technologies and their extensive adoption in products and services across industries, the role of AI tools and techniques in business and the global economy has become a compelling topic.
The staggering progress, breakthrough results, and striking demonstrations of AI’s capabilities have sparked speculation about its potential to revolutionize the way people live and work.
We comprehend AI and its impact, focusing on the economic implications of AI, delving into its potential contribution to global economic activity.
The Expansive Scope of AI
AI encompasses not one, but a myriad of technologies.
Companies are expected to adopt AI technologies to varying degrees, with some embracing an opportunistic approach by testing a single technology in a specific function, while others display bolder strategies by absorbing all five categories throughout their organizations.
For the purpose of modeling, these approaches are respectively defined as adoption and full absorption. However, the majority of companies will likely fall between these extremes, adopting various AI technologies at different stages.
In a forecast by McKinsey Global Institute’s (MGI) by 2030, simulations project that around 70% of companies will have adopted at least one type of AI technology, but less than half will have achieved full absorption of all five categories.
The speed of adoption and absorption is anticipated to be relatively rapid, surpassing that of previous technological advancements. Nonetheless, several barriers may impede swift AI adoption, such as latecomers finding it challenging to leverage AI due to missed opportunities seized by early adopters.
Developments in capabilities and the attraction of talent also play a significant role. Despite these hindrances, the average level of AI adoption estimated by simulations suggests that AI has the potential to generate approximately $13 trillion in additional global economic activity by 2030.
This boost amounts to a 16% increase in cumulative GDP compared to the present day, equating to an annual GDP growth rate of around 1.2%. Remarkably, this forecasted impact aligns favorably with the historical effects of other transformative technologies like steam engines, robots, and information technology.
The Gradual Unfolding of AI’s Economic Impact
The effect of AI on economic growth is anticipated to emerge gradually, with its true magnitude becoming increasingly visible over time.
Although not a linear progression, the contribution of AI to economic growth is projected to be over three times higher by 2030 than in the preceding five years. This pattern aligns with an S-curve adoption trajectory, characterized by a slow initial start due to significant costs and investments required for learning and deploying AI technologies.
However, as competition intensifies and complementary capabilities improve, the pace of AI adoption and its subsequent economic impact are expected to accelerate. Maximizing the productivity gains from AI innovations will likely require complementary management and process innovations.
This “slow-burn” pattern of impact should not be misconstrued as an indication of limited potential, but rather underscores the need for sustained investment and strategic implementation to reap the full benefits of AI. Early adopters stand to gain substantial advantages over firms that lag behind or fail to embrace AI.
Challenges Arising from AI Adoption
The adoption of AI has the potential to widen gaps between countries, companies, and workers. At the country level, AI may exacerbate existing digital disparities, further reinforcing the current global digital divide. Developed nations, which have traditionally led in technological adoption, are likely to widen the gap in AI implementation compared to developing countries.
This divergence in outcomes reflects variations in AI adoption levels, with developed economies compelled to leverage AI to mitigate the challenges of aging populations and declining GDP growth.
Conversely, developing countries may have alternative avenues for improving productivity, such as adopting best practices and industry restructuring. Additionally, developing nations may perceive a smaller economic benefit from AI adoption compared to advanced economies. However, this does not imply that developed economies are automatically poised to fully capitalize on AI, nor does it condemn developing nations to cede the AI race. Countries can forge strategies, bolster foundational elements, enhance capabilities, and actively accelerate AI adoption to capitalize on its potential.
Effects on the Workforce
The adoption of AI technologies is expected to reshape the employment landscape, potentially exacerbating inequality among workers. The demand for jobs is projected to shift away from repetitive tasks towards socially and cognitively driven activities, as well as those that necessitate high levels of digital skills.
Job profiles centered around repetitive tasks and low digital skills may experience a decline. In contrast, positions involving non-repetitive work and high digital skills could witness a rise.
These shifts in employment composition are likely to impact wages.
The Last Word
In conclusion, the rapid advancement of artificial intelligence (AI) is set to have a profound impact on the global economy and the workforce.
The potential of AI to revolutionize various industries and enhance productivity is undeniable.
However, the unfolding of AI’s economic impact will not occur overnight. It will follow a gradual trajectory, with the true magnitude becoming increasingly visible over time. The adoption and integration of AI technologies will require sustained investment, strategic implementation, and complementary management innovations to maximize its productivity gains.
Despite the immense opportunities, challenges remain. AI adoption has the potential to widen disparities between countries, companies, and workers. It may exacerbate existing digital divides, as developed economies, with their technological advantages, are likely to outpace developing countries in AI implementation. The shifting employment landscape driven by AI could also exacerbate inequality among workers, favoring those with high digital skills while potentially leaving others behind.
In this era of transformative technology, embracing AI responsibly and leveraging its potential for the greater good of society will be crucial.
It requires careful consideration of ethical implications, equitable distribution of benefits, and ensuring that displaced workers have opportunities for reskilling and upskilling. Only through thoughtful planning and proactive measures can we navigate the looming impact of AI on our economy and workforce successfully.
PrabhatGusain is Co-founder & CEO, CoFounder App