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With all this talk of the AI bubble and how the economy will be revolutionized, it seems like AI is a river full to the brim with gold that all the investors are flocking to. But how will it actually change the US economy? Recently, the US has been investing large amounts of money into AI companies like Nvidia and OpenAI to remain competitive in the AI race against China, highlighting AI’s critical role in the new arms race for national security and superiority. Alongside these investments, the White House claims AI will revolutionize the economy and bring the US into a new golden age. However, amid ongoing discussions about potential job loss and changing markets, is that optimism justified?
When it comes to jobs, the outcome is uncertain. Some workers could face unemployment or have lower incomes if their jobs could simply be done more efficiently by AI, while others may see an increase if their jobs are made to be more productive. AI could reshape the wage environment by taking over the hard, difficult, and tedious work while the actual workers hone their creative and critical thinking skills, which AI struggles with. AI is also expected to reduce costs and improve productivity in many sectors, especially healthcare, and could lead to energy being saved with its new advances in recyclable 3D printing.
But above all, experts hope that AI will create an economic boom. One projection states that AI-enabled workers could contribute $7 trillion to the global GDP, and add $1.2 trillion to $3.8 trillion in just the US alone. Some experts argue that the US’s relative economic stability right now could be attributed to AI, with it “saving the US economy right now.”All of this is great, suggesting higher wages and a reduction of poverty, but, as always, there are two sides to this coin.
AI could eradicate millions of jobs. A 2017 report stated that, by 2060, AI will be able to complete 50% of all tasks in the workplace, and the remaining jobs will be more physical and low-paying. We could also see income inequality increase, with companies benefiting while workers struggle. AI will most definitely provide an increase in efficiency and productivity that could generate more money, but whether workers will actually see that in their paycheck is a different story. During the automation and computer revolutions, from 1978 to 2016, there was a 60% increase in productivity, but only a 10% increase in wages.Furthermore, even though AI has the potential to put trillions into the U.S. economy and increase GDP, it could more largely benefit the US’s main competitor: China, with a 26% increase in GDP compared to a 14.5% increase for all of North America. Moreover, due to the current high cost of AI, it may hurt small businesses and firms that can’t compete with large, huge companies like Google or Microsoft. We’re already seeing cuts as well, with UPS and Amazon planning to reduce their workforce by the thousands due to AI. They do this in order to become more efficient and productive, and it’s not clear what will happen to those workers.
There is also talk of an AI bubble, which, like the dot-com bubble, if it were to “pop,” could do great harm to the economy. But the question here is whether AI would do the same, which remains to be seen. So will AI lead us into a new industrial revolution or a recession?
One thing is clear: AI is here to stay, and the actual reality will most likely be a mix of the worst and the best possible outcomes. Just like with the first industrial revolution, things are being redefined, not replaced–factories didn’t replace rifle making; it simply changed how it’s done. Jobs will change, as, between modern and historical evidence, AI will only cause occupational shifts rather than whole replacement, but this shift is likely to be messy, but, in the long term, lead to a stronger economy and workforce. Many suggest gaining soft skills in communications, critical thinking, collaboration, etc, alongside constant learning could greatly help. Along with that, experts find that, due to the sheer cost of AI, it may still be at least a decade away from full implementation. In 1970, computer technologies were in the headlines, but it wasn’t until 1990 that there was full implementation.
Moreover, unions are rallying to find ways to prevent mass job loss, with California having enacted a law to add AI regulations to the workplace, and the U.S. government has created plans for a high-paying workforce to manage the AI infrastructure and to support the new economy, including apprenticeships and educational programs, even for high schoolers. Moreover, the Department of Labor (DOL) is working to track how AI is affecting the job market to help policymakers make decisions regarding AI and labor. Overall, just as we have seen in the past with the Industrial Revolution and the Automation Revolution, AI won’t destroy the job market; it’ll only change it. Jobs will shift more to human capabilities like communication, interaction, and creativity. AI is providing what once was a slow, weakened economy an opportunity to revitalize itself, and this can be done in many ways. AI has huge possibilities. It could revolutionize security and help reduce poverty, boosting the economy, if it is used correctly and without malicious purpose.
However, it has downsides as well beyond the economy, namely with the environment, but hopefully, with further developments, an eco-friendly AI can be made that will help the environment as well. This was seen with major companies like Amazon, Google, Microsoft, and even OpenAI pleading and investing to reduce their carbon emissions by a certain time period, and have invested millions in solar power technology. Some are even lobbying for regulations to be passed on AI in regard to the environment. In regard to the tech race between the U.S. and China, that remains to be seen, but it is highly likely that there may not be one clear winner; it will likely evolve as each country grapples with its own internal issues, needs, and wants from AI.
Lastly, when it comes to the AI bubble, there are many arguments for and against it, but it is advised to be cautious about AI stocks, focus on already established results to invest in, and recognize the overhype that may surround a certain AI product in order to safely invest. Some say that it is a bubble due to its overvaluation, circular investment, and elongated starting processes, along with claims of a kind of frenzy surrounding it. However, some say that AI has high productivity gains, and, unlike the dot-com bubble incident, AI has more immediate uses, and that the infrastructure investment is justified due to the sheer use of AI. But, truly, it’s impossible to know for sure what will happen until it happens. Many call this the “modern Industrial Revolution,” and they’d be right to say so, with how the workforce is changing so drastically. It’s highly likely that the net gain will be more than the net loss for the economy.
Despite this, it’s important to remember that AI is still being developed and changed, and has many flaws. Much remains to be seen with AI, but it’s highly important to keep an open mind. Despite what some people claim, this isn’t the end of the world; it’s really just a changing one, that, if embraced, could lead to a better one too.
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