It’s the Incentives, Stupid

In an op-ed in the Wall Street Journal Richard R. Smith and Arafat Kabir call attention to a risk of generative artificial intelligence:

This month’s lackluster employment numbers spurred talk that artificial intelligence is destroying jobs. Whether or not that is showing up in the statistics, AI presents a different challenge than past technological disruptions—in large part because it is eliminating the entry-level positions that traditionally served as stepping stones to career advancement.

This shift helps explain a troubling pattern in workforce anxiety. A recent Pew Research survey shows that more than half of employed adults worry about how AI may be used in the workplace. A September Deutsche Bank survey reports that 24% of workers under 35 express high concern about losing their jobs to AI, compared with only 10% of those over 55.

It’s been historically true that younger workers embrace new technologies while older workers resist change. But AI seems to have flipped this dynamic. When AI automates routine tasks, organizations often find they need experienced employees who can combine AI capabilities with years of business knowledge. What those organizations don’t need is entry-level employees learning the basics. Data shows rising unemployment since 2022 among 22- to 25-year-olds in AI-affected sectors—even while employment for older workers remains stable.

The traditional bottom rung of the career ladder is disappearing. We need to think about how younger workers will be affected in an AI-driven future to ensure that we have enough talent to replace retiring workforces.

They present two possible remedies:

This begins with companies recognizing that AI represents a fundamental shift rather than merely another tool. One example could be focusing on “AI native” tracks in which, instead of starting new employees with routine tasks that AI can handle, they begin with AI oversight and optimization roles. They learn to train, monitor and improve AI systems while simultaneously building domain expertise—combining technical fluency with business acumen.

A second option can be a mentor-intensive development program that pairs junior workers directly with senior professionals—letting AI handle the routine tasks that used to fill a junior employee’s day. Instead of learning by doing grunt work, juniors learn judgment and strategy by working alongside experienced colleagues on higher-level problems from day one, building the business acumen and strategic thinking that AI can’t replicate.

In short they’re warning about a problem that is already emerging but will become dire in ten or twenty years and advising managers “don’t let that happen”. Rather than relying on an implicit moralism that assumes managers can simply choose to behave differently without facing personal or professional penalties, I wish they had focused on the political and economic realities that underpin the behaviors they are warning about.

That reminded me of a conversation I had with my boss (a regional manager for a Fortune 500 company) nearly 50 years ago. When I pointed out the risks and adverse consequences of the course of action he was advocating, he told me “If I don’t focus single-mindedly on my numbers for next quarter, my boss will put someone in here who will” or, in other words, “long term be damned!”. That was one of the things that convinced me to leave the corporate world and strike off on my own.

The question I wish that Dr. Smith and Mr. Kabir had addressed is why managers would act in the way they prescribed. For the last forty years at least short term thinking has dominated and people are very strongly predisposed to keep doing what has worked for them in the past.

It’s not enough that they’re risking cutting off the pipeline that would provide senior engineers, technicians, or managers in the future. Their focus is on the bottom line and stock prices because those are the incentives they have. How would incentives need to change for managers to do what the authors propose?

Absent changes to compensation structures, promotion criteria, or market expectations, exhortations to “think long term” are empty. Managers respond rationally to incentives, and for decades those incentives have rewarded short-term extraction over institutional continuity.

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