I think the editors of the Washington Post are failing to make an important distinction in their new editorial on the implications of LLM AI on “white collar” jobs. That distinction is between what generative AI is actually likely to accomplish in the near term and how it is being sold by AI service providers and how American managers are interpreting that. The editors remark:
Artificial-intelligence catastrophism is everywhere. This month saw stock-market ructions after Anthropic, a leading AI company, announced that it had developed and deployed AI “agents” to autonomously execute legal, marketing and sales tasks. The economic potential is real, but the hand-wringing is overblown.
Yes, AI appears to be a transformational technology, and that transformation will sometimes be disruptive. But it won’t render humans obsolete, and the disruption of white-collar work might do a lot of good.
The editors treat AI as a technological phenomenon whose labor effects depend on capability. But corporations do not wait for capability; they act on forecasts. Whether those forecasts are accurate is economically secondary. The layoffs occur at the moment executives believe the technology will soon substitute for labor not when it actually does.
Even if the editors are technically correct, their conclusion about disruption being overblown is wrong because economic behavior precedes technological reality. The economic impact of AI will be driven less by actual technical capability and more by managerial belief in vendor claims. Consequently, job loss can occur even if the technology is immature.
Just a few days ago Microsoft AI CEO Mustafa Suleyman predicted that AI would automate most tasks in white collar jobs with human-level performance within 18 months. Anthropic CEO Dario has repeatedly warned that AI would eliminate half of all entry-level white collar jobs within the next 5 years. IBM CEO Arvind Krishna paused hiring at IBM, explaining that a large number of jobs will be “replaced by AI”. Those are the sales pitches.
How these sales pitches are being interpreted and utilized by Fortune 500 CEOs is equally clear. In 2024 Carol Tomé, CEO of UPS, laid off 14% of the company’s managers, explaining:
We will constrain head count growth through the end of the year, in addition to a limited reduction in roles across the firm… These targeted steps are consistent with our priorities of gaining more agility and creating the right team structures in order to implement effective AI solutions
This year the company has already laid off a significant number of non-managerial workers due to loss of contracts. The contracts were lost in large part due to AI. The CEO of the financial technology company Klarna has frozen hiring—AI can do all of the jobs. Last year David Solomon, CEO of Goldman Sachs, announced a hiring freeze due to AI. I cannot distinguish between the actual results of AI and confidence in the future promise of AI but these CEOs are responding to the sales pitches by improving their companies’ bottom lines by reducing headcount. In the final analysis it doesn’t make any difference whether they’re right or wrong. The jobs are gone in either event.
That’s not alarmism. Those layoffs and freezes are cold, hard facts with serious real world implications for young people who now have thousands of dollars in student loans in anticipation of jobs that are not materializing.
The theory of creative destruction suggests that new jobs will come along for those who are displaced, like happened with agriculture and other changes. What it doesnt account for is how long it takes to adapt and develop those new jobs. Looking back at the history of the Industrial Revolution it looks like that can take quite a while and it can be pretty rough for those who have been displaced.
Steve
There are more master weavers now than there were in 1800. The original Industrial Revolution temporarily eliminated a relative handful of jobs, created far more, and improved well-being enormously. As I’ve illustrated in the past the Digital Revolution eliminated some jobs, created others. So far the numbers are about equal. The AI Revolution will produce a relative handful of jobs and eliminate millions of jobs. It may improve well-being but it won’t be a net job creator.