Tech Explained: Goldman Sachs analysts warn 25% of all work hours could be automated by AI: ‘We expect that the AI transition will lead to…’ in Simple Terms

Goldman Sachs analysts have predicted that AI could automate a quarter of all work hours. This will lead to significant job displacement but will stop short of a complete employment crisis. According to a Fortune report, Goldman Sachs analysts Joseph Briggs and Sarah Dong cited Department of Labour job numbers to claim that AI could automate 25% of all work hours. The analysts estimated, “We expect that the AI transition will lead to a meaningful amount of labour displacement.”However, the analysts say AI won’t eliminate jobs evenly across all industries. “Our baseline forecast for a 15% AI-driven labour productivity uplift and the historical relationship between technologically driven productivity gains and job loss implies that 6-7% of jobs will be displaced over the adoption period,” they noted.“We estimate a peak gross unemployment rate increase of around 0.6pp (corresponding to a 1 million increase in unemployed workers,” the analysts wrote in their research paper.The research paper, titled “How Concerned Should We Be About a Job Apocalypse?” attempts to answer a question first raised by Nobel Prize-winning economist Wassily Leontief in 1983. He wondered whether technology could become so advanced that “humans could go the way of horses”, referring to how tractors replaced horses in farming and transportation in the early 1900s. Could computers make human thinking obsolete the same way engines made horsepower unnecessary? The Goldman Sachs analysts concluded that people should be concerned but not overly worried.

Why Goldman Sachs analysts think that people shouldn’t be highly concerned about AI replacing jobs

The analysts’ prediction sounds bad, but there is good news. Past periods of technological change have created many new jobs that no one could have imagined beforehand, the Goldman Sachs analysts mentioned.“Technological change is a main driver of long-run job growth via the creation of new occupations; only 40% of workers today are employed in occupations that existed 85 years ago, suggesting that AI will create new roles even as it renders others obsolete. More than 6 million workers are currently employed in computer-related occupations that did not exist 30-40 years ago, while another 8-9 million are employed in roles enabled by the gig economy, e-commerce, content creation, or video games,” the analysts wrote.Fundstrat head of research Tom Lee recently made a similar comparison on the Prof G Markets podcast with Scott Galloway and Ed Elson, comparing the current AI boom to the introduction of flash-frozen foods in the 1920s. Citing his company’s research, he said this reduced farm workers from 40% of the US workforce to 2%, but enough new jobs were created that the change was overall positive.“Let’s say there was a CNBC in 1920, and these economists were saying, ‘Frozen food, if it comes along and it’s going to wipe out 95% of all farmers, is going to wipe out the US economy.’ The US economy can’t survive frozen food … Instead, it freed up time, right? And it created, it allowed people to be repurposed, and it created a completely new labour force,” Lee notedIn 1983, Leontief originally wrote, “The role of humans as the most important factor of production is bound to diminish in the same way that the role of horses … was first diminished and then eliminated.” This was later shortened over time and is now widely credited to him as, “Humans could go the way of horses.”