AI to cause major realignment in UK labour market

23 July 2018 7 min. read
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A new study has estimated that Artificial Intelligence will actually lead to a small net increase in jobs in the UK in the next 20 years. However, according to the report, it will also see a seismic shift in the allocation of UK labour, particularly with an almost 700,000 strong reduction in the manufacturing sector’s headcount – the negative effects of which will require interventions from governments and businesses, in order to mitigate.

The continued march of innovative new Artificial Intelligence (AI) technologies have brought with them the potential for improved efficiency of resources, heightened productivity in manufacturing, and even the potential for low-cost medical care in the developing world. However, not all the effects of the new AI revolution are thought of in positive light. One of the most consistent debates on the issue, is the extent to which automation, machine learning and AI may lead to job losses.

Predictions on this front vary drastically, from McKinsey & Company’s assertion that less than 5% of jobs could in fact be completely replaced by technology – instead suggesting that over 60% of all work activities could be augmented with automation by 2055 – to the borderline dystopian vision of careers site Joblift, which estimated that Artificial Intelligence may only replace 19% of the jobs it ‘takes’. With high levels of employment having become essential to preserving the UK’s thin-spread economic growth in the absence of wage growth, such a drastic reduction in active labour would be disastrous for the UK economy, particularly post-Brexit.

Total estimated job displacement and creation from AI 2017-37 (000s)

According to the latest research from Big Four firm PwC, however, these particular fears are unfounded, at least for the next 20 years. Indeed, figures published in the professional services giant’s most recent ‘UK Economic Forecast’ anticipate that while AI and related technologies such as robotics, drones and driverless vehicles could indeed displace many humans from jobs, it will actually create a small surplus of additional jobs, as productivity and real incomes rise, and new and better products are developed thanks to new standards of efficiency brought in by AI.

In the report, PwC’s researchers estimate that the countervailing displacement and income effects on employment are, “likely to broadly balance each other out over the next 20 years in the UK, with the share of existing jobs displaced by AI (c.20%) likely to be approximately equal to the additional jobs that are created.” In other words, they anticipate that while around 7 million jobs may be displaced, an additional 169,000 more will be created by the introduction of AI into the UK economy. As the nation’s population rapidly ages, while Brexit threatens to reduce the levels of talent arriving from the EU, the UK could feasibly face a talent shortage of almost 3 million unfilled jobs by 2030, rather than mass unemployment, according to a study by Korn Ferry.

In-keeping with this, John Hawksworth, Chief Economist at PwC, said of the study’s findings, “Major new technologies, from steam engines to computers, displace some existing jobs but also generate large productivity gains. This reduces prices and increases real income and spending levels, which in turn creates demand for additional workers.”

Estimated % of UK jobs displaced/created per sector between 2017/2033

The predictions of a slim net increase in jobs might offset some of the doomsday rhetoric surrounding the subject of AI, although the news does not come without challenges of its own. Broadly speaking, PwC’s estimates point toward a major realignment of the UK workforce. While the overall level of employment will be broadly stable until 2033, PwC suggests there will be “winners” and “losers” according to industry sectors.

Health and social work will see the largest boost to work, with a 22% net addition in jobs thanks to AI, while professional, scientific and technical services (16%) information and communication (8%), education and accommodation and food services (both 6%) will see the largest net increase in jobs in the long run. On the other hand, manufacturing is set to see a quarter of its jobs disappear, with a 25% decline in jobs in the sector. This is almost matched by transport and storage, which will likely see a 22% reduction of its roles, and public administration, which will shrink by 18%.

Manufacturing nosedive

The UK has seen the number of manufacturing jobs fall by 17% over the past decade, with around 620,000 jobs lost, according to estimates based on data from the Office of National Statistics. The nosedive is likely to continue, according to PwC’s analysis, as employment in the manufacturing sector looks set to haemorrhage nearly 700,000 jobs by 2033. Typically workers who lose their jobs in these traditional segments of employment are often lacking in skills in other areas – particularly those aged over 55 – and have often been neglected by governments and businesses in terms of their education to reposition them in new employment, in new sectors.

Estimated job displacement and creation from AI by industry sector 2017-37 (000s)

In order to mitigate the displacement effect on this large portion of the workforce, as well as to help members of the UK’s labour pool who have already found themselves out of work, PwC issued a number of recommendations to accompany its report. Most importantly, the firm suggests that the UK Government should invest more in ‘STEAM’ skills that will be most useful to people in this increasingly automated world. While this does mean pushing for schools to focus more on STEM subjects (science, technology, engineering and mathematics), it also means Britain should explore how art and design – the ‘A’ in ‘STEAM’ – can feature at the heart of innovation. It is not solely about educating new labour, though, and PwC also states that governments have a responsibility to encourage workers to continually update and adapt their skills so as to complement what new machines and AI can do. Meanwhile, the UK Government should strengthen the state’s safety net for those who find it hard to adjust to technological changes.

Euan Cameron, UK AI leader at PwC, commented, “It’s likely that the fourth industrial revolution will favour those with strong digital skills, as well as capabilities like creativity and teamwork which machines find it harder to replicate.”

Drawing on the lessons of the past, Cameron concluded, “Historically, rapid technology change has often been associated with increases in wealth and income inequality, so it’s vital that government and business works together to make sure everyone benefits from the positive benefits that AI can bring. These include increased productivity and consumer choice, as well as improved outcomes in those areas that matter most to people such as education to healthcare.”