Rising Wages Could Indicate AI’s Potential Takeover of Jobs
In a surprising twist, experts suggest that an unexpected sign of AI’s impending takeover of jobs could be higher wages. This counterintuitive theory is based on historical data that shows how technological innovations have led to the obsolescence of entire job categories, resulting in higher pay for those who continue to hold onto their positions.
Economists from the National Bureau of Economic Research recently conducted a study that supports this theory. They found that when a particular job category is believed to be on the verge of extinction, employees start leaving the field in search of other professions. Consequently, fewer individuals enter the dying job category, creating a supply shortage for employers. To attract and retain workers, businesses are then forced to offer higher wages, referred to as obsolescence rent by the study authors.
Costas Cavounidis, the lead researcher and associate professor at the University of Warwick, advises employees not to jump to conclusions about the health of an occupation based solely on its wages. When a major technological shock is expected, rising pay doesn’t necessarily indicate that the job category is growing. Instead, it may reflect the dwindling number of workers in that field and the desperate attempts of employers to retain them.
The study also has significant implications for business leaders who should start preparing for labor shortages during the anticipatory dread stage of a job’s demise. This stage refers to the years leading up to a technological revolution that is expected to eradicate a particular job role. The strategic firm right now would be hoarding labor in occupations that they expect will not be able to hire people in the future, says Cavounidis, emphasizing the importance of foreseeing and addressing potential labor shortages.
To illustrate this phenomenon, Cavounidis and his team analyzed wage data for early 20th-century teamsters, who were responsible for driving teams of horses pulling cargo wagons. As motorized vehicles became more prevalent, younger workers began avoiding the profession, and existing teamsters sought safer alternatives such as truck driving. Older workers chose to remain in their roles, assuming they would retire before the demand for their services diminished. Consequently, the scarcity of available teamsters led to higher wages.
The researchers discovered similar patterns in other jobs that became redundant due to technological advancements. For instance, dressmaking was affected before the emergence of garment-making factories, with older workers holding onto their jobs as younger individuals sought alternative occupations.
In today’s context, truck drivers are concerned about the potential job loss resulting from the introduction of self-driving vehicles. Cavounidis suggests that the lack of interest among young people in becoming truck drivers might be due to their belief that the job will eventually disappear.
Cavounidis embarked on this study to explore how workers respond to concerns about the future of their jobs amidst the ongoing debate surrounding AI and job retraining. While it remains uncertain whether all the fears surrounding AI will materialize, their impact on workers is already apparent. Furthermore, if AI rapidly replaces jobs, there may not be any adjustment period or obsolescence rent.
Ultimately, the researchers hope that their work will help shape government policies aimed at protecting workers in an ever-changing job landscape. We can’t tell you who’s at risk, Cavounidis explains, but I hope we might shed some light on what you should do once you’ve detected this risk.
As technology continues to advance, it is essential for employees, business leaders, and policymakers to remain prepared and proactive in addressing the challenges brought about by automation. Only by staying informed and adaptable can individuals navigate the evolving job market successfully.
