The recent report by Citrini Research paints a frightening future of massive AI- induced unemployment, crashing stock markets, rising default rates, and a general descent into economic chaos.
But such a prediction has no historical or economic basis. Let us envision the following scenario. Assume that AI enables every worker to double his or her productivity, in other words, to be able to produce twice the output (automobiles, reports, deliveries, customer service, etc.) than they do currently.
In such a world, all the goods and services that are produced today in a 5-day work week could be produced in half the time. If workers and firms cut back their hours by 50% (in other words, move to a 2 ½-day workweek), the same total output of the economy would be produced that is produced today. In this scenario, the average real hourly wage would double, since the same quantity of goods and services are produced in half the time. This conclusion is supported by both theory and historical evidence that increases in productivity lead to increases in real wages: double productivity and real wages will double.
In this scenario, most workers would want to take advantage of their higher wages to expand their income and raise their lifestyle. If workers toil just one more day a week (from 2 ½ to 3 ½ days), their real income will increase by 40%. In our $30 trillion economy, this extra day of work would produce $12 trillion of extra goods, services, and income. Workers would use their expanded purchasing power to buy better housing, transportation, schools, improved government services, and increase their leisure and travel experiences enabled by the vast expansion of their free time (recall, weekends are now 3 ½, instead of 2 days).
Critics of AI focus on the white-collar workers whose specific task might be eliminated by AI. But most white-collar jobs rely on the worker’s general intelligence, diligence, and discipline. These skills can be readily transferred to the industries that will expand because of the surge of workers’ incomes.
What about the millions of drivers who will lose their jobs because of automated self-driving? They will find more than enough jobs in the exploding entertainment and leisure industry, spurred by the increase in leisure time.
The demand for healthcare will also soar since more workers can afford better treatments while technology will sharply reduce costs. CAT and PET scans will become as cheap as X-rays. Since AI hallucinations will never be eliminated, do you really think radiologists will disappear as patients demand a pair of human eyes to double-check an AI cancer diagnosis?
Before the industrial revolution, humankind had to work 12 hours a day, seven days a week to produce the goods for bare-bones survival: food and basic shelter. Today, in the modern world, survival can be achieved by working less than a day. In 1800, 80% of American workers toiled in the farming industry. Today that is less than 2% and the US exports food to the rest of the world.
Pessimists maintain that the speed of the AI Revolution makes these historical comparisons irrelevant (although I remember predictions that Amazon and the internet would eliminate all retail by the middle of the 2020s). But that assertion fails to take account of the great flexibility of workers to adapt to sudden changes. Shifts in production during wars and even the recent pandemic showed how economies can adapt to changes in circumstances far faster than those induced by AI. Workers with highly developed skills will find great demand from the new industries that will be enabled by artificial intelligence.
AI will not bring an economic apocalypse. AI will lead us to the greatest increase in the standard of living since the dawn of the Industrial Revolution. Although some professions will clearly be impacted, the dramatic increase in consumer income will more than offset the loss of jobs caused by the new technology. The AI future is not one to be feared, but one to be embraced.
Jeremy J. Siegel
Emeritus Professor of Finance, The Wharton School of the University of Pennsylvania
Senior Economist, WisdomTree
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