FREE NEWSLETTER

GET EXCLUSIVE CONTENT

Free Newsletter Free Newsletter
reveal-banner-180px-x-150px-v1gif

AI will create more jobs than it displaces in the professional sector, says wide ranging PwC report

Added on the 17th Jul 2018 at 10:00 am
Share Button

In a wide-ranging report out today (17 July), PwC has published analysis that it says demonstrates that artificial intelligence and related technologies will create as many jobs as they displace in the UK over the next 20 years, with the ‘professional, scientific and technical’ sector forecast to be one of the biggest winners.

In absolute terms, PwC says around seven million existing jobs could be displaced, but around 7.2 million could be created, giving the UK a small net jobs boost of around 0.2 million.

In the professional sector, the net result of job creation versus displacement is estimated to be +16%, making it the second highest benefactor after health and social work. Information and communication will benefit from an 8% net rise in jobs, while education is forecast to see a 6% net increase. However, one of the biggest losers, PwC says, will be the financial and insurance industries, where the net job loss is estimated to be -7%.

Manufacturing (-25%), transport and storage (-22%) and public administration (-18%) are estimated to see the largest net long-term decrease in jobs due to AI according to the analysis by PwC, which estimates the number of jobs could drop by nearly 700,000.

John Hawksworth, chief economist at PwC, said: “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. Our analysis suggests the same will be true of AI, robots and related technologies, but the distribution of jobs across sectors will shift considerably in the process.

“Healthcare is likely to see rising employment as it will be increasingly in demand as society becomes richer and the UK population ages. While some jobs may be displaced, many more are likely to be created as real incomes rise and patients still want the ‘human touch’ from doctors, nurses and other health and social care workers.

“On the other hand, as driverless vehicles roll out across the economy and factories and warehouses become increasingly automated, the manufacturing and transportation and storage sectors could see a reduction in employment levels.”

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

Industry sector % of existing jobs (in 2017) Number of jobs (000s)
Creation Displacement Net effect Creation Displacement Net effect
Health and social work 34% -12% 22% 1,481 -526 955
Professional, scientific and technical 33% -18% 16% 1,025 -541 484
Information and communication 27% -18% 8% 388 -267 121
Education 12% -5% 6% 345 -158 187
Accommodation and food services 22% -16% 6% 518 -371 147
Administrative and support services 23% -24% -1% 698 -733 -35
Other sectors 13% -15% -2% 466 -533 -67
Wholesale and retail trade 26% -28% -3% 1,276 -1,403 -127
Construction 12% -15% -3% 279 -355 -75
Financial and insurance activities 18% -25% -7% 209 -286 -77
Public administration and defence 4% -23% -18% 64 -339 -274
Transportation and storage 17% -38% -22% 296 -683 -387
Manufacturing 5% -30% -25% 133 -814 -681
Total 20% -20% 0% 7,176 -7,008 169

Source: PwC analysis

Based on differences in industry structure alone, the net effect of AI on jobs may not vary that much across the UK. London has the most positive estimated impact (+2%), which benefits from being home to 28% of the UK’s professional, scientific and technical activities, as well as 31% of the UK’s information and communication sector.

In contrast, regions in the North and Midlands, with somewhat higher weightings towards relatively automatable industrial jobs, have marginally negative estimated net impacts, but only by around 1% or less of existing job numbers since even these regions are now dominated by service sector employment. However, there could be larger regional variations linked to factors other than industrial structure (e.g. relative skill levels across regions for jobs within a given industry sector), which are not reflected in this analysis for data availability reasons.

PwC’s report highlights that how individuals, businesses and the government engage with AI and new technologies will affect how many jobs are created and how much it contributes to the UK economy. Government, in particular, can play an important role in steering the economy towards a more optimistic scenario by mitigating the costs of the displacement effect while maximising the positive income effects from AI and related technologies. There is the opportunity to build new regional identities around new services as a result of these sectoral changes, which could also help enhance civic pride.

Euan Cameron, UK AI leader at PwC, commented: “AI offers a huge potential economic boost to the UK and it’s great to see the government recognise and support the development of the sector through the AI Sector Deal.

“People are understandably worried about the impact of AI on jobs, and businesses and the government need to address these concerns head on. Our research highlights where the biggest impacts will be and which areas are most vulnerable, so that businesses and government can plan how best to help people develop the skills that will prepare them for the future.

“As our analysis shows, there will be winners and losers. 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.

“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.”

Recommendations

To mitigate the displacement effect PwC’s recommendations are that:

– Government should invest more in ‘STEAM’ skills that will be most useful to people in this increasingly automated world. This means focusing more on STEM subjects (science, technology, engineering and mathematics), but also exploring how art and design (the ‘A’ in ‘STEAM’) can feature at the heart of innovation. Governments should also encourage workers to continually update and adapt their skills so as to complement what machines can do.

– Government should strengthen the safety net for those who find it hard to adjust to technological changes.

To make the most of the income effect PwC recommends:

– Central and local government bodies need to support sectors that can generate new jobs, for example through place-based strategies focused on university research centres, science parks and other enablers of business growth.

– Government should implement its AI strategy in full, which sets out a broad range of policies to support development of the AI sector, linked into the broader industrial strategy. This would go a long way to maximising the income effect of AI on jobs in the UK.

– Promoting effective competition: it is critical to maximising the income effect that the productivity gains from AI are passed through in large part to consumers through lower (quality-adjusted) prices. This requires competitive pressure to be maintained both in the technology sector producing the AI and in the sectors using it, so an effective competition policy will be important, balancing the need for a reasonable return to innovation with providing long term benefits to consumers.

This report builds on an earlier PwC study that estimated the proportion of UK jobs at potentially high risk of automation, as well as other research using PwC’s detailed macroeconometric model that estimated the potential boost to UK GDP from AI and related technologies. By combining estimates from these earlier research studies with new analysis, it presents for the first time a PwC estimate of the net long-run impact of AI and related technologies on UK employment, broken down by industry sector.

There are no comments yet, add one below.

Any Comment?