Skip to main content

AI and the Future of the Labor Market: The Advent of a New Paradigm?

  • 87 Accesses

Part of the Evolutionary Economics and Social Complexity Science book series (EESCS,volume 28)

Abstract

Information and communication technology (ICT) is changing society as we know it, and artificial intelligence (AI) will replace almost half of the current jobs in the near future. The ICT-based economy has several novel aspects that the industrial economy did not possess: network externalities, monopolies of platforms, provision of zero price services, and ambiguous roles between consumers and producers; ICT’s matching ability will cultivate markets in a deeper and more thorough manner than before. While the demand for high-skill labor related to technological progress increases, the skills gap remains wide. How will individuals who are under permanent threat of unemployment or are excluded from the market by AI respond to this situation? In this chapter, I propose a simple thought experiment to consider the impact of AI on the labor market. In this experiment, I examine the following aspects: the social implementation of AI, responses of workers to survive, social cost of unemployment, possibility of disruption, and the advent of a new society accompanied by changes in values. These analyses will help determine how institutional design and economic policy can be harnessed to address the social dilemma arising from technological innovations that raise labor productivity.

Keywords

  • Knowledge-based economy
  • Artificial intelligence (AI)
  • Technological unemployment
  • Skill gap
  • Network externality
  • Winner-takes-all
  • Prosumers
  • Thorough marketization
  • Semi-market economy
  • Gig economy
  • Reputation
  • Intuition

This is a preview of subscription content, access via your institution.

Buying options

Chapter
USD   29.95
Price excludes VAT (USA)
  • DOI: 10.1007/978-981-19-0937-5_5
  • Chapter length: 20 pages
  • Instant PDF download
  • Readable on all devices
  • Own it forever
  • Exclusive offer for individuals only
  • Tax calculation will be finalised during checkout
eBook
USD   129.00
Price excludes VAT (USA)
  • ISBN: 978-981-19-0937-5
  • Instant PDF download
  • Readable on all devices
  • Own it forever
  • Exclusive offer for individuals only
  • Tax calculation will be finalised during checkout
Hardcover Book
USD   169.99
Price excludes VAT (USA)
Fig. 5.1
Fig. 5.2
Fig. 5.3

Notes

  1. 1.

    Strange (1986) named the international financial market, which had become so violent that the state institutions lost control of capital, as casino capitalism.

  2. 2.

    World Economic Forum (2020) reports a prospect of job creation and replacement by machines in 5 years. It predicts that by 2025, the proportion of humans in labor will decrease from 67% in 2020 to 53%, and 85 million jobs may be replaced by a shift in the division of labor between humans and machines or algorithms, while 97 million new jobs, such as data analysts, big data specialists, digital marketing and strategy specialists, digital transformation specialists, and so on, are expected to emerge. Nevertheless, the increasing ratio of the latter will slow down, and the skill gaps will continue to be wide. Employers will retrain 50% of their employees replaced by AI to relocate them in the companies, even though it is not certain that the investment will pay off. This seems to be typical of employees who are able to remain employed in the short term. Government retraining supports those who are unemployed in 26 advanced and emerging countries.

  3. 3.

    It should be noted that market and social conditions are influenced by policies, social institutions, and AI program concepts, so there is also more diversity than discussed here.

  4. 4.

    Ishiguro (2021) and Hirano (2021) referred to AI robots in their recent works. The main character in Hirano’s Real Intention works as a real avatar. Real avatars are a new type of occupation where a human agency visits places with AR headsets to deal with the requirements on behalf of the wealthy who cannot or do not want to execute the job by themselves due to aging, living abroad, or other reasons. The labor cost is so low that workers are used to support AI, not be replaced by AI. The cases discussed here are vividly portrayed and described by these novelists.

  5. 5.

    The original edition of this chapter was published in Japanese as (Furukawa 2020).

References

  • Anderson C (2006) The long tail: why the future of business in selling less of more. Hyperion Publishing, New York

    Google Scholar 

  • Brynjolfsson E, McAfee A (2011) Race against the machine: how digital revolution is accelerating innovation, driving productivity, and irreversibly transforming employment and economy. Lightning Source, La Vergne

    Google Scholar 

  • David B (2017) Computer technology and probable job destruction in Japan: an evaluation. J Jpn Int Econ 43:77–87

    CrossRef  Google Scholar 

  • Ford M (2009) The lights in the tunnel: automation, accelerating technology and the economy of the future. Create Space Independent Publishing, Scotts Valley

    Google Scholar 

  • Frey CB, Osborne MA (2014) Agiletown: the relentless march of technology and London’s response. Deloitte. https://www2.deloitte.com/uk/en/pages/growth/articles/agiletown-the-relentless-march-of-technology-and-londons-response.html. Accessed 1 March 2016

  • Frey CB, Osborne MA (2017) The future of employment: how susceptible are jobs to computerisation? Technol Forecast Soc Chang 114:254–280

    CrossRef  Google Scholar 

  • Furukawa J (2010) The mechanism of crowdsourcing: voluntary public goods supply in the knowledge economy. Seishin Stud 115:63–101

    Google Scholar 

  • Furukawa J (2014) Economic analysis of free provision of information goods with network externality: why is open-source software provided for free? Seishin Stud 122:3–26

    Google Scholar 

  • Furukawa J (2020) Technology: the impact of the knowledge economy. In: Osamu S, Junko F (eds) Market society at the crossroads: social change and the interplay between people, markets and the state. Bunshindo, Tokyo, pp 61–92

    Google Scholar 

  • Hirano K (2021) Real intention. Bungeishunjyu, Tokyo

    Google Scholar 

  • Ishiguro K (2021) Klara and the sun. Faber & Faber, London

    Google Scholar 

  • Keynes M (1930) Economic possibilities for our grandchildren. In: Essays in persuasion, 1963. W. W. Norton, New York, pp 358–373

    Google Scholar 

  • Klein G (2013) Seeing what others don’t: the remarkable ways we gain insights. Public Affairs, New York

    Google Scholar 

  • Kurzweil R (2005) The singularity is near: when humans transcend biology. Viking Adult, New York

    Google Scholar 

  • Mortensen D, Pissarides C (2016) Job matching, wage dispersion, and unemployment. Oxford University Press, Oxford

    Google Scholar 

  • NRI (2017) Computerization and the future of job in Japan. https://www.nri.com/-/media/Corporate/jp/Files/PDF/journal/2017/05/01J.pdf?la=ja-JP&hash=6B537BB1EB48465D0AF4A3EA1B1138809F916683. Accessed 12 June 2017

  • Polanyi M (1966) The tacit dimension. Routledge, London

    Google Scholar 

  • Reich R (2001) The future of success. Knopf, New York

    Google Scholar 

  • Rohlfs J (1974) A theory of interdependent demand for a communications service. Bell J Econ Manage Sci 5(1):16–37

    CrossRef  Google Scholar 

  • Saito O (2014) Historical origins of the male breadwinner household model: Britain, Sweden and Japan. Jpn Labor Rev 11(4):5–20

    Google Scholar 

  • Searle JR (1980) Minds, brains, and programs. Behav Brain Sci 3(3):417–424

    CrossRef  Google Scholar 

  • Simon HA (1990) Reason in human affairs. Stanford University Press, Palo Alto

    CrossRef  Google Scholar 

  • Strange S (1986) Casino capitalism. Basil Blackwell, Oxford

    Google Scholar 

  • World Economic Forum (2020) The future of jobs report. https://www.weforum.org/reports/the-future-of-jobs-report-2020/in-full. Accessed 10 June 2021

Download references

Author information

Authors and Affiliations

Authors

Corresponding author

Correspondence to Junko Furukawa .

Editor information

Editors and Affiliations

Rights and permissions

Reprints and Permissions

Copyright information

© 2022 The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd.

About this chapter

Verify currency and authenticity via CrossMark

Cite this chapter

Furukawa, J. (2022). AI and the Future of the Labor Market: The Advent of a New Paradigm?. In: Aruka, Y. (eds) Digital Designs for Money, Markets, and Social Dilemmas. Evolutionary Economics and Social Complexity Science, vol 28. Springer, Singapore. https://doi.org/10.1007/978-981-19-0937-5_5

Download citation