The hypothesis that advancement in Artificial intelligence can enhance the quality of labour and consequently its contribution to multifactor productivity and economic growth has continued to attract attention in recent times. However, not much empirical evidence is available in the literature to support this hypothesis considering current economic realities. This study investigates the impact of AI-driven labor on economic growth in Switzerland. Data from 1960-2022 is used to analyze the relationship between labor and growth. Dynamic ARDL simulation is employed for policy simulation and prediction. The findings suggest that the short-term implementation of OpenAI may cause economic shocks, but a strategic approach can lead to long-term benefits. The study emphasizes the importance of investing in human capital through education and training programs. It also recommends a proactive and balanced approach to harness the potential benefits of AI while addressing its challenges.
Top1. Introduction
The advent of technology has spurred a paradigm shift in how things are done globally. It has affected every facet of human life. A major aspect of technology that has made much impact is Artificial Intelligence (AI). The AI system has been defined by the OECD (2019) as
“…a machine-based system that is capable of influencing the environment by producing an output (predictions, recommendations, or decisions) for a given set of objectives. It uses machine and/or human-based data and inputs to (i) perceive real and/or virtual environments; (ii) abstract these perceptions into models through analysis in an automated manner (e.g., with machine learning), or manually; and (iii) use model inference to formulate options for outcomes. AI systems are designed to operate with varying levels of autonomy”.
Essentially, AI is structured to perform tasks which only humans could perform such as problem solving and reasoning. AI has been found to have the potential to assist humans, both in completing their cognitive tasks as well as automating tasks which have been identified as difficult to do for humans.
The introduction of Artificial Intelligence has been greeted with much enthusiasm on the possible positive and negative effects that the introduction holds for the future of work and how this will affect growth in the overall analysis. It is trite to say that it is agreed that the advancements in AI have proven to be superior to human cognitive capacities (Somer, 2018). They have proven to excel in the performance of tasks at the human level in areas including, but not limited to, speech recognition, visual image recognition, fault detection in humans and even automobiles, translation, product packaging, driving, and bodyguarding. For example, Somer (2018) referred to a situation in 2016 when a Google program defeated the world’s best Go master and another in 2017 when AlphaZero, an AI-powered program, defeated the world’s best chess engine. Also, the Google fleet of self-driving cars, the Waymo One, is said to have collectively logged over 3 million autonomous miles on the road. These examples point to the change that AI portends for labour productivity as well as the economy.
It is however unclear what the role of AI will be in the labour-growth nexus. The arguments have varied in this regard. Brynjolfsson et al. (2019) noted that AI will play a positive role in the labour-growth nexus by enhancing productivity and inadvertently leading to economic growth. AI, the authors opine, will achieve this through the removal of the bottlenecks that come with human handling of tasks. Becker (2015) and Bloom et al. (2019) reviewed the role AI can play in the enhancement of productivity and the promotion of economic growth from the viewpoint of intellectual property rights, pointing out that investments in AI can be deployed in the building of intangible capital asset that is an ingredient for growth. The two studies proved that these returns from the intellectual property rights on AI have the potential to significantly contribute to intangible capital accumulation and put the economy on the pathway to boom. A report by Goldman Sachs noted that AI “could drive a 7% (or almost $7 trillion) increase in global GDP and lift productivity growth by 1.5 percentage points over 10 years” (Goldman Sachs, 2023). Gries and Naudié, (2018) and Gordon (2018) do not however share in this optimism that AI will enhance productivity and engender significant growth. Where there is skills obsolescence of labour, technological progress, or AI, will only have a negative impact on economic growth (de Grip and van Loo 2002). On their own, Brynjolfsson and Petropoulos (2022) that using the quantum to which economic growth is engendered as a framework to measure the contribution of AI to productivity is not suitable enough, particularly when all that is considered are goods and services offered at positive prices. Mert (2015) holds a middle ground in this argument. The study argued that technological advancement generally has the potential to positively and negatively affect labour productivity, and inadvertently economic growth.