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Report spells out tech impact

AI will create net gain in jobs as work set for shake-up

Artficial Intelligence

AI will boost productivity


 

Artificial Intelligence is expected to create a net benefit of 15,000 jobs in Scotland by 2037, according to new research by PwC.

In its latest UK Economic Outlook (UKEO), the professional services firm predicts that the deployment of robotics, drones, driverless vehicles and other digital innovations aimed at ‘smart automation’, will lead to the creation of 558,000 jobs and the displacement of 544,000 jobs, as the employment market faces its biggest shake-up in a lifetime.

Artificial intelligence (AI) will create jobs as productivity and real incomes rise, and new and better products are developed.

PwC’s latest Economic Outlook , projects growth in Scotland of just over 1% in 2018, lagging behind UK growth of 1.3%. In 2019, growth in Scotland will pick up to 1.3% but remain behind overall UK growth in 2019 of 1.6%, the report says.

Modest growth will come as a result of the continuation of subdued real consumer spending growth and the drag on business investment from ongoing economic and political uncertainty relating to the Brexit negotiations.

The moderate outlook carries the assumption that the UK will avoid a “hard Brexit” where it leaves the European Union in March 2019 without any trade or transitional agreement and therefore reverts to World Trade Organisation rules.

The UKEO also expects the Bank of England’s Monetary Policy Committee to increase interest rates by a quarter of one percent this year, with one further increase in 2019.

David Brown, government and public sector leader for PwC in Scotland, said: “The overall economic growth rates in Scotland remains below the UK’s as the construction and services industries continue to post relatively weak performances, coupled with overall reductions in investment across businesses.”

Looking 10-20 years ahead, emerging technologies like robotics and artificial intelligence could hold the potential for faster productivity growth, with a positive net impact on employment.




PwC’s study explains that as AI capabilities allow firms to produce the same product at a lower cost, these savings will be passed on to consumers to keep companies competitive.

Households will therefore be able to buy more with their money as a result, leading to employment opportunities as firms respond to the extra demand.

As well as reducing prices, labour-saving technologies also improve the quality of existing products and enable new products to be brought to market, which also create a need for additional workers.

The net effect on this will be most positively felt in London, with 138,000 addition jobs created, or +2.3% of existing job numbers. This is followed by the South East, with 41,000 jobs or +0.8% of existing job numbers. Scotland is third in the list of 12 nations and regions, with 15,000 jobs or +0.5% of existing job numbers.

Across the UK the largest net increase in jobs in the long run include health (+22%), professional, scientific and technical services (+16%) and education (+6%), with manufacturing (-25%), transport and storage (-22%) and public administration (-18%) set to witness the largest net long-term decrease.




The analysis leads to the expectation that 46% of long-term UK output growth will come from AI, or around 0.9% of UK GDP growth per year, on average.

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.

It says 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, said:  “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:

  • Place-based industrial strategy should target job creation. 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.


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