Digital Labor Economics: Part 2

This article will have some of my opinions blended in so please understand this is just my perspective but I would love to hear what you think and any different views you might have. In the last article we introduced the concept of “digital labor” which is where you leverage automation combined with Gen AI to help get work done. Digital labor works hand and hand with human labor to help them be more productive and get more done. Shifting the supply curve of labor to the right to find a new equilibrium with the labor demand curve.

"What would a 2-3% GDP growth increase from GEN AI mean to society?"

Gross Domestic Product (GDP) Defined: According to Investopedia, GDP measures the monetary value of goods and services produced within a country's borders in a given time period, usually a quarter or a year. Changes in output over time as measured by the GDP are the most comprehensive gauge of an economy's health.

In 2022, the US GDP was 25.46 trillion so a 3% increase would be roughly $764 billion. For perspective, our 2022 budget for department of education was $76.4 billion, one tenth of the increase aligned to Gen AI. IBM CEO recently talked about this at the B20 summit.

"With AI, I'm most excited about... how we can get 2-4% productivity, which can then turn to free cash flows and then turn to grow companies or economies of nations.We haven't seen anything like that since the semiconductors got invented"-Arvind Krishna, IBM Chairman & CEO

This week, I was in a Future of AI Panel at the 37th annual NAMIC Conference in NYC and a very thoughtful question came up.

“Will Gen AI exacerbate the equality gap between the rich and poor or will it provide opportunities to help close the gap?”

Unfortunately we didn’t have time for me to get my $0.02 in during the panel, but it left me pondering this insightful question.

I got to thinking about an idea I learned about in one of my economics courses at the University of Texas. Quality of life for what we consider the poverty level in United States is much better now than it has ever been in the past. People living in poverty might have running water, a cell phone, electricity, access to any information on the internet, access to lots of free learning materials on sites like YouTube.

This got me thinking, is the real question about the size of the gap or how Gen AI improving GDP will allow for better standard of living for everyone. In a capitalist society, you incentivize your entrepreneurs to drive innovation through various subsidies like tax cuts. The idea is they will seek profits and will create jobs and other benefits for society in the mission of maximizing profit. If Gen AI delivers the 2-3% productivity increases we are discussing, then we might very well see a larger gap between the top 1% and the poor, but if this productivity increase drives a better quality of life for the poor, is that more important than making things more equal? Is it more about providing equal opportunity or ensuring everyone has equal resources?

If equal opportunity is the goal, I believe Gen AI can be a great equalizer for those who are willing to learn. I recently read a statistic that over 30% of college kids used ChatGPT within the last year. Yet many executives I meet have never actually used Gen AI. Anyone who takes the time to dive in and learn will be far ahead of those sitting around waiting to see what happens. Roughly 92% of people now have a smart phone so if that is the main barrier to entry, then I believe we are in a good place.

I believe the key is providing free education on Gen AI to diverse communities. It is important that language models learn from diverse languages and cultures to make sure everyone is fairly represented. IBM is devoted to upskilling 30 million people around the world in our Gen AI solutions so we can truly democratize this powerful technology.

Please share your point of view whether you agree or disagree.

Malcolm Adams Dr. Maxine Cain Dr. Jacque Rushin, MBA, MSc, M.Div Charles Neal PMP, CSM Marge Jackson Orlando Hampton