UK needs to face up to the future when it comes to AI and jobs, says new report from the Tony Blair Institute

The Tony Blair Institute for Global Change (TBI) has today published an in-depth study of AI and the labour market.

‘The Impact of AI on the Labour Market' finds that AI could have a transformational impact – affecting the demand for workers, supply of workers, and people's day-to-day experience of the workplace.

AI could eventually save up to a quarter of the average worker's time. These time savings could boost productivity growth significantly with TBI estimates suggesting GDP could be 5-14 per cent higher by the middle of the century than a scenario without AI-enabled growth. 

Time savings are also likely to lead to some job losses through automation. One to three million jobs could eventually be displaced by AI,  though these displacements will not occur all at once, but instead will rise gradually with the pace of AI adoption across the wider economy. On an annual basis, TBI estimates job displacements could peak at between 60,000 and 275,000 jobs a year. The report sets this in the context of the average number of job losses seen over the past decade in the UK (450,000 per year) and the size of the overall labour force (33 million).

This labour substitution effect is only part of the story.  AI is also likely to create new demand for workers by boosting economic growth and speeding the development of new products and services that create entirely new jobs – which will likely limit AI's impact on unemployment. While there is a great deal of uncertainty over the figures, TBI's estimate is that the peak rise in unemployment will be in the low hundreds of thousands and not materialise until the late 2030s. 

Moreover, AI could also help workers attain more skills and live healthier lives. It could improve skills by increasing educational attainment by up to 6 percent and by providing tailored on-the-job training. And improve health by enabling early and predictive diagnoses, expanding health-system capacity and increasing labour-market access for people with different abilities.

To take advantage of the opportunities while managing the challenges, TBI is calling on government to upgrade the support available to workers to cope with the higher rate of churn and more dynamic pace of change that AI is likely to create.

TBI Executive Director for Policy Sam Sharps said:

“Much of the debate around AI's impact on the labour market has been focused narrowly on its potential to displace jobs. While some job losses are likely, they should be viewed against the potential of AI to also create new jobs, improve worker health and skills, and significantly raise economic growth. 

“One thing that is not in doubt, however, is that the UK will need to upgrade its labour-market infrastructure to cope with the higher rate of churn and more dynamic pace of change that AI is likely to create.

“This includes equipping workers with knowledge of the coming changes and the support facilities – including financial safety nets, retraining opportunities and job-matching services – to help maximise employment.

“The government now needs to face up to the future and make sure workers are ready for the impact of AI on the jobs market.”

Proposals in the TBI paper include every worker in the UK having access to a new Early Awareness and Opportunity System (EAOS), managed by the Department for Work and Pensions. 

The EAOS would provide a new public service for citizens to check how AI is likely to affect their job and offer tailored information on opportunities to use existing skills to retrain and progress in their current pathways or adopt another career pathway.

In addition, the Treasury should establish individual LIFESPAN funds – ‘Lifetime Income Flexibility and Employment Savings Programme for Adaptive Needs' – to provide workers with an income buffer for unemployment. These funds would be structured in a similar way to private pensions, with workers auto-enrolled and paying a fixed proportion of their pre-tax income into them – to benefit from tax efficient saving.  But unlike pensions, workers would be able to draw down their LIFESPAN funds prior to retirement in response to major life events (redundancy, parental leave, retraining) where they are temporarily out of the workforce.  This would provide them with a personal safety net to finance re-employment and help ensure the workforce is more resilient to changing working patterns.

Methodology

The full methodology for the report can be found in the technical annex.