[Real Beat] Does Salary Increase with Productivity Boosted by AI? [Office Shift] (35)

Impact of New Technology Adoption in the Workplace on Wages
"Where Does AI-Generated Profit Go?" Three Key Questions

Editor's Note[Jjinbit] is a shortened form of 'Jung Hyunjin's Business Trend' and 'Real Business Trend,' a segment that showcases trends in changes in work. The segment within Jjinbit called 'Office Shift' carefully examines the changes in offices triggered by the COVID-19 pandemic and aims to lay the foundation for exploring answers to work styles through experiments we have experienced together. It will be delivered to you every Saturday or Sunday. After 40 installments, it will also be available as a book.

There is no office worker who does not value their paycheck. Although financial income has become more important compared to the past due to the stock market boom, earned income from hard work remains a crucial 'lifeline' for office workers. This lifeline is determined by a complex combination of factors including working hours, work productivity, and workload. Each of these factors is therefore a major concern for office workers.

Even in the era of artificial intelligence (AI), the value of a paycheck and the factors influencing it do not change. However, the dynamics of the factors affecting paychecks do change. When new technologies like AI increase work productivity, the amount of work that can be handled within the same working hours increases. If AI replaces some routine tasks, humans are more likely to engage in high value-added creative work.

Does increased work productivity lead to higher paychecks? Will companies share the profits generated with their employees? As expectations rise that AI will create enormous economic value, the focus will likely shift to how profits will be distributed. With the generative AI craze sparked by ChatGPT extending into workplaces, we have examined three questions related to our paychecks.

① Do employees who use AI get paid more?

"So-called 'early adopter' employees who quickly integrate AI into their work are benefiting."

CNBC reported this in June, citing its own survey of about 9,000 U.S. office workers. When asked whether their wage increases outpaced inflation, 33% of employees who used AI at work said yes, while only 10% of those who did not use AI at all said so. Considering the overall average of 12% among all respondents regardless of AI use, it suggests that employees using AI felt a greater effect of wage increases.

However, the survey does not provide evidence that employees using AI actually received higher pay. CNBC only asked workers about their perceptions and did not compare actual wage increase rates with inflation rates.

It was analyzed that satisfaction with work and workplace increased as AI was used in work, leading to a more positive evaluation of pay. Among employees who believed AI was necessary at work, 38% felt they were well paid, surpassing the 24% of those who did not use AI at work. Additionally, employees using AI reported higher job satisfaction and perceived more opportunities for career development compared to those who did not.

Working with AI assistance made tasks easier and reduced burdens, increasing workplace satisfaction and leading employees to feel that their wage increases outpaced inflation.

Although employees seem to feel the effect of wage increases now, long-term predictions are difficult as various factors determining paychecks may change. Alberto Rossi, a professor at Georgetown University's business school, recently told a media outlet, "Companies are unlikely to reduce work," noting that while employees hope for higher rewards with increased productivity, it is unclear how companies will evaluate the costs of using AI.

Earlier, MIT professor Daron Acemoglu and Boston University professor Pascual Restrepo pointed out in a 2019 paper that automation driven by technological advances like AI will reduce labor demand and warned, "Do not expect productivity gains to translate into wage increases." However, they added that although demand for existing jobs may decline, new jobs will emerge, and "the future of work depends on how new technologies are integrated and how these changes transform job content."

② If AI generates profits, do employers and shareholders benefit?

Given the situation, there is a forecast that profits generated by AI will go to companies. Companies expect AI to automate various tasks, aiming to reduce costs and increase profitability.

Harry Holzer, a nonresident fellow at the Brookings Institution and professor at Georgetown University, analyzed in January last year that when automation based on AI and robots occurs in workplaces, business owners usually reap the rewards. Broadly speaking, workers not replaced by machines may see wage increases, but those replaced face harsher conditions, so individual situations vary. Overall, it is expected that business owners who can reduce labor costs through AI adoption will benefit more than workers.

There is also speculation that shareholders will benefit from AI automation profits.

The U.S. White House and the European Union (EU) predicted in an AI impact report on the future workforce released less than a month after ChatGPT's launch in December last year that shareholders will profit from AI. The report cited data from Professor Alex Wood of the University of Birmingham, stating that in some European countries, productivity gains from AI adoption in warehouses increasingly flow to shareholders as dividends or stock options. It also noted that workers' bargaining power over wages may decline due to data-driven algorithmic management.

The report predicted, "It is unclear whether most warehouses will become fully automated 'dark warehouses' without human staff in the future, but current technologies being applied in warehouses are likely to shift toward automation rather than expanding human labor."

③ Is the job threat from automation only a story for low-wage workers?

Historically, new technologies have mainly impacted low-wage workers. Technologies replacing relatively simple tasks were developed first, often substituting workers in roles like serving or machine operation.

However, the outlook regarding AI's application to work shows a different pattern. Unlike previous automation waves, the generative AI revolution is expected to significantly impact not only low-wage but also high-wage jobs. With generative AI like ChatGPT possessing advanced language capabilities, it has become increasingly possible to automate tasks previously performed by workers with college degrees or higher.

McKinsey Global Institute forecasted in a report last month that AI adoption could threaten jobs of low-wage workers, such as office assistants, food servers, and customer service representatives. It predicted that low-wage workers may seek higher-paying jobs. Workers earning less than $38,200 annually are up to 14 times more likely to change jobs than the highest earners.

At the same time, McKinsey predicted in another earlier report that high-wage workers will also be affected by automation. It estimated that generative AI could replace 57% of tasks performed by workers with master's or doctoral degrees and 60% of tasks performed by workers with bachelor's degrees. Previously, McKinsey had estimated AI could replace only 28% (master's/doctoral) and 36% (bachelor's) of their tasks, but the generative AI boom this year accelerated technological progress, making it possible to replace more than half of their tasks.

The same report noted that the automation rate for workers with a high school diploma was 64%, higher than for those with bachelor's degrees or higher, but the increase from the previous 51% was smaller, narrowing the gap in automation rates between these groups.

What will our jobs created by AI look like? There are many questions, but finding precise answers at this point is difficult. Various perspectives and forecasts abound regarding AI's introduction into work environments. Once AI is fully integrated into workplaces, the resulting changes are expected to be enormous. In this unpredictable situation, both companies and employees will likely need to enhance adaptability as the best strategy.