AI and Jobs: The Role of Demand

Abstract

In manufacturing, technology has sharply reduced jobs in recent decades. But before that, for over a century, employment grew, even in industries experiencing rapid technological change. What changed? Demand was highly elastic at first and then became inelastic. The effect of artificial intelligence (AI) on jobs will similarly depend critically on the nature of demand. This paper presents a simple model of demand that accurately predicts the rise and fall of employment in the textile, steel, and automotive industries. This model provides a useful framework for exploring how AI is likely to affect jobs over the next 10 or 20 years.

Keywords: Artificial intelligence, automation, technical change, sectoral growth, labor demand, computer technology, deindustrialization

JEL Classification: J2, O3, N10