Global Economic Transformation · By the end of the 19th century, weavers earned 2x more, than in...

The Advent of AI and the Redefinition of Work

Martin Fleming, Chief Economist and Chief Analytics OfficerIBM Corp.

Global Economic Transformation

2 © 2019 IBM Corporation

Global Transformation Epochs


Technological Innovation Over the Long Run

Source: Bryan Kelly, Dimitris Papanikolaouz, Amit Serux, and Matt Taddy; Measuring Technological Innovation over the Long Run; November 2018. Link

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3286887


Global 19th Century Transformation By the end of the 19th century, weavers earned 2x

more, than in 1830

Over the century, 98% reduction in the labor requirements in weaving a yard of cloth

Francis Cabot Lowell and Paul Moody created the first integrated textile mill

Smarter workers mastered complex weaving quickly

A labor market for skilled weavers developed after the Civil War

Source: James Bessen, “Will Robots Steal Our Jobs? The Humble Loom Suggests Not,” January 25, 2014, Washington Post


Global Transformation

China’s Re-Entry Aging Population Political Realignment

Central Banks and Lagging Productivity and Inflation

Lagging Growth and Income Inequality

Radical Redesign of Global Supply Chains

© 2019 IBM Corporation9

Productivity Revival


Nonfinancial Corporate Sector Leading Productivity Revival


In the 1980s and 1990s, the Retail Trade sector drove rising productivity growth

How businesses respond to their unique productivity opportunities are an important driver of realized gains

Slow adjustment can reduce the pace of job reallocation and productivity growth

In the post-2000 period, rising within-industry productivity dispersion drives productivity improvement

Productivity Leaders Become More Responsive

1.5

1.7

1.9

2.1

2.3

2.5

2.7

Young Mature Young Mature

Labor Productivity GainsIndustry Dispersion

1996 - 2012

1996 1996-2012

Technology Non-Technology

Source: Ryan A. Decker, John Haltiwanger, Ron S. Jarmin, and Javier Miranda; Changing Business Dynamism and Productivity: Shocks vs. Responsiveness; Unpublished Manuscript, June 2017, Link.

http://econweb.umd.edu/%7Ehaltiwan/Shocks_06_30_17.pdf


Reinventors oFinancial outperformanceoWell alignedoManage change oRedirect resources for scaleoPay attention to people skillsoEncourage experimentation for new ideasoCo-creation and collaboration with

customers and partnersoLeverage data for world-class customer

experiencesAspirationals

Practioners

Reinventors

Incumbents Strike Back

27%

37%

36%

Source: IBM Institute for Business Value; Incumbents Strike Back, Insights from the Global C-Suite Study; (IBM Corporation, Armonk, NY, February 2018)


Dancing with Disruption– Current competitive environment, opportunities emerging, and

balance between stability and dynamism favors the Reinventors

Trust in the Journey– Reinventors as design thinkers are testing assumptions and re-

orienting their organizations to engage their customers and create bonds based on trust

Orchestrating the Future– Pull of platform business models. Step change in capability

that occurs as organizations scale their partner networks in new ways. Reconsider value propositions and allocation of resources to own or participate in platforms

Innovation in Motion– Leaders are liberating employees to experiment and

innovate, get up close to customers and thrive in an ever-evolving ecosystem of dynamic teams and partnerships

Perpetual Reinvention

Source: IBM Institute for Business Value; Incumbents Strike Back, Insights from the Global C-Suite Study; (IBM Corporation, Armonk, NY, February 2018)


The Future of Work


The Future of Work

Source: Erik Brynjolfsson, Tom Mitchell, and Daniel Rock; “What Can Machines Learn, and What Does It Mean for Occupations and the Economy?”; Paper presented at the American Economic Association Annual Meetings, Philadelphia, January 2018.


Technology-Task Mismatch Hypothesis

Occupations are made up of tasks ( )

Manufacturing Sector

Displacement Effect Productivity Effect

𝑥𝑥

0 I NNI

Source: Daron Acemoglu and Pascual Restrepo; “Artificial Intelligence, Automation and Work”; December 26, 2017

Displacement Effect


Occupation-Task Matrix Produces Stylized Facts

Terciles of occupational employment, ordered by BLS wage in 2010

Terciles of tasks performed by workers, ordered by the Indexed task wage in 2010

Task Employment SharePercentage Point Changes, 2010-2017


Task Demand and Compensation Growth

Wage Changes 2010 – 2017

2010$


Occupation-Task Structure Little Changed Over the Decade

46.0%

46.2%

46.4%

46.6%

46.8%

47.0%

2010 2017

High Wage

27.2%

28.0%

28.8%

29.6%

30.4%

31.2%

2010 2017

Mid Wage

21.6%

22.4%

23.2%

24.0%

24.8%

25.6%

2010 2017

Low Wage

+0.4 ppt-2.2 ppt+1.7 ppt

Task Changes by Occupation Wage Tercile


Tasks SML Face Falling Demand Since 2010There is a weak, but statistically significant, negative relationship between changes in Burning Glass tasks and higher SML scores

Global Economic Transformation · By the end of the 19th century, weavers earned 2x more, than in...

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