PwC has produced an optimistic outlook for UK employment on the back of AI, robotics, and automation. Chris Middleton welcomes the report, but warns that PwC appears to have ignored four serious problems.
Artificial Intelligence (AI) will create more jobs in the UK than it displaces by boosting economic growth, claims a new report from PwC.
The report finds that around seven million existing jobs could be displaced by the technology over the next 20 years, while around 7.2 million new ones could be created: a net gain of 200,000 jobs.
The research builds on an earlier PwC study that estimated the proportion of UK jobs at high risk of automation. By combining estimates from those earlier research studies with new analysis, PwC presents a detailed estimate of the net long-term impact of AI and related technologies on UK employment, broken down by industry sector.
Winners and losers
Although PwC estimates that the overall effect on UK jobs will be neutral, there will be net winners and losers by industry sector, says the new AI report.
For example, in the health and social care sector, PwC believes that one million new jobs could be created – a net increase of 22 percent – as the UK grapples with the challenges of looking after an ageing population.
Other winners will be professional, scientific, and technical services (a 16 percent net increase in employment), information and communications (eight percent), education (six percent), and accommodation and food services (six percent).
However, manufacturing will be worst hit, with a net loss of 700,000 jobs (25 percent of roles). Transport and storage (-22 percent) and government and defence (-18 percent) will also see long-term employment decreases, warns PwC.
Jobs in the UK’s critical financial services sector will also be hit by the technology, with a net loss of seven percent, according to PwC’s estimates, as will construction and retail (a loss of three percent).
The North/South divide
On the face of it, this would seem to suggest that those parts of the UK that are traditionally more reliant on industrial and manufacturing jobs, such as the Midlands and the North of England, would be worst hit by the large-scale introduction of AI and automation, while London and the South may benefit the most – deepening economic and regional disparity.
In 2017, think tank Future Advocacy produced a ‘political heat map’ of the UK, showing how AI and automation would affect each constituency within the country in terms of job losses. It found that the Midlands and the North would indeed be hardest hit.
But according to PwC, while the capital will experience the biggest positive employment impact (a net employment increase of two percent), the Midlands and the North will only lose out by around one percent of existing jobs, “since even these regions are now dominated by service sector employment”, says the report.
“However, there could be larger regional variations linked to factors other than industrial structure (eg relative skill levels across regions for jobs within a given industry sector), which are not reflected in this analysis for data availability reasons,” it adds.
The role of government
Euan Cameron, UK AI leader at PwC, said: “AI offers a huge potential economic boost to the UK and it’s great to see the government recognise and support the development of the sector through the AI Sector Deal.
“People are understandably worried about the impact of AI on jobs, and businesses and the government need to address these concerns head on.
“It’s likely that the fourth industrial revolution will favour those with strong digital skills, as well as capabilities like creativity and teamwork, which machines find harder to replicate.”
Government can play an important role in steering the economy towards a more optimistic outlook by mitigating the costs of the displacement effect, while maximising the positive income effects from AI and related technologies, explains the report.
To mitigate the displacement effect, PwCs recommends that:
- Government should invest more in the ‘STEAM’ (science, technology, engineering, arts/design, and maths) skills that will be most useful to people in an increasingly automated world.
- Government should also encourage workers to update and adapt their skills continuously – aka lifelong learning – so as to complement what machines can do, while strengthening the safety net for those who find it hard to adjust to technology change.
To make the most of the income effect, PwC recommends that:
- Central and local government should support sectors that can generate new jobs, for example through place-based strategies focused on university research centres, science parks, and other enablers of business growth.
- Government should implement its AI strategy in full, linked into its broader industrial strategy.
- Government should promote effective competition: it is critical to maximising the income effect that all productivity gains from AI are passed on to consumers in the form of lower prices.
Good recommendations and, on the face of it, an optimistic picture. But does PwC’s research stack up?
Internet of Business says
First, lumping together AI, automation, autonomous transport, and more, in this way muddies the waters and is unhelpful. While there are strong connections between all of these technologies, along with blockchain, the IoT, and so on, their separate impacts are diverse and complex.
More, the convenience of an almost exact correlation between employment gains and losses undermines the credibility of the report. Reality is messy and PwC’s predictions are untestable, without waiting for 20 years. Nonetheless, they form a useful snapshot of the skills and employment challenges facing the UK.
These issues aside, there are four significant problems with this report, which appears in the wake of other studies claiming that the economic growth triggered by AI, automation, robotics, autonomous transport, and other Industry 4.0 technologies, will create new demand and new jobs.
First, a credible new report says that the hype cycle surrounding AI is coming to an end, which will trigger a wave of consolidation, not to mention of disappointment as many organisations fail to experience the promised gains from their new technology.
The core reason for this isn’t that the technology doesn’t work, but that many organisations are implementing AI for the wrong reasons.
The think tank found that many organisations are implementing AI tactically to slash costs, rather than as a long-term strategic bet to improve the business, capitalise on new opportunities, and get closer to customers.
In this specific sense – the quest for easy cost-cuts – AI, robotics, and more, are simply ‘the new outsourcing’, and as with offshoring customer contact centres and other work, organisations may find that the reality is more complex than analysts promised them, and the savings not always guaranteed.
Second, what PwC sees as a new service-based economy in the Midlands and the North is at least partly rooted in low-value, low-skilled jobs, specifically in the booming call centre and customer chat market.
Those jobs are themselves at very high risk of automation, as companies such as Google move into the call centre business, in effect, with technologies such as Duplex. Customer contact roles already suffer from very high churn rates and, in many cases, long hours, poor working conditions, and few rights.
In 2012, the union Unison estimated that over three percent of all UK jobs were in call centres: roughly one million workers in 5,000 centres. In 2016, ContactBabel estimated that 734,000 workers were then employed in 6,200 contact centres. It stands to reason that many, if not most, of those jobs won’t exist in the medium term as AI-enabled solutions spread.
And third, while the report’s authors can’t be blamed, perhaps, for seemingly ignoring the ‘B’ word in their growth calculations, it’s unwise to take these findings at face value when the long-term effects of Brexit on the UK economy are apparently not factored in to PwC’s optimistic predictions.
While the real-world effects of leaving the EU are, currently, as unknown as the details of Brexit itself, there is a real and significant risk that it could wipe out any economic growth and productivity gains from the influx of new technologies. Internet of Business is not aware of any credible studies that forecast a booming economy in the wake of leaving the single market.
At present, UK productivity is flatlining and has been for years. On the upside, employment levels are high. However, the idea that automation and AI will so dramatically affect UK productivity that 7.2 million new jobs will be created seems unlikely, and it does PwC little credit for making that prediction.
Given that PwC’s estimates of employment neutrality are largely based on the economic growth resulting from AI and automation, it’s entirely possible that the post-Brexit economy may not be able to support the creation of enough new jobs to balance the technology equation, even if such a neat balance were plausible in the first place.
If we look at solely at the negative employment impacts of the technologies – minus the predicted gains from economic growth and booming demand – a very different picture emerges.
For example: a 38 percent loss in transport and storage roles, on the back of the new technologies; a 30 percent drop in manufacturing jobs; a 25 percent loss in financial services opportunities; and a 24 percent drop in administrative and support jobs. Those are PwC’s own figures.
Only one sector, education, will experience losses in less than double figures (five percent), says the report, in a wave of employment impacts that affects traditional middle class careers just as seriously as it does manufacturing roles, for example.
According to PwC, 20 percent of jobs overall will be lost to these new technologies. But unless the UK economy grows sufficiently to counterbalance those losses, the employment effects could be catastrophic. PwC suggests that the economy and/or demand will grow by that much, but it is hard to see how the company can make that prediction while apparently ignoring the risks from Brexit – whether ‘no deal’, ‘hard’, or ‘soft’.
Indeed, the government’s own management of the issue is damaging business confidence.
Which brings us to the fourth problem: lower prices for consumers. The idea that all of the advantages of these new technologies will be passed on to customers in the form of lower prices, especially in the wake of any damaging form of Brexit – which is likely to force prices up – are a pipe dream.
In summary, PwC is right to highlight that technologies such as AI – along with automation, robotics, and so on – are not a simple case of ‘machine in, humans out’, especially when tasks tend to be automated more than entire jobs. It is also right to praise the UK’s new AI initiatives, the new Sector Deals, and other policy initiatives that put these technologies front and centre of a revitalised industrial strategy.
Just as ecommerce, mobility, and the sharing economy have disrupted nearly all traditional businesses, so they have also created new companies, new opportunities, and new types of employment – which in the UK is currently at high levels. That will doubtless be the case with AI and robotics, too: new companies that provide AI and data analytics services, for example, or drones to service and maintain our critical infrastructure. New transport opportunities abound, along with new smart city initiatives.
But the promise of a bright new economic future for the UK on the back of these technologies can – according to PwC – only become reality if healthy economic growth and increased demand results. In the wake of Brexit, no such guarantee can be made. And it’s absurd to claim otherwise.
Plus: Brexit damaging UK digital transformation
In related news, Brexit is damaging the UK government’s own digital transformation programmes, according to a report on diginomica. HMRC’s annual report and accounts reveal that 139 programmes have been put on ice to date, thanks to the need to prepare internal systems for Brexit – a trend that will inevitably be reflected in other departments.
Mirroring tactical trends elsewhere in the economy, HMRC said that during its review it focused on “short-term benefits and making cost savings, rather than considering how to better deliver long-term transformational changes”.