Goldman Sachs warns AI job displacement creates lasting costs for workers facing pay cuts

AI-Driven Job Losses Could Have 'Lasting Costs,' Goldman Sachs Warns As Workers Face Pay Cuts, Slower Car

Workers who lose their jobs to artificial intelligence could face years of reduced pay and slower career growth, according to a new analysis by Goldman Sachs. AI Job Losses Hit Worker Pay In a report released Monday, Goldman said its review of 40 years of labor market data shows that workers displaced by technological change often experience long-term financial setbacks, reported Business Insider. "Our analysis suggests that, similarly to previous waves of technological change, AI-driven displacement could impose lasting costs on affected workers, worsening labor market outcomes for several years," the report said. The bank found that workers who lost jobs to technology previously took an average 3% cut in real earnings compared with those in more stable occupations. Over the next decade, earnings growth for these workers lagged by 10 percentage points compared with peers who never lost their jobs. They also took slightly longer to find new employment and faced a higher risk of future unemployment. Goldman pointed to "occupational downgrading" as a key factor, with displaced workers moving into routine, lower-skill roles because their previous skills were devalued. The report added, "The scarring effects also spill over into broader economic outcomes," including slower wealth accumulation and delayed homeownership. AI Workforce Impact And Job Trends The hires focused on product development, engineering, research, and sales, following the release of advanced AI models for coding, analysis, and media generation. JPMorgan Chase CEO Jamie Dimon said AI could eventually shrink the work week to four days, noting the bank had 600 AI use cases across fraud detection, risk management and marketing. He predicted rising productivity and breakthroughs in health care and other industries while cautioning about potential job losses and stressing the need for reskilling programs. Billionaire Mark Cuban is also comparing the AI revolution to the personal computer era, and urged workers to embrace new tools quickly. He highlighted that while AI learning could be intimidating, accessible online resources gave workers a chance to gain new skills and remain competitive in a rapidly changing job market. Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors. Photo courtesy: Shutterstock Market News and Data brought to you by Benzinga APIs To add Benzinga News as your preferred source on Google, click here.

AI Disruption Could Have a Scarring Effect on Displaced Workers: Goldman Sachs

AI-driven displacement could impose lasting costs on affected workers, worsening labour market outcomes for several years Workers losing their jobs to artificial intelligence could have a long-term impact in terms of facing lower earnings and slower career growth, says a new report. In fact, an analysis of over 40 years of labour market data reveals that those displaced by technology continue to face challenges long after losing their jobs, says Goldman Sachs in a recent report. "Our analysis suggests that, similarly to previous waves of technological change, AI-driven displacement could impose lasting costs on affected workers, worsening labour market outcomes for several years," analysts say while noting that the impact could be even worse if job losses happen during a recession. The effect of AI is already being felt in particular niches of the US economy, says Joseph Briggs, who co-leads the global economics team at Goldman Sachs Research. "You can see AI's impact in the tech sector, where the employment share as a proportion of the whole economy has gone below the long term trend," he had said in an earlier report. The report says that workers who lost their jobs due to tech changes saw an average 3% drop in real earnings compared to those displaced from more stable roles. In fact, the impact often lasts for a longer time with such workers witnessing earnings growth that was 10 basis points lower than those who remained employed. Moreover, those workers getting displaced by technology take longer to find new jobs, spending on an average of about a month more compared to others. Even when they do get alternate employment, the risk of another period of unemployment remains higher in such cases for up to ten years, the report said, noting that these numbers were based on studies in the US. Goldman Sachs highlights one key reason for such an impact to be "occupational downgrading" which it describes as the point where workers move into roles that require fewer skills than their previous jobs. "The same technological shifts that eliminated their positions also eroded the value of their existing skills," the report says. The report also estimates that AI-related chances have curtailed job growth by around 16,000 jobs per month over the past year in the United States. It had previously estimated that up to 7% of all workers in the United States could be displaced by AI over the next ten years. However, Goldman Sachs continues to be optimistic about the future saying that retraining can improve outcomes for workers. Those who taught themselves new skills post a job loss actually saw a slight increase in wage growth over the next decade. Also, their chances of unemployment reduced over time. In the earlier report authored by Briggs, it was estimated that the timeline for companies to adopt AI on a wide scale would be ten years whereby 6% to 7% of workers may get displaced. However, the key question is how fast this transition would occur, says Briggs and if it takes a decade, there could be a 0.6 percentage point increase in the unemployment rate. "But if it's more frontloaded, the impacts on the economy are much larger," Briggs says. Apart from tech workers, others in the knowledge and creative sectors, such as management consultants, call centre workers, and graphic designers, have also seen some displacement of their labour by AI, but these are relatively small parts of the overall job market.