Christina Gayton Technology

Artificial Intelligence’s Impact on China’s Labor Force

AI could replace Chinese jobs, or they could fill China’s future expected labor shortages due to a rapidly aging population.

By: Christina Gayton

AI could replace Chinese  jobs, or they could fill China’s future expected labor shortages due to a rapidly aging population.

One of the hottest buzzword technologies currently being developed is artificial intelligence.  AI has been permeating daily life in many of the world’s largest economies like the US, Japan, and China. However, in contrast to the first two countries whose labor markets are largely white collar workers, China’s labor market is comprised primarily of manufacturing; this aspect raises concerns regarding AI that are unique to China. Although it is a leading developer of AI, the  Chinese job market is often cited as the most vulnerable to replacement by the technology.  What’s more, although the country has experienced an average growth rate of seven to ten percent since 1987,  China’s labor force has been shrinking, and its elderly population has been expanding.  With the projected decrease in the labor force from 911 million to 781 million by 2030  and the rise in elderly population to fourteen percent, China could face slower growth if AI tech isn’t employed to fill this labor shortage. Depending on how China’s government and economy reacts to this change in society, economists and scientists theorize China’s future with AI could go one of two simple ways: either they highly benefit from the new tech, or they experience a massive slow in economic growth.

REPLACED JOBS

Upon  initial analysis, the former seems highly likely. However, with the combined effects of job-replacing tech and China’s ageing population, it seems almost inevitable that the country will have a slowdown in economic growth, at least temporarily. A report by the China Development Research Foundation states that at least 70% of current occupations in China will be impacted by AI, and by 2040, “99% of workers in agriculture, fisheries and forestry, 98% of workers in construction and 94% of workers who install and maintain power systems will be replaced by AI.” Not all white collar jobs are safe either. The report also estimates that “22% of the jobs in banks, 25% in the insurance market and 16% in the capital market” would be filled by machines by 2027. If the economy and government don’t adapt quickly to these changes, it could spell massive unemployment.

HUMAN AND PROGRAM MUTUALISM

That said, further analysis shows that the effect of AI on China’s economy is not set in stone and may largely depend on how humans work with AI mutualistically. For instance, the technology may be able to create new jobs requiring human judgement of machine predictions. Author of Prediction Machines, Joshua Gans, explains that despite AI providing cheaper predictions, human judgement will still be needed to sort through these predictions. Additionally, AI may simply replace jobs already being lost due to China’s shrinking labor force and can ultimately fill a much needed labor shortage. Combined with Gans’ theory on AI, it seems that more jobs may eventually open up in creative fields, as the mundane, repetitive world is automatized.

THE LONG-RUN

If automation is readily adopted in China, researchers at the McKinsey Global Institute predict it could close China’s predicted labor shortage gap from 600 million to 100 million and increase the productivity growth from .8 to 1.4 percent annually. On the opposite hand, even if automation is readily adopted, if the government, companies, and individuals do not take proactive measures to develop new work skills and education, China’s labor market may face  greater challenges. Despite these challenges though, an extensive report by PricewaterhouseCoopers predicts that the overall net impact of AI on jobs will be positive, due to increased productivity, further job creation, and improved products.

Works Cited:

Image Source:https://www.scmp.com/news/hong-kong/health-environment/article/2098859/elderly-care-technology-impresses-hong-kong-expo

Agrawal, A., Gans, J., & Goldfarb, A. (2018). Prediction machines: The simple economics of artificial intelligence. Boston, MA: Harvard Business Review Press.

Bughin, J., Hazan, E., Ramaswamy, S., Chui, M., Allas, T., Dahlstrom, P., Trench, M. (June 2017) Artificial Intelligence: The Next Digital Frontier? McKinsey Global Institute. Retrieved from https://www.mckinsey.com/~/media/McKinsey/Industries/Advanced%20Electronics/Our%20Insights/How%20artificial%20intelligence%20can%20deliver%20real%20value%20to%20companies/MGI-Artificial-Intelligence-Discussion-paper.ashx

China Development Research Foundation. (September 2018) Human Capital Investment in the AI Era: Future Challenges and Coping Strategies in the Chinese Job Market. Retrieved from http://en.people.cn/n3/2018/0917/c90000-9500920.html

Fertig, Y., Hawksworth, J. (September 2018) What will be the next impact of AI and related technologies on jobs in China? Retrieved from https://www.pwc.com/gx/en/issues/artificial-intelligence/impact-of-ai-on-jobs-in-china.pdf

 

 

 

 

 

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