Episode summary
Study Shows AI Hitting Paychecks, Not Payrolls
Wall Street Week
· · 12 min · Hosts: Chrystia Freeland · Guests: Torsten Slok, Diane Gherson
Summary
Apollo chief economist Torsten Slok says early labor-market data suggest AI is showing up first in paychecks, not payrolls. In a study of 300 occupations, he found that jobs with higher AI exposure have seen weaker wage growth, while the employment effect is still insignificant. He argues that the feared displacement effect is not obvious yet because AI is also making it easier to start businesses, and weekly Census data show U.S. business formation at a historic high.
Slok says the policy question is unresolved because the macro outcome could still go either way: AI could weaken labor demand and lift unemployment, or it could accelerate job creation and even overheat the economy. He remains optimistic, saying AI should raise productivity, create new businesses in consulting, finance and legal services, and increase employment over time.
Former IBM HR chief Diane Gherson says companies are already making practical decisions about which work to automate, which workers to retrain and where savings will come from. She says automation is hitting repetitive, high-attrition jobs first, especially in customer service and business services, while contractors are more likely than employees to face wage pressure. She also argues that some firms are using AI to augment workers rather than replace them, with the goal of preserving judgment, leadership and career pipelines.
Key takeaways
- Apollo chief economist Torsten Slok says occupations more exposed to AI are seeing weaker wage growth, but employment effects are still insignificant.
- Slok says U.S. business formation is at the highest level ever in the weekly Census data, suggesting AI may also be boosting entrepreneurship.
- Slok says policymakers should wait and see because AI could either raise unemployment sharply or make the economy hotter.
- Former IBM HR chief Diane Gherson says companies are automating high-attrition jobs first and are more likely to cut contractor wages than employee pay.
- Gherson says some firms are using AI to augment workers, not just lay them off, and that this can preserve senior talent pipelines.
Notable quotes
“those occupations that are highly exposed to AI, they are seeing weaker wage growth, but the employment effect on everyone is insignificant”
“What we found was that that effect is not quite here yet. Instead, let's also not forget that when AI, of course, becomes more easily available as a tool, now it's also easier to open a new business”
“So far, not on employment, but it's going to create some downward pressure on wage growth”
“it's your classic demand supply. So people are taking jobs at lower rates in those job categories, customer service being an example or business services”
How the episode opens
Westin: This is a story of puts and takes. Until recently, most of the talk about the effect of AI on employees has been based on theory. But now we are starting to get some data.
Torsten Slok is chief economist for Apollo and recently co-authored a paper analyzing those data for hundreds of occupations. And though it is early going, the initial results indicate that those most affected feel it in the size of their paycheck rather than whether they get to keep their job. -It is now possible to look at what happened before ChatGPT came along and what happened after ChatGPT came along.
And what we did was that we categorized the employment and wage numbers into occupations and asked what occupations were exposed a lot to AI and what occupations are exposed less to AI. And then we looked at as a natural experiment, what happened before ChatGPT came along and what happened after ChatGPT came along. So when you look at the 300 different occupations that we looked at in terms of AI exposure, the conclusion is, at least where we sit right now, that those occupations that are highly exposed to AI, they are seeing weaker wage growth, but the employment effect on everyone is insignificant.
Westin: What surprised you about the results that you might not have expected going in? -Well, the debate around AI in the labor market for now some time has been about labor displacement. In other words, there's a lot of worries about that when AI comes along, then work process is going to get automated and therefore a lot of workers are going to lose their jobs.
What we found was that that effect is not quite here yet. Instead, let's also not forget that when AI, of course, becomes more easily available as a tool, now it's also easier to open a new business.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- ai impact on wages
- labor market
- job automation
- business formation
- retraining vs layoffs
Companies and tickers mentioned
- IBM
- Apollo Global Management
- IBM
Watch the episode
Watch “Study Shows AI Hitting Paychecks, Not Payrolls” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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