The new jobs could be the old jobs
What will the impact of AI on jobs be? The standard economists answer for this - or any technology - is that whatever old types of jobs might be lost, will be replaced by new job. This in turn normally leads to the inevitable follow up: what new jobs?
While it is next to impossible to predict all the new types of business model that are enabled by a new technology, we can at last look at what extra demand there might be for existing types of work.
One of the most striking economic possibilities from AI is that that it might lead to a kind of reverse Baumol effect: labour intensive jobs that over time have become less affordable, could once again be within reach of a growing population as incomes rise more broadly from AI driven productivity.
In order to test the demand for labour intensive services, we ran a series of surveys for six current types of service: cooking, cleaning, handymen, tutoring, therapy and legal advise. For each service, we asked how much people buy today, how much they would buy if they became relatively cheaper and what total demand would cap out as.
Across the range, we found a series of well behaved demand curves - with demand highly for reductions below today’s prices and then eventually tapering off as it becomes cheaper and cheaper. (No matter how cheap it is, there is only so much cleaning you can buy.)
This was largely consistent across the six types of service, with one exception: tutoring. There was saw that higher income households were around 50% more likely to be interested in it, while a significant proportion of lower income households weren’t interested even if it was free.
But overall, we saw across the range, we are a long way from maximising out the demand for people have for these kinds of services.
While you shouldn’t take the specific magnitude seriously, a quick back of envelope calculation suggest that the workforce could absorb an order of magnitude more people in these lines of work. That is before taking into account the similar effects you’re likely to see in other areas such as childcare, nursing or creating one pieces of art.
Two hundred years ago, this kind of labour intensive work service made up a significant proportion of the labour force. One possibility for the future is that it easily could do so again.
