Social security: is AI a threat to the welfare state?
Critics of artificial intelligence (AI) fear that it could replace large numbers of workers, leading to falling wages and undermining the basis for social contributions, which are calculated as a percentage of earnings. This has led to calls for heavy taxation of capital to fund social spending and reduce taxes on remaining incomes, though this might trigger capital flight. However, historical data shows that wage shares of national income have remained relatively stable over decades, even increasing slightly in Germany due to labor shortages. In the U.S., while the share of wages in national income has declined, total wages adjusted for inflation have risen significantly. New technologies like AI do not automate all tasks but only a small portion, according to Nobel laureate Daron Acemoglu, who estimates that less than five percent of jobs in the U.S. could be economically replaced by AI. Additionally, technological progress creates new roles where humans hold competitive advantages, such as AI managers or ethics advisors. Productivity gains from AI can offset job losses.
Many companies are integrating artificial intelligence into their operations, yet productivity gains have not materialized as widely anticipated. According to recent reports, while AI adoption is widespread among businesses, its impact on overall productivity remains limited. This situation has sparked debate over whether traditional managerial roles are becoming obsolete due to automation and technological advancements. The discussion centers around how AI affects employment structures, economic output, and social systems. The integration of AI into corporate environments has led to concerns about job displacement, particularly for roles traditionally performed by humans. Some analysts argue that AI threatens to replace large numbers of workers, potentially leading to a collapse in wages and undermining the foundation for social contributions based on income taxes. These fears have prompted calls for heavy taxation of capital to fund social programs and ease the tax burden on remaining wage earners. However, such measures could trigger capital flight, raising further economic uncertainties. Despite these concerns, historical data suggests that the share of wages in national income, known as the wage share, has remained relatively stable over decades. In Germany, this figure has hovered around 70 percent since the 1970s, even rising slightly to 75 percent in recent years due to labor shortages. In contrast, the United States has seen a decline in the wage share over the past two decades, although total wages adjusted for inflation have increased significantly. These observations suggest that new technologies do not necessarily lead to a dramatic shift in the balance between wages and capital. New technologies such as AI automate only a small portion of tasks previously done by humans. Nobel laureate Daron Acemoglu's research indicates that in the United States, approximately 20 percent of all tasks could theoretically be automated within ten years, with only about a quarter of those being economically viable. Thus, less than five percent of all jobs in the U.S. are likely to be replaced by AI in the near future. This relatively low percentage contrasts sharply with media coverage highlighting AI's potential in specific areas. Moreover, technological progress does not merely eliminate jobs, it also creates new ones. For instance, roles such as AI managers, who implement AI systems in companies, and AI ethics consultants, who ensure algorithms adhere to fairness and privacy standards, are emerging. As technology evolves, additional unforeseen roles will arise, similar to how previous industrial revolutions created new professions such as machinists during the age of steam power, electricians with electrification, and programmers with the advent of computers. AI also enhances productivity, which can offset job losses caused by automation. Companies using AI in translation, programming, presentation creation, medical imaging diagnosis, and other fields experience reduced production costs. Lower prices stimulate higher demand, allowing firms to produce more. This increased production requires more human labor for non-automatable tasks, thereby boosting total wages. Consequently, the wage share often increases due to this productivity effect. While AI initially disrupts certain sectors, such as young economists in consulting firms who may no longer be needed for information gathering or presentation creation, the long-term outcome involves the emergence of new jobs. These positions may directly result from AI applications or stem from the accelerated growth in productivity driven by AI. This dynamic interplay between job loss and creation underscores the complex relationship between technological advancement and labor markets.
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