Is AI the Answer to Our Labor Shortage?
These days, it feels like everyone is talking about artificial intelligence (AI) and how it may impact our lives personally, professionally, and societally. (Alphabet, Meta, and Microsoft used the term 65, 57, and 53 times, respectively, in recent quarterly earnings conference calls.) For many, the furor was jumpstarted by the emergence of ChatGPT, the AI chatbot developed by OpenAI and released last November. ChatGPT has reportedly passed a variety of challenging exams, including the SAT (scoring a 1410 (or 95th percentile)), the Certified Sommelier Exam, state bar exams, and the US Medical Licensing Exam. If AI is capable of passing these exams, might it be used more broadly in today’s economy to ease the effects of the ongoing labor shortage?
Wide swaths of workers left the workforce during the COVID-19 pandemic, which left companies of all sizes, across industries, with diminished labor forces and significant operational challenges. Although people are slowly returning to the workforce and the unemployment rate has fallen to its pre-pandemic level of 3.5 percent, the labor force participation rate (i.e., those working or actively looking for work as a percentage of the civilian, noninstitutional population) has not rebounded completely. It stands at 62.6 percent, roughly 0.4 percent—or 1.8 million workers—shy of where it was in February 2020. Meanwhile, March data from the Job Openings and Labor Turnover Survey (JOLTS) showed demand for labor remains strong, with 9.5 million open positions. While this figure is in decline, it is still extremely elevated when compared with the pre-pandemic range of 6 million–7 million open positions. Currently, there are roughly 1.5 job openings per unemployed person, a statistic which leads us back to our initial question: Can AI help close the gap between labor supply and demand? The answer, we believe, is not yet. Closer analysis reveals the majority of demand right now stems from lower-skilled and lower-wage jobs—areas where it is harder to both implement AI technology and reap its benefits.*
* Source for all data in this paragraph: US Bureau of Labor Statistics.
Automation’s Appeal
We believe automation and robotics offer compelling pathways to solving current, challenging labor dynamics while also boosting cost savings, operating efficiencies, and data-driven insights. Consider McDonald’s, which opened its first (mostly) automated location in Texas this year. According to the franchise’s owner, the technology “not only allows us to serve our customers in a new, innovative way, it gives our restaurant team the ability to concentrate more on the order speed and accuracy, which makes the experience more enjoyable for everyone.” Other LBA companies, such as Emerson Electric (EMR) and NVIDIA (NVDA), could also benefit from increased adoption of automation technology.
EMR began as a manufacturer of electric motors and fans, but it’s currently a leading global automation company serving the industrial, commercial, and consumer markets. Today, EMR is creating software and analytics offerings that can be used in concert with its hardware, such as control systems and intelligent devices. Customers—including life sciences companies and manufacturers with automated production lines—employ EMR’s combined technologies to help achieve environmental initiatives, such as reduced emissions. Within life sciences, the automation of (1) manual workflows and (2) the transfer of data between drug development and production is helping to accelerate the drug-development pipeline. And in factory automation, EMR’s AVENTICS smart pneumatics systems generate machine-specific data to support predictive machine maintenance, expedite cycle times, and improve the overall quality of manufactured goods. In both cases, EMR’s technology helps customers eliminate hazardous jobs and unsafe conditions.
Similarly—and as discussed in previous newsletters—NVDA’s omniverse computing platform can be used to automate and optimize warehouse operations through “digital twin” software. This technology, which creates a virtual simulation of existing warehouse conditions, lets companies like Amazon test how to optimize equipment and processes in “virtual real time” before rolling out changes to production. Similarly, BMW is using NVDA’s omniverse to design a wholly digital version of a future factory; the technology is allowing BMW to test layouts and analyze robotics and logistics systems before the facility’s construction commences.
AI has the potential to be an incredible tool, and we are seeing companies investing significantly in the space. However, we do not think it is the key to solving the current labor shortage. Instead, we believe automation will make companies more efficient, safe, and productive—and allow workers to focus on high value-added tasks, those which draw on uniquely human strengths like creativity, problem-solving, and intellectual curiosity.
This article was published as part of the LBA Spring 2023 Reflections & Observations.