Losing your job to AI could be even more costly than workers expect, Goldman Sachs says.
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In a report on Monday, the Wall Street bank said it analyzed 40 years of labor market data and found that workers who lost their jobs due to technological disruption were still paying the price years after their initial displacement.
“Our analysis suggests that, similarly to previous waves of technological change, AI-driven displacement could impose lasting costs on affected workers, worsening labor market outcomes for several years. These effects could be substantially larger when displacement coincides with a recession,” analysts wrote.
Historically, workers displaced from “technology-disrupted occupations” took an average 3% cut in real earnings compared to those displaced from “more stable occupations,” Goldman said, citing its analysis of longitudinal survey data that tracked the outcomes of more than 20,000 workers since 1980.
The pay cuts also lasted for a while. In the decade following a job loss, technology-displaced workers saw real earnings grow an average of 10 percentage points less compared to workers who never lost their jobs. Their real earnings also grew 5 percentage points less compared to workers who lost their jobs for other reasons.
Tech-displaced workers took about a month longer to find a new job than those who lost their roles in “more stable” fields, the analysts added. Once a worker was displaced by a new technology, their risk of experiencing another “unemployment spell” also remained elevated for the next 10 years, the bank said.
Tech-displaced workers were also likely to build wealth more slowly throughout their lives, the bank suggested, pointing to factors like delayed homeownership.
“A key mechanism behind these worse outcomes is occupational downgrading. Workers displaced by technology are more likely to move into more routine occupations requiring fewer analytical and interpersonal skills, likely because the same technological shifts that eliminated their positions also eroded the value of their existing skills,” the analysts wrote.
“The scarring effects also spill over into broader economic outcomes,” they added.
AI-related job cuts are already rippling through pockets of the job market as firms look to increase productivity and cut costs.
In a separate report, Goldman estimated that AI substitution and augmentation in the job market had slashed new job growth by around 16,000 payrolls a month in the last year.
The bank previously estimated that AI could displace as many as 7% of all US workers over the next 10 years.
There is some good news, though.
Workers who lose their jobs due to a technological disruption aren’t doomed. Those who retrained after a tech-driven job loss saw an average 2 percentage point increase in cumulative real wage growth over the next 10 years. Their probability of being unemployed over that period also declined by around 10 percentage points, Goldman estimated.
“Encouragingly, our analysis suggests that retraining programs could help to mitigate some of the negative effects of AI-related job displacement, enabling displaced workers to earn modestly higher wages and achieve more stable employment,” analysts added.
