A looming recession might provide a big push in the adoption of AI as weak economic conditions always provide the impetus for using machines to cut costs and raise productivity.Martin Meissner/The Associated Press
As we prepare to kick off 2023, we are doing so knowing that the global economy is faltering while organizations are still being squeezed by high costs. On top of that, even a recession might not make much difference to the tight labour market they face. With technologies improving by leaps and bounds and companies looking for ways to improve the bottom line, the timing is just right for a huge uptick in AI use in a way that could transform the economy and labour market.
When it comes to embracing AI, Canada is near the forefront. According to the 2021 Global Vibrancy Ranking on artificial intelligence from Stanford University, the country is in fifth place, behind the United States, China, India and the United Kingdom. The index is calculated using a number of metrics, including hiring in AI, research done within the country and investment in the sector. When it comes to hiring, AI employment in Canada is ranked second of 22 countries, behind only India.
Creating technology and implementing it throughout a range of industries are two different things, however. There’s lots of room for growth in the latter and a looming recession might provide a big push in that direction. We have seen it many times before: weak economic conditions always provide the impetus for using machines to cut costs and raise productivity.
Most recently that has happened in a big way in the oil and gas sector, where the fall in oil prices a few years ago sparked changes to production processes, ultimately meaning fewer people were needed for many functions. Now, as industries from manufacturing to services look to a challenging year ahead, everything will be on the table when it comes to creating efficiencies.
Some, such as the retail sector, are already taking increasing advantage of AI technologies. This year, Walmart used an AI model to predict how many pumpkin pies to have in each of their Sam’s Club stores over U.S. Thanksgiving, taking into account factors including weather, whether football in an area is an away or home game (the latter apparently requiring more pie) and the popularity of competing goods such as pecan pies in any given area. Once all the inputs were taken into account, stores received recommendations as to how many pies to have on hand by the hour.
It is, to be sure, a scenario that stokes fear in the hearts of many, whether they are scared of a science-fiction-like takeover, or simply because they are scared that their boss would be thrilled to replace them with AI. Although it is true that historically technological transitions have turned out fine for workers, freeing them up to do higher-value tasks, there is a legitimate concern that this time around the gains will not be shared, and that unemployment will rise.
What might cushion the blow is one of the same things that is hastening the move toward using technology in the first place, which is that the labour market is now extremely tight. That has a lot to do with a demographic situation in which a particularly large cohort of older workers is heading for retirement while not being replaced by a glut of younger ones.
As is the case in the U.S. and in many other countries, the unemployment rate in Canada is now close to a generational low. That has stoked wage costs and inflation, and is predictably leaving employers intrigued by the idea of robots who never demand a raise. The reality is that with labour force growth as slow as it looks to be in the years ahead, a move to using robots and AI technologies can be made without causing the spike in unemployment that might have happened in the past. Over the longer term, the hope is that more efficient industries create both more jobs and higher-skill and higher-wage jobs.
The Fourth Industrial Revolution is already in full swing and technological change was going to happen regardless. Still, necessity is the mother of invention as they say, and the economy of 2023 might make it necessary to invent new ways of doing things. AI and robots are at the ready to make that happen, so let’s all brace for the changes ahead.
Linda Nazareth