Executive Summary
There is no question that GenAI will lead to a profound change in the way we work
Around half of all jobs in developed countries are affected by AI in one way or another. Looking at individual jobs, it is striking that it is creative, non-routine jobs – such as writing, medical diagnosis or programming – that are most likely to be transformed by the use of AI, if not replaced. The risk of job loss is highest in the service sector and among younger workers.
Solow's famous dictum that computers are everywhere – except in productivity statistics – no longer applies to AI – but only in the US. Even among small business, 40% use AI tools. Not surprisingly, the impact of AI is most evident in the US information sector: while employment is falling, output is rising sharply. In other US service sectors, such as finance or professional and business services, the picture is less clear, but here too there are significant increases in output and at least stable employment.
Meanwhile, Europe is lagging behind. It is too early to determine if AI has impacted productivity growth in Europe. This growing gap between the US and Europe is hardly surprising, given that Europe is lagging behind in AI adoption. Last year, only 13.5% of all companies reported using AI technologies. This low prevalence explains the different effects of AI on employment. When only a few companies use AI, they are likely to benefit from increased demand for their products – for early adopters, AI is an important competitive differentiator. However, this advantage disappears with widespread use of AI technologies. In the second stage, productivity effects are no longer masked by demand changes, and the expected decline in employment becomes visible. It is likely that this will soon be the case in Europe. AI-driven labor vulnerabilities should therefore be addressed before AI transforms labor markets.
Besides reskilling, another lever that can be used to strengthen the resilience of the labor market to AI-related disruptions is encouraging participation in capital income. Even workers with higher education levels – who should all be in the top half of the income and wealth distribution – have a lot of catching up to do when it comes to return-oriented investment decisions. When looking at portfolio structure, we find that more than half of financial assets are held in bank deposits – even in the top wealth deciles.
The potential gains from a simple asset shift are huge. For example, if the sixth decile was to shift half of its bank deposits into higher-yielding assets such as shares, bonds and investment funds, it would generate a higher return of around EUR10,300 over the next ten years – without taking into account the savings generated during this period. In the ninth decile, this excess return from a one-off shift would be EUR27,550. In terms of disposable income, this would be an increase of +18% and +31%, respectively, compared to an unchanged portfolio structure. But the positive effect extends beyond individuals. Together, these four wealth deciles have bank deposits totaling EUR4.1trn. A shift towards capital markets would give a huge boost to the European project of a Capital Markets Union.
The widespread use of AI will create dislocation along the way, making it all the more urgent to build financial resilience. The potential labor market effects could further increase polarization and undermine the social fabric. Repairing the social contract is therefore a mammoth task for the years ahead. The guiding principle should not be alimentation but resilience, the ability to bounce back after setbacks. The ultimate goal is to reduce inequality, not with handouts, but by strengthening the capabilities of each individual. This includes greater employee ownership and participation in capital income. The idea is that people will make AI work for them and generate an additional income stream. With the right (tax) incentives, it is undoubtedly possible to turn more employees into shareholders and thus strengthen their financial resilience in the coming times of disruption.