AI Already Reshaping Job Market: High-Exposure Roles See Steeper Decline in Hiring

In March, Shopify’s CEO mandated a new policy requiring managers to justify why they need more human headcount instead of using AI, foreshadowing a broader shift in employment practices. A few weeks later, Duolingo followed suit, announcing plans to phase out contractors and replace them with AI. These announcements reflect a growing trend among tech companies where AI is increasingly seen as a viable replacement for human workers, leading to reduced hiring. Early reports and internal conversations with employers suggested that the AI revolution might take years to significantly impact the job market, but recent data from Revelio Labs indicates that the shift is already underway. Revelio Labs, an analytics firm, conducted a study to identify which jobs are currently being replaced by AI. Economist Zanele Munyikwa analyzed job descriptions over the past three years and found that the proportion of tasks that AI can perform has decreased by 19%. This decline is largely attributed to companies hiring fewer people for roles that AI can handle. Munyikwa’s research segmented jobs into three categories: high-exposure (many AI-doable tasks), medium-exposure, and low-exposure (few AI-doable tasks). Since the release of ChatGPT by OpenAI in 2022, job openings have declined across all categories, but the reduction has been more pronounced for high-exposure roles (31%) compared to low-exposure roles (25%). The jobs most at risk from AI include tech functions such as database administrators, IT specialists, information security analysts, and data engineers. Conversely, in-person roles like restaurant managers, foremen, and mechanics have shown the least exposure to AI. Similar findings were reported by researchers at Washington University and New York University in 2023. They observed a 2% drop in job listings and a 5.2% decline in monthly earnings for freelance writers after the introduction of ChatGPT on Upwork. However, the implications of these trends are complex. While many companies are optimistic about AI’s capabilities, some are beginning to experience drawbacks. Fintech company Klarna, for instance, initially hailed its AI investments for enabling a hiring freeze. The company claimed that its AI assistant could handle the workload equivalent to 700 full-time agents. However, this strategy backfired, leading to a decline in service quality. Consequently, Klarna resumed hiring human agents to ensure higher standards of service. CEO Sebastian Siemiatkowski emphasized the importance of maintaining human support for customer satisfaction, although he still anticipates further workforce reductions through attrition. Despite Klarna’s setbacks, the enthusiasm for AI-driven cost-reduction remains strong in the tech industry. Many CEOs, including those at Shopify and Duolingo, are motivated to reduce their reliance on human employees due to perceived inefficiencies and expenses. As AI technology continues to advance, the potential for significant workforce changes grows. For example, Siemiatkowski predicts a reduction of 500 more employees within a year as Klarna’s technology improves. This trend raises questions about the long-term viability of white-collar professions. It is uncertain whether AI can consistently perform all the tasks these companies anticipate. Quality, creativity, and customer interaction are critical factors that might influence the effectiveness of AI. If AI fails to meet these standards, companies may reassess their strategies. However, given the rapid advancements in AI, many industry leaders believe that these challenges will be overcome, heralding a new era of reduced human employment. Industry insiders caution that while AI offers substantial cost savings and efficiency improvements, it also comes with risks, particularly in terms of maintaining high standards of work and customer satisfaction. Companies must balance the benefits of AI with the unique strengths that human employees bring, such as empathy and nuanced decision-making. The ongoing evolution of AI technology and its integration into business processes will continue to shape the future of employment, leaving employers and employees alike to adapt to a rapidly changing landscape. Revelio Labs is a leading workforce analytics provider known for its comprehensive data and insights into labor market trends. Their findings underscore the immediate and significant impact of AI on hiring practices and highlight the need for further research and cautious implementation. The tech industry’s enthusiasm for AI-driven solutions reflects a broader trend toward automation and digitization, which is reshaping the business world and potentially leading to long-term structural changes in the labor market.