Artificial Intelligence and Its Impact on Labor Productivity

Published on

By Hannah Kim

From the University of Pennsylvania

(Dice, 2023)

What Is AI and What Does Its Growth Mean for the Workforce?

Since 1940, the job market has exponentially expanded by 80% due to technological innovations, with more than half of employees working in occupations that did not exist decades ago (see Figure 1). Artificial Intelligence (AI) has contributed to this rapid growth through its advanced cognitive abilities, mimicking those of human level intelligence and causing profound impacts on labor productivity. AI is capable of solving problems that it was not particularly programmed for, processing aggregated data, learning from past decision-making patterns, and achieving natural language processing (interpreting and comprehending human language). Drawing upon previous experiences, the computerized software generates recommendations, explanations, and predictions grounded in statistical evidence to produce outputs that correspond to new inputs. Key industries have recognized the transformative potential of this technology, which has resulted in a growth of 635 AI acquisitions since 2010 (Qadir, 2020).

Figure 1. Industries with the most and least developed occupations since 1940 (Goldman Sachs, 2023).

The AI industry is projected to produce a 7% increase in GDP worldwide in addition to improving productivity rates by 1.5 percentage points in the next decade (Goldman Sachs, 2023). Though the innovation can automate virtually 300 million jobs, it does not directly replace employees (Goldman Sachs, 2023). The synergy between AI and humans produces more professions that require higher-level cognitive skills and expands upon the current capabilities of traditional industries. Generative AI can streamline manual, routine tasks that demand less creativity and analytical thinking, providing workers more time to dedicate towards more significant responsibilities in management or quality assurance. Employees in accounting, auditing, and tax saw an overall 50% reduction in time across various tasks while Microsoft reported a 55% decrease in time spent on programming (Garg, 2023). AI automates data-processing (e.g. market trends and competitive landscape) for managerial decision making to be supported by evidence. Due to its accelerated ability to process natural language, AI particularly impacts the C-suite and other jobs that demand higher levels of education and offer higher wages. Top executive tasks will be simplified as a result of AI’s efficient organizational skills in analyzing and interpreting market trends, customer behaviors, competition, economic conditions, and staff management. Leaders can access higher-quality information, allocate more time to valuable tasks, and make decisions robustly supported by data.

AI in Business

Software companies have leveraged AI to offer diversified services to consumers. In order to improve customer retention and satisfaction, firms have launched new products and applications, introducing AI-enhanced offerings at premium prices, and gradually increasing prices of current products with integrated AI features. In total, Goldman Sachs Research projects that the market potential for generative AI software stands at $150 billion (Goldman Sachs, 2023). Companies such as Walmart have also begun using machine-learning intelligence apps to achieve operational efficiency. Digital technologies such as HANA (SAP’s Cloud Platform) analyze ongoing data trends and process transaction data to provide predictions that guide future steps. Moreover, AI has expanded to encompass marketing, recommending users on platforms (e.g. Netflix, YouTube, Spotify) personalized suggestions to boost sales and customer engagement. Recommendations range from the latest hit films and songs to grocery products and books (Qadir, 2020).

Improving the Customer Experience

Expedia and Instacart have progressively integrated ChatGPT functions within their platforms to enhance customer experience and efficiency. On Expedia, by providing specific prompts, users can receive instant advice from AI about destinations, accommodations, transportation, and activities. The additional smart shopping feature enhances the booking process, making it more streamlined for users by storing their hotel options on the app (Crowdbotics, 2023). Furthermore, the plugin on Instacart, once activated, enables users to engage with Instacart directly from the ChatGPT website about meal planning. Once a customer asks for dinner recipe recommendations, the plugin generates an ingredient list along with detailed instructions for preparation. Users can conveniently have the plugin transform the ingredient list into an Instacart order, which can be both placed and delivered in less than an hour (Crowdbotics, 2023).


Chatbots, which are computer programs that automate conversation in natural language, have increased in popularity among businesses. Aided by AI technology, chatbots can mimic human conversations via real-time interactions with users to deliver simple services, such as facilitating purchases, organizing meetings, or answering questions. Not only can firms enhance consumer experience by automating responses to simple questions about product details and services, but they can further cut customer service expenses by approximately 30% when chatbots are used as an initial point of contact, reported by Chatbots Magazine. In addition to reduced costs, businesses are expected to save a substantial 2.5 billion hours by 2023 (Crowdbotics, 2021). Chatbots necessitate less time and energy to train than human employees, offering a more cost-effective option for companies.

Collaborating With AI in Consulting

AI expedites data gathering and analysis, tasks in which consultants currently dedicate hours to identify market trends and insights to help clients make well-informed choices. AI-powered analytics tools work with real-time data, enhancing speed, precision, and efficiency. Thus, businesses can spend less time and money in acquiring the necessary information in comparison to hiring traditional consultants.

Although the innovative capabilities of AI may disrupt the consulting industry, a majority of businesses today remain reluctant to trust AI in making informed decisions due to their shallow knowledge on the algorithm and its reliability (Kaplan, 2023). Consultants can bridge this gap between the company and the innovative tool. They can leverage AI algorithms to automate labor-intensive tasks, including market research and reporting writing, and dedicate more time toward more meaningful responsibilites (e.g. creative problem-solving or critical thinking) to help clients (Kaplan, 2023). By capitalizing on advanced technology to engage in more impactful, higher-level activities, consultants can improve their overall work quality and efficacy.


Though AI and its ability to rapidly aggregate and analyze data may gradually succeed entry-level employees, manual labor will be exponentially reduced as a result. In order to enhance labor productivity, workers must incorporate and collaborate with AI on daily tasks, enabling themselves to allocate more time and energy towards tasks that necessitate critical thinking and creative decision-making. It is imperative for firms to understand that AI can interpret statistics, numbers, and human language to a certain extent, but falls short in invention and imagination. Rather than viewing AI solely as competition or complete substitution for employees, workers must optimize its skills as reliable resources for inspiration and guidance for higher analytical tasks to produce quality work.


Works Cited:

Crowdbotics. (2021, August 30). Chatbots in the Workplace: Pros, Cons, and Best Practices.; Crowdbotics.

Crowdbotics. (2023, July 25). How These 5 Well-Known Apps Are Integrating with ChatGPT.; Crowdbotics.

Garg, P. (2023, June 29). The future of consulting in the age of Generative AI.; EY.

Goldman Sachs. (2023, April 5). Generative AI Could Raise Global GDP by 7%. Goldman Sachs; Goldman Sachs.

Kaplan, S. (2023, March 31). How A.I. Will Disrupt the Consulting Industry: Here’s what consultants can do. Inc.; Inc.

Qadir, A.-N. (2020, July 9). Applications of AI/ML in Business.; Crowdbotics.

More posts by Hannah G. Kim.
Artificial Intelligence and Its Impact on Labor Productivity
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