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CIARAN RYAN: AI’s impact extends beyond job loss; it’s transforming how labor markets and businesses function. A notable portion of routine tasks is becoming automated, significantly impacting entry-level roles, which may ultimately drive profit margins up. We’re witnessing a shift towards more skilled positions in service and manufacturing sectors.
What does this future hold for both employers and employees? To delve into this, we have Adriaan Pask, Chief Investment Officer at PSG Wealth, joining us once again.
Hi Adriaan, thanks for your time. The pace of AI development is beyond what many anticipated. Are we on the verge of widespread job losses because of it?
ADRIAAN PASK: Hi, Ciaran. Thanks for having me. It’s a compelling conversation, and we need to carefully evaluate the potential implications. The situation in South Africa could be quite different from economies like the US; however, trends in those areas may provide valuable insights for our local outlook.
Research from the International Monetary Fund (IMF) indicates that approximately 40% of global employment is exposed to AI, with this figure rising to about 60% in advanced economies.
Additionally, Goldman Sachs has projected that around 300 million full-time jobs worldwide could be impacted by AI over the next decade.
Interestingly, widespread job losses aren’t evident at this stage. Instead, job absorption has slowed in specific sectors.
Entry-level positions, for example, are experiencing slower uptake. Moreover, the impact will vary based on how the labor market is structured. Highly administrative, repetitive, and process-driven roles are at the greatest risk.
Conversely, higher-level positions appear more protected. These roles, which rely on experience, judgment, and oversight—particularly those associated with evaluating the accuracy and appropriateness of AI-generated outputs—are faring better.
Furthermore, there’s a perspective suggesting that while AI may eliminate some jobs, it will also create new ones. Areas like programming, engineering, and process design could experience growth due to advancements.
CIARAN RYAN: Absolutely. Looking at accounting, many routine tasks are easily managed by AI, and there are even amusing incidents in the legal field where hallucinations have led to fictitious court cases.
There seems to be a trust deficit regarding AI, despite its potentially alarming trajectory for some.
Do you think AI will enhance profit margins or merely shuffle costs? What does the evidence suggest?
ADRIAAN PASK: According to various studies, the Stanford AI Index indicates that in areas like service operations, supply chain management, and software engineering, about 40% to 50% of respondents claim to utilize AI and realize cost benefits.
However, these savings are generally modest, typically less than 10%. More significantly, the overarching story is about revenue. Presently, growth in top-line earnings is minimal, with fewer than 5% of organizations utilizing AI reporting increased sales.
The conversation has yet to move beyond efficiency gains, with most discussions centered on how AI can help companies reduce costs.
As labor and salary constitute major expenses for many businesses, replacing some roles with AI could provide cost benefits. However, the broader societal implications for the economy could be significant.
While wage expenditures may decline, investments in infrastructure are likely to increase. These expenses, although depreciable over time—rendering them less urgent than labor costs—still require long-term consideration.
CIARAN RYAN: Certainly. A significant concern is the potential ramifications for employment. Which areas of the labor market do you predict will be most impacted?
ADRIAAN PASK: Currently, the services sector and entry-level roles are witnessing substantial changes. For instance, in the US, the influx of graduates into the workforce is not particularly robust, as companies are no longer vigorously creating new positions.
This is echoed by research from the IESE Business School, which found a decline in wages for junior employees at AI-exposed firms following the introduction of ChatGPT.
Consequently, we’ve observed a reduction in graduate absorption and reduced demand for junior talent, reflected in stagnant wages. Even those who manage to secure employment aren’t experiencing wage growth.
CIARAN RYAN: The next evolution appears to be robotics, which seems like a natural progression. China seems to be ahead in this field by incorporating robotics into its manufacturing systems. What should we expect over the next five to ten years concerning AI and robotics?
ADRIAAN PASK: That’s a vital point, especially considering our earlier discussion about the services sector and entry-level roles. In manufacturing, robotics is set to drive significant changes.
Traditionally, large language models in AI and robotics as a field have been distinct. However, we’re currently witnessing a convergence of the two.
This integration enables the operation of expansive factories and distribution facilities using sophisticated robotics coupled with AI, improving both efficiency and capability.
It’s now about enhancing the automation itself rather than merely optimizing human work.
You’re right, this indicates the next development stage. There are already forward-thinkers in this space, with the US and China making substantial investments. However, widespread adoption is still in its infancy.
The future of manufacturing will not only incorporate robotics in isolation; it will involve a blend of robotics and AI. This transition will reduce routine tasks while simultaneously increasing the demand for highly skilled technological oversight, potentially leading to fewer opportunities for lower-skilled workers.
This raises broader questions regarding inequality and the societal effects of these transitions.
CIARAN RYAN: One point raised about robotics is its capacity to expedite the timeframe for a country to achieve competitiveness.
If you can purchase off-the-shelf technology from China and implement it in your factories—effectively replacing your workforce with robots—you could compete on a global scale. Do you foresee this as a future possibility?
ADRIAAN PASK: That concept is intricate and varies by industry. Scale and input costs are pivotal factors. While advanced technology can facilitate competition, the underlying scale must remain economically feasible.
Nonetheless, it’s a thought-provoking remark. In many respects, it could also create a more level playing field by minimizing productivity disparities across nations.
From a South African perspective, the growing focus on technology and automation within the reform narrative is particularly noteworthy. This is encouraging, as neglecting this area could leave South Africa trailing behind.
Overall, this is a sector worthy of close observation.
CIARAN RYAN: Now, connecting this back to investment, we have several significant initial public offerings (IPOs) on the horizon.
With companies like SpaceX, Anthropic, and OpenAI planning major IPOs soon, how should workers, managers, and investors approach AI and prepare for what lies ahead?
ADRIAAN PASK: From a worker’s perspective, roles likely to prosper in the future landscape are those where relationships, oversight, and experience play a vital role. In contrast, roles linked to repetitive tasks or rigid rule-based duties are more at risk.
From a business standpoint, companies are understandably focused on leveraging technology to boost profit margins. However, it’s crucial to consider the broader picture beyond immediate efficiency gains.
Key considerations include succession planning and capacity building: who will emerge as the organization’s future leaders? Who will take charge of technology systems once current senior professionals retire?
This necessity emphasizes continuous knowledge transfer and a reliable flow of young talent into the organization, which we believe remains vital for operational success.
From an investment perspective, it’s also essential to identify businesses that focus not solely on margin expansion. Cost-saving measures have built-in limits, while growth potential is more unrestricted.
As a result, AI strategies should increasingly be evaluated based on their contributions to top-line growth.
The critical focuses become: how does AI help attract more clients, and how does it drive higher sales? It’s not merely about cutting costs, but about creating pathways for effective growth.
We are particularly interested in businesses that adopt this strategic approach to AI.
CIARAN RYAN: This is a fascinating topic that is evolving at a rapid pace. Certainly, this will be a focus of discussions for years to come.
We’ll wrap up here. Thank you, Adriaan Pask, Chief Investment Officer at PSG Wealth, for your insights.
ADRIAAN PASK: Thank you, Ciaran. I appreciate it.
Brought to you by PSG Wealth.
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