Standing on the shoulders of robots: Can AI-powered productivity solve the talent crisis? 

Artificial intelligence (AI) can help mitigate the effects of unfavorable demographics, skills mismatches, and changing workforce expectations on the global economy. But with some markets at greater risk than others, the impact of AI may vary throughout the world. The issue facing every leader today is how to mitigate the risks and turn the potential gains from AI into a sustainable advantage for their organizations.

Generative AI has emerged as an ally in modern workplaces — but many view it as a threat or simply do not know enough about it to plan effectively. From finance to healthcare, AI's ability to swiftly process vast amounts of data, learn from patterns, and execute repetitive tasks can significantly reduce the burden of routine responsibilities on workers. It promises to not only augment human effort and make work more efficient, but also to amplify human intelligence — expanding our capabilities to take on new jobs and unlock value.

In our latest Global Talent Trends report, 41% of executives think most of AI’s value will come through augmentation and efficiency gains in 2024 (30% expect greater returns from amplified intelligence). Employees, however, see things differently. Oliver Wyman Forum reports that over half of the workforce now uses generative AI, but 39% of employees (especially blue-collar workers) feel their productivity is the same or worse today because of it. Either way, AI will impact many jobs — directly or indirectly.

The good news is that various AI and automation capabilities are combining to increase productivity and innovation, with AI enabling new avenues of value creation. The issues before us now are how to accelerate the potential of generative AI and how to identify which industries and economies might benefit the most.

We have only just begun to gauge the full impact of generative AI in the workplace, but early studies tend to show a 10% to 20% leap in productivity. Call centers are heralding a boost of up to 14% and we expect similar gains in other functions, such as marketing, finance and HR, that are well-positioned to embrace this technology.

Knowledge workers will also benefit. Harvard Business School found that generative AI can help business consultants complete certain tasks 25% faster, while improving quality by 17% for above-average performers — and up to 43% for those below the average.

Ultimately, the promise of AI is not exclusive to certain functions or tools. As AI touches more business applications and work activities, its effects will be compounded and felt firm-wide — especially as this technology permeates into more senior roles.

Mercer set out to explore the potential impact of generative AI on productivity and long-term economic conditions, with research and insights designed by Man Bites Dog and carried out by Oxford Analytica. We commissioned a high-level model based on GDP forecasts, demographic trends, labor statistics, and research into generative AI. Our thought experiment focused solely on the impact of AI on labor productivity, while keeping other variables such as migration and fiscal policy fixed.

First, we identified 10 key countries which are significant contributors to GDP today (and likely will be in the future). These countries cover developed markets like the UK and the US, and emerging markets such as China and India. Then we divided each market category into six industry sectors:

• Finance and insurance
• Information and technology
• Manufacturing
• Healthcare and social assistance
• Transportation and warehousing
• Hospitality and foodservice

Using historical data, we calculated the average productivity growth rates for each sector. We then divided the market categories into high-speed and low-speed performers (those in the 75^th versus 25^th percentiles, respectively, of compound annual growth rates ending from 2016 to 2018) to estimate year-2035 productivity growth rates.

The model predicts that as early as 2025, six out of 10 markets could already struggle to meet customer demand through labor supply alone. HR leaders cite this risk as a top concern for their firms this year, and only one in two executives globally believe their companies have the talent required to meet demand today. As demographic shifts lead to a decrease in skilled workers, all these markets may see constrained economic growth.

Based on this hypothetical scenario, we examined what role AI productivity gains could play in mitigating the impact of demographic shifts (see Figure 1). To explore this, we would need to determine the productivity gains that AI alone could deliver. If demand was truly unlimited (in other words, whatever we produced would find a buyer), then how much more productive could AI make us with a potentially limited labor supply?

Even with conservative estimates, AI’s potential to boost productivity — and therefore, output — could offset the headwinds from changing demographics and a shrinking skilled labor force. And while many experts predict that productivity gains from AI will be relatively consistent across economies, our findings suggest that AI may not disrupt equally, with developed markets possibly showing a greater benefit than emerging markets.

*Per annum, 2020 – 2035
Emerging markets = China and India
Developed markets = France, Germany, Italy, Japan, Singapore, Sweden, UK, and USA
Sources: Oxford Analytica, Mercer

Much of the variance in these projections between developed and emerging markets comes down to the possible impact of AI on different sectors (see Figure 2), and the anticipated speed of AI implementation in different countries. Based on worker profiles, planned investments, and the nature of work in each industry, the financial services and information and technology sectors are likely to benefit the most from AI. Developed economies where these sectors feature more prominently are most suited for AI adoption, and therefore seem to be better positioned for the largest productivity gains.

Sources: Eisfeldt et al, Oxford Analytica

This simulation shows that AI is a vital piece of the productivity puzzle. However, its full potential will be reserved for the businesses that align AI initiatives with the broader goals of creating a positive and cohesive organizational experience. 

Given the escalating global talent crisis, we encourage employers to reassess their strategies, adopt a holistic approach to digital transformation, and reshape workforce planning and work design to support AI implementation. Organizations have several opportunities here.

There is also the opportunity to rethink the productivity equation and the value of human work. Our analysis suggests that AI-driven productivity gains could free up 36 workdays a year for the average worker across countries and industries. However, the real advantage could come from looking at the longer-term impact, and from using time and cost savings for innovation, skill building and helping workers move into more “value-adding” activities. Beyond flowing these savings to the bottom line, investing in more sustainable people practices, an enhanced employee experience, and using AI to drive greater workforce agility will ensure that everyone benefits from AI and automation.

All of this paints a picture of a future where humans and AI work together to achieve unprecedented levels of innovation and efficiency. It also highlights the opportunities created by AI to rethink the value of work and consider all drivers of productivity. With a growth mindset, we will stand firmly on the shoulders of robots, propelled into a new era of unparalleled possibility.