The tech jobs market is as strong as it ever was

But there’s still a mixed bag of data out there

After the big companies conducted mega layoffs at the beginning of this year, it would be natural to think that the tech unemployment rate would skyrocket. If we think about tech jobs as purely IT, engineering and developer kinds of roles, then those jobs are definitely still in demand and less affected than you might imagine.

There’s a big factor working in the favor of tech professionals looking for work: They’re sought after in both the technology industry and across other industries that also require workers with the same technical skills. Those non-technology companies are finally getting a shot at some of the better talent that has been locked in tech industry jobs for the last few years.

Still, when you add tens of thousands of people to the unemployment payroll, it’s bound to have an impact eventually — even if all those jobs weren’t pure tech jobs.

Right after the latest jobs numbers came out earlier this month, the number of job openings across all sectors fell to its lowest level in two years. What’s more, CompTIA found that tech job posting volume was down, suggesting that companies might have put hiring on hold, at least for the short-term.

This hardly seems surprising, given that the Fed has been raising interest rates for the last 19 months with the specific goal of cooling the economy. In fact, over the last year, rates ballooned from 1.68% in July 2022 to over 5% today. The attempts seemed to have worked if the declining jobs data is any indication.

Fed interest rate hikes from July 2022 to July 2023 Image Credits: FRED

When we looked at the tech jobs outlook in February, we expected it to be worse than it was, but tech jobs growth remained surprisingly strong. Today, the picture isn’t quite as bright — though not awful — but there is clearly a shifting landscape for tech workers.

And you may ask yourself, “How did we get here?”You may recall (or may have stricken it from your memory due to the trauma) that in March 2020, we went into a lockdown. That caused the economy and tech jobs to plunge briefly, but throughout that year and into 2021, companies began recognizing that there was a business opportunity in having so many workers at home.

02

AI to have greater impact than job market disruption risks

ARTIFICIAL intelligence (AI), a technology nearly half a century in the making, has finally taken the world by storm.

AI-powered chatbots, such as ChatGPT, have captured the imagination of people around the world, thanks to their broad utility.

Meanwhile, the recent blockbuster financial results of the world’s leading AI chipmaker Nvidia Corp demonstrate that smart money is now pursuing the AI dream.

Scientific research on building computers capable of simulating intelligent, human-like behaviour can be traced back to the 1980s. But advances in computing power have now brought practical applications of AI within reach.

As a general-purpose technology, AI can now be applied in any field, ranging from cancer diagnosis and urban planning to fraud detection.

It also has the potential to offer breakthrough solutions that are incomparably better than existing approaches.

Singapore is among a handful of governments worldwide that have already prepared a policy framework to harness AI’s benefits in recognition of its transformative potential. The republic initiated its National AI Strategy in 2019.

Like any other modern technology, however, AI has been greeted with both exuberance and scepticism.

The exuberant lot is hopeful that AI’s transformative powers will land immediate benefits by sending growth into hyper drive worldwide.

The sceptics are worried that the human-like attributes of the new technology will result in massive unemployment as knowledge workers, such as infocomm professionals, physicians, pharmacists, architects, engineers, scientists, designers, accountants, lawyers and teachers, are replaced by machines.

The ultimate versions of both sides of the debate are probably off the mark. A more plausible scenario lies in the middle.

No matter how promising a new technology is, it takes time to build the hardware on which it will run and more time for it to get usefully adopted across the economy.

In addition, regulatory frictions, fragmented global supply chains, geopolitics, infrastructure constraints and social acceptance will extend the adoption timeline and limit economic impact in the near future.

Still, years of academic research indicate that AI will eventually have a significant impact on the global economy.

From a macroeconomic perspective, for any technology to be truly transformative, it must augment either labour or capital – the two most crucial factors needed to boost productivity.

Cutting output costs

A simple example of capital augmentation is replacement of wood by steel to increase the productivity of a plough. AI can automate much more complex mechanical processes or replace entire production lines with robots and in time lower the cost of output.

We have already seen this cost reduction impact on durable goods prices, which declined by 35% in the three decades to 2020, thanks to automation.

In services, though, prices have increased by 120% in the same period. Even after the surge in usage of digital apps and eCommerce platforms by consumers during the Covid-19 lockdowns, there has been little to no price impact and hence no productivity gains.

But since AI’s biggest attribute is to mimic human intelligence, it would augment the cognitive skills and abilities of the existing labour force in the service industries as well.

Hence, one staff member in a professional services office should eventually be able to do the work currently done by five, or even 10 people, for example.

Thus, AI’s potential to cut costs in the service economy will be transformative.

A study by the National Bureau of Economic Research (NBER) found that customer service workers at a Fortune 500 software firm who were given access to generative AI tools became 14% more productive on average than those who were not, with the least-skilled workers reaping the most benefit.

In addition, the NBER study conducted by researchers at Stanford University and the Massachusetts Institute of Technology show that AI helps improve customer sentiment, reduces requests for management intervention and improves employee retention.

With production processes and a labour force that are more productive, companies will be able to lower their products and services’ prices, boost sales and generate more profits.

In this scenario, companies would also not mind sharing part of the monetary benefits of increased productivity with their workers. In turn, higher incomes would boost consumption of goods and services.

As profits and consumption increase, companies will make new investments in production capacity, services and new jobs, leading to the explosive growth estimates experts have given in recent years.

For instance, PwC, one of the world’s top accounting firms, estimates that AI could contribute up to US$15.7 trillion to the global economy by 2030, almost as much as the current output of the European Union.

Of this, US$6.6 trillion is likely to come from increased productivity and US$9.1 trillion is likely to come from consumption-side effects.

Higher productivity

US investment bank Goldman Sachs predicts that as tools using advances in AI work their way into businesses and society, they could drive a 7%, or almost US$7 trillion, increase in global gross domestic product and lift productivity growth by 1.5 percentage points over a 10-year period.

Experts at Boston Consulting Group (BCG) believe that if cost reduction and falling prices are how AI delivers significant productivity growth, then consumers will be the winners. Lower prices will boost real incomes that can be spent elsewhere.

“Consider that food once took a significant share of people’s wallet, but as prices fell – via mechanisation and, later, fertilisers – income was freed up to spend on household goods and services, such as tourism.

“This is how tech drives aggregate growth – and how dystopian predictions of mass unemployment have not come to pass because new spending also creates new jobs,” said Philipp Carlsson-Szlezak, BCG’s global chief economist, in a report.

“But for companies, this means that the productivity cascade – tech-cost-price-income – is a threat as much as opportunity. Firms that can lead down the cost curve, maintain relative advantage, lower prices and capture market share will be winners – at the expense of those who cannot,” he added.

However, some disruption in the labour market is still expected.

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