The U.S. labor market had an extra bright spotlight on it at the Federal Reserve Bank of Kansas City’s Annual Symposium this year. It started when the K.C. Fed decided on the theme of the event, as it always does, months before the end-of-summer start date: “Labor Markets in Transition: Demographics, Productivity and Macroeconomic Policy."
Months ago the K.C. Fed clearly had no way to know that the US. labor market would become a red hot spotlight on the monetary policy side of Jackson Hole symposium ledger after the July jobs report in early August suddenly showed a big slowdown in payrolls growth and steep downward revisions in the two previous months — which in turn no doubt led Jay Powell in his Jackson Hole speech to focus on “risks to employment to the downside” as a key factor in determining what policy steps it takes next.
Enter Steven Davis. He was a discussant on the Fed’s panel, “Macroeconomic Consequences of Declining Labor Mobility.” He is a senior fellow at both the Stanford Institute for Economic Policy Research and at the Hoover Institution at Stanford. And while he covers all kinds of economic issues in his “Economics, Applied” podcast, his Stanford research focus is listed as “work” and “money and finance.” Perfect for the labor market issues raised at the symposium.
On the monetary policy side, where the Fed seems to think the data on the recent pullback in the growth in payrolls in the latest jobs report shows that it’s time for it to get on the rate cut path, Steve notes some key factors. One, that the sharp curtailment in immigration to the U.S. is the biggest factor accounting for the reduction in job growth. In other words, a drop in supply for workers, not in demand for workers, and — my interpretation: not necessarily a reason to cut rates.
On the research side, where the symposium focused on the U.S. labor market in transition, participants discussed a number of fascinating issues: domestic migration of workers across states and between cities, how employers offering some work-from-home benefits have helped keep down inflation, how generative AI may end up helping both skilled and unskilled workers advance in their jobs, and much more.
So dive in and hear what Steve has to say. Spoiler alert on what he thinks the sharp slowdown in jobs growth means for the Fed: it’s all about meals. Jay Powell may have set the table for a September policy change, but it doesn’t mean he’s going to serve the tasty rate cut lunch for which so many are hungering.
Special note: for those of you who might want to know more about the work and research done by Steve ’s former friend and colleague Edward “Eddie” Lazear, mentioned in our interview, I have included a link to his bio below.
The labor market rules and runs cold 00:02:29:13
Jay Powell said it pretty well in his speech. There's both a reduction in labor supply. Coming from the really sharp reduction in immigration. So that's one thing that's happening. And there are some signs that there is a bit of weakening in labor demand, perhaps beyond the reduction of labor supply, but perhaps not. But I think we should have expected that there would be a reduction in payroll employment growth because of the sharp restriction in immigration that began in the latter months of the Biden administration, but then basically got almost completely choked off during the first few months of the Trump administration.
Job revisions make more sense than data as originally reported 00:03:10:03
So I was actually a little bit surprised about the payroll numbers that came out before the revisions. They seem to be surprisingly strong. So now they're probably a bit closer, to what is the natural employment growth in the US economy so long as we stick with this highly restrictive, immigration policy. I guess you would put that in this mix of what's driving it.
Normal growth is…lower…drum roll, please 00:03:57:07
And there's also more caution because, how do you decide what to do in that situation. Right. Well it's tough, but one thing my, friend and former colleague Ed Lazear often emphasized is just to take the natural growth in the working age population, and use that as to get a handle on what the normal growth is for the economy…The thing we have to recognize now is that the normal growth in jobs for the economy today is a lot less than it was 18 months ago, mainly because of the reduction in immigration. I haven't done these calculations myself recently, but people I trust who have say it's probably around 50,000 to 60,000, job new jobs per month on net.
Today’s Normal- mostly a supply side reduction 00:04:41:11
So anything that's like normal, that's today's normal. Normal. Okay. That's today. Exactly. Well, that's not, what, two years ago, but that's the key thing. So. So when we talk about normal, we have to be very careful. What we mean here. Normal today is that I'm using the term is not at all the same as it was two years ago. Because of the sharp curtailment in immigration. We were having million, 2 million, up to 3 million new, immigrants net in the United States per year during parts of the Biden administration. And now it's virtually choked off. So that is a huge change in the labor supply side of the labor market. I think that's the biggest factor accounting for the reduction in job growth.
Other headwinds- 00:05:21:00
There are some other headwinds come from coming from, the tariff policy and and the uncertainty around that. But I think the thing that people don't probably give enough attention to is the enormous restriction, enormous cutback in immigrants.
Costs rise and the amount demanded recedes 00:05:58:13
<Tariffs cause> higher production costs when they're, when they're <firms are> purchasing intermediate inputs from abroad or they're using intermediate inputs produced in the United States that themselves made using foreign imports. But then again, in addition, as they pass along higher costs some of those higher costs to consumers, they may sell less of their goods and services as a result. That's one thing that's kind of the standard effects of tariffs.
Uncertainty is an added factor 00:06:24:23
But perhaps more important in the last few months is just the uncertainty that has surrounded the tariffs, which is definitely a factor, making businesses more cautious about investment and also making some consumers more cautious about investments in, say, new automobiles. Sure. Household durables and so on. So those are things that those are some of the headwinds that I referred to earlier on the demand side of the economy that I think are also in play, and that will remain in play, and could get worse, could get better depending on what the, what President Trump decides to do with respect to tariffs. So it's interesting to me in the sense that, you know, there's been a lot of debate around the Federal Reserve and what their mandate and what they can take on and what they can't.
Should the Fed toss maintaning credibility into the mix? 00:07:57:10
That's right. And so there are two sides to this argument <about cutting rates or not>. What I would add to what you said, in what ways and my thinking is remember that the Fed did has taken a hit to its credibility and its reputation from what played out in the period from 2021 to 2022 in particular, there was a big inflation surprise. It was much more than the fed had been projecting. And so in the current environment, that's not too long ago. I put a little bit more weight than some on…not wanting to let inflation get out of control again… Because we've already taken some hit to our credibility, both our, our credibility for technocratic competence, but also our credibility to, manage the inflation rate in an appropriate way.
Lunch is on the menu but will it be served in Sept? 00:09:12:07
So I think the way I, the way I heard, Chair Powell speech is he set the table for a probable rate cut in September, but he also left open the possibility that lunch will not be served, whereas I think the markets took it as lunch is almost surely going to be served. And what do you want for lunch.
Internal dynamics tell a story, too 00:09:56:17
How about, domestic migration of workers across states and between cities? What's going on now? That was one of the interesting things that came out from this research. And then the panels like for the paper I discussed, that was delivered by Karen Dynan, was on exactly that issue. And the picture there is mixed. So I think the central point of her paper with her coauthors was we don't see any big evidence that there's been a decline in the willingness of Americans to move across states in response to state specific labor demand shocks.
Some labor mobility issues may remain 00:10:29:22
So that sounds okay. That sounds reasonably reassuring. On the other hand, we have seen in other work that the differences in wages across local areas in the United States has spread out. One aspect of this is the kind of the well known rise of these high wage cities like Francisco, San Jose, New York, Boston and decades past that would have drawn a lot of people into those cities and helped arbitrage those wage differentials spatially. That doesn't happen as much in the US economy as it used to. So that's a concern. Another concern really, and this is feeds into why I think the political polarization in the United States. There are some places and people in those places who feel they've been left behind with some justification. There are neither enough jobs moving in, nor maybe enough people moving out, to kind of equalize things across different parts of the country.
A labor force remedy: reduce this rigidity 00:11:25:12
So I think we do need to continue to think about how can we facilitate job creation, especially in those parts of the country where there's a lot of underutilization of the labor force where young people leave because there's no good opportunities in the labor market, or facilitate the migration of the people in those areas to places where job opportunities are better.
Some workers trade amenities/flexibility for less pay gain 00:12:30:02
There's several things that this really is a big, profound change. As you said so early on, what happened is, many employers found it possible to, kind of ease their wage gains by offering some of their employees the opportunity to work remotely. Most people, not everybody. They really value the opportunity to work at home. And I don't mean full time remote, necessarily, even 1 or 2 days a week... just makes many aspects of life easier, especially for people who have young kids in the household. So, people - some people- took that deal and employers that were able to take advantage of that opportunity were able to slow their wage growth; that process is largely played out. But I think it had a beneficial effect in the United States.
Trading amenities for wages slowed wage inflation 00:13:15:22
It's one of the reasons we've had relatively slow, measured wage growth coming out of the Covid crisis, because people were taking some of the gains in the form of the amenities value they attached to work from home. It helped the fed bring down inflation, quickly without it. And it helped the Fed avoid a wage price spiral. Helped.
The long commute… 00:13:36:03
And so all that's all great. It's kind of in the past what's been building that more gradually though is as employers turnover their workforces. What you see in the data and I talked a little bit about this here in the conference is an increasing number of employees, especially people hired since 2020, who are living a long way from their employer’s worksite, like 50 miles or more. And, just to give you an idea of the number that was maybe 3 or 4% of employees before the pandemic, it's up to about 10% now. And it's probably headed to more like 12% or 13%. So that, that that's, interesting for a lot of reasons. It means employers can expand the geographic reach of their recruiting efforts. And it means that people who don't want to live in a dense urban area, but have the kinds of skills where the that's where the jobs are now. They can maybe live in the exurbs, but they only have to come, come in two days a week. Well, then you can probably live 50 miles away, but not if you have to come in five days a week.
AI a phenomenon of huge interest 00:14:41:17
Well, so, looking ahead, AI, artificial intelligence, and it's by people who are investing in it or the companies and many people who study it. They're big, big on it. Right. This was a very positive outlook of all the good it could do. There's still a concern, obviously, about the jobs that it will replace. I think too, that, I'm a little bit of a skeptic to this to the degree that I think there's a lot of hype and… Oh, boy, this is the greatest thing.
Pay-off may still be down the road 00:15:21:03
Put your money in it now. But this may, it may not turn out to be all that is expected. First I want to distinguish between the different kinds of AI. There's kind of generative AI, which is already here for many of us. You know, ChatGPT is just the most prominent example. It's here already. It's already having some effects on, say, entry level software, coding jobs and that type of thing. Okay, so that's in play already. But then there there's also the kind of thing that, Ruth Porat talked about in her remarks. And of course, Ruth Porat is the president and chief investment officer at Google. Not a bad job to have.
Productivity enhancing AI 00:16:51:15
Some forms of artificial intelligence are, are great at doing that and vastly reducing the cost. So that's, that's not generative AI. That is reducing the cost of certain kinds of scientific enterprise. Now, those things I don't have a good sense of how many of those there are, how frequent will come along.
A big deal but it still has a gestation period 00:17:15:13
But I think I'm reasonably confident that over the long term, those are going to matter a lot. And even generative AI is going to matter a lot. Maybe not in the next three years, but eventually. Yeah. So I'm kind of in the view of, yeah, this is a big deal, but don't expect it to all unfold. And next 3 to 5 years.
Who benefits from AI/Who gets hurt? 00:19:08:12
We could. And it's hard to say exactly who will get the most benefit from advances in AI, but, I think they will be spread widely. They have, but I'll just say we're not certain about this, but I'll give you some examples. There are, studies out there already that find evidence that generative AI, for example, is good at helping people with low levels of skills kind of reach the medium. If you think of like call centers, if you're if you're a customer service representative, you know, I can't bring you all the way up from the lower quartile of customer service quality, but they might be able to bring you up to the median by telling you, well, here's a suggestion on how you should answer this question or that question and so on. So that sounds like it would raise the productivity of, kind of moderate to medium-skilled workers. But there are other cases in which it looks like AI might actually boost the productivity of the most skilled workers. And then there's the question of, well, how much of the gains will flow to the developers of AI or the owners of the AI property rights as opposed to consumers and in the form of lower prices and, and better products.
Steven J. Davis
Steven Davis is the Thomas W. and Susan B. Ford Senior Fellow and Director of Research at the Hoover Institution, and Senior Fellow at the Stanford Institute for Economic Policy Research (SIEPR). He was on the faculty at the University of Chicago Booth School of Business for more than 35 years, including service as deputy dean of the faculty.
He is also a research associate of the National Bureau of Economic Research, visiting scholar at the Federal Reserve Bank of Atlanta, senior adviser to the Brookings Papers on Economic Activity, advisor to the Monetary Authority of Singapore, elected fellow of the Society of Labor Economists, IZA Research Fellow, and senior academic fellow of the Asian Bureau of Finance and Economic Research. He hosts Economics, Applied – a video podcast series sponsored by the Hoover Institution.
Davis is a co-creator of the Economic Policy Uncertainty Indices, the Survey of Business Uncertainty, the U.S. Survey of Working Arrangements and Attitudes, the Global Survey of Working Arrangements, the Work-from-Home Map project, and the Stock Market Jumps project. He cofounded and co-organizes the Asian Monetary Policy Forum, held annually in Singapore.
Awards and Honors:
Addington Prize in Measurement (2012)
Society of Labor Economics, Elected Fellow (2015)
Trailblazing economist and presidential adviser Edward Lazear dies at 72
The SIEPR senior fellow founded the field of personnel economics.
https://siepr.stanford.edu/news/trailblazing-economist-and-presidential-adviser-edward-lazear-dies-72
Described as “perhaps the foremost labor economist of his generation,” economist, White House adviser and Stanford University professor Edward P. Lazear passed away from pancreatic cancer on Nov. 23.
Recognized as the founder of the field of personnel economics, Lazear’s boundless energy and entrepreneurial spirit have led to contributions in many domains. At Stanford University, he served as the Morris Arnold and Nona Jean Cox Senior Fellow at the Hoover Institution and the Davies Family Professor of Economics at Stanford Graduate School of Business. He was also a Senior Fellow at the Stanford Institute for Economic Policy Research (SIEPR).
“Ed was a pioneering labor economist, a gifted teacher, an accomplished public servant and an extraordinary colleague,” said Condoleezza Rice, director of the Hoover Institution.
“Ed brought a love of economics to generations of students and colleagues,” said Jon Levin, Philip H. Knight Professor and Dean of Stanford GSB. “His classes invariably were oversubscribed, and Stanford GSB students recognized him with both the MBA and PhD teaching awards. His infectious enthusiasm for ideas made him an all-time great seminar participant and an active convener of his colleagues. His colloquium (the ‘Eddie Lunch’) brought faculty together from across Stanford for two decades.”
Lazear served at the White House from 2006 to 2009, where he was chairman of President Bush’s Council of Economic Advisers. Lazear was a trusted confidant to President George W. Bush and played a key role in fashioning the response to the financial crisis in 2007 and 2008. Lazear was both an adviser and friend of the president, even earning the nickname “Stork” from the former president for his appearance during their frequent bike rides at Camp David. The two maintained their friendship ever since.
A champion of free-market competition and capitalism, Lazear had a gift for creating simple, original models that cut to the heart of an economic problem. His book Personnel Economics, published in 1995, established a new field in labor economics, focused on human resource practices and incentives in organizations. He made important contributions as well in education, immigration, productivity and entrepreneurship.
A student of and intellectual successor to economist and Nobel Laureate Gary Becker, Lazear founded the Society of Labor Economists and later served as its president. He was the founding editor of the Journal of Labor Economics, and also founded the working group on Personnel Economics at the National Bureau of Economic Research.
“Eddie Lazear was an incredibly creative, productive, and influential economist,” said Mark Duggan, the Wayne and Jodi Cooperman Professor of Economics and the Trione Director of SIEPR. “He was also a dedicated teacher, advisor, and mentor to so many economists early in their careers. He will remain an inspiration to all economists and social scientists trying to advance knowledge and to improve economic policies for the benefit of the world. All of us in the SIEPR community will miss him greatly and we will never forget his passion for economics and his generosity.”
Lazear won practically every award labor economics has to offer, including the Leo Melamed Prize, IZA Prize in Labor Economics, the Jacob Mincer Prize, election to the American Academy of Arts and Sciences, and designation as Distinguished Fellow of the American Economic Association.
“Earlier this year, the Society of Labor Economists established the Edward P. Lazear Prize to recognize outstanding contributions to research, the profession and civil society – a fitting encapsulation of Eddie’s own professional accomplishments,” said Levin, who is also a senior fellow at SIEPR.
Since 2017, Lazear has served as an adviser to the Federal Reserve Bank of Minneapolis. He was a frequent contributor to the Wall Street Journal and other news media. He was an avid traveler, bike rider and skier.
Lazear was born in 1948 and grew up in Los Altos, California. He graduated from UCLA and received his PhD in Economics from Harvard University. He taught at the University of Chicago for nearly 20 years before joining the Stanford faculty.
Lazear is survived by his wife, Victoria, his daughter, Julie Lazear, and son-in-law Dustin Dupuis.
The labor market rules and runs cold 00:02:29:13
Jay Powell said it pretty well in his speech. There's both a reduction in labor supply. Coming from the really sharp drop in immigration. So that's one thing that's happening. And there are some signs that there is a bit of weakening in labor demand, perhaps beyond the reduction of labor supply, but perhaps not. But I think we should have expected that there would be a reduction in payroll employment growth because of the sharp restriction in immigration that began in the latter months of the Biden administration, but then basically got almost completely choked off during the first few months of the Trump administration.
Job revisions make more sense than data as originally reported 00:03:10:03
So I was actually a little bit surprised about the payroll numbers that came out before the revisions. They seem to be surprisingly strong. So now they're probably a bit closer, to what is the natural employment growth in the US economy so long as we stick with this highly restrictive, immigration policy. I guess you would put that in this mix of what's driving it.
Normal growth is…lower…drum roll, please 00:03:57:07
And there's also more caution because, how do you decide what to do in that situation. Right. Well it's tough, but one thing my, friend and former colleague Andy Beshear often emphasized is just to take the natural growth in the working age population, and use that as to get a handle on what the normal growth is for the economy…The thing we have to recognize now is that the normal growth in jobs for the economy today is a lot less than it was 18 months ago, mainly because of the reduction in immigration. I haven't done these calculations myself recently, but people I trust who have say it's probably around 50,000 to 60,000, job new jobs per month on net.
Today’s Normal- mostly a supply side reduction 00:04:41:11
So anything that's like normal, that's today's normal. Normal. Okay. That's today. Exactly. Well, that's not, what, two years ago, but that's the key thing. So. So when we talk about normal, we have to be very careful. What we mean here. Normal today is that I'm using the term is not at all the same as it was two years ago. Because of the sharp curtailment in immigration. We were having million, 2 million, up to 3 million new, immigrants net in the United States per year during parts of the Biden administration. And now it's virtually choked off. So that is a huge change in the labor supply side of the labor market. I think that's the biggest factor accounting for the reduction in job growth.
Other headwinds- 00:05:21:00
There are some other headwinds come from coming from, the tariff policy and and the uncertainty around that. But I think the thing that people don't probably give enough attention to is the enormous restriction, enormous cutback in immigrants.
Costs rise and the amount demanded recedes 00:05:58:13
<Tariffs cause> higher production costs when they're, when they're <firms are> purchasing intermediate inputs from abroad or they're using intermediate inputs produced in the United States that themselves made using foreign imports. But then again, in addition, as they pass along higher costs some of those higher costs to consumers, they may sell less of their goods and services as a result. That's one thing that's kind of the standard effects of tariffs.
Uncertainty is an added factor 00:06:24:23
But perhaps more important in the last few months is just the uncertainty that has surrounded the tariffs, which is definitely a factor, making businesses more cautious about investment and also making some consumers more cautious about investments in, say, new automobiles. Sure. Household durables and so on. So those are things that those are some of the headwinds that I referred to earlier on the demand side of the economy that I think are also in play, and that will remain in play, and could get worse, could get better depending on what the, what President Trump decides to do with respect to tariffs. So it's interesting to me in the sense that, you know, there's been a lot of debate around the Federal Reserve and what their mandate and what they can take on and what they can't.
Should the Fed toss maintaning credibility into the mix? 00:07:57:10
That's right. And so there are two sides to this argument <about cutting rates or not>. What I would add to what you said, in what ways and my thinking is remember that the Fed did has taken a hit to its credibility and its reputation from what played out in the period from 2021 to 2022 in particular, there was a big inflation surprise. It was much more than the fed had been projecting. And so in the current environment, that's not too long ago. I put a little bit more weight than some on. Well, not wanting to let inflation get out of control again… Because we've already taken some hit to our credibility, both our, our credibility for technocratic competence, but also our credibility to, manage the inflation rate in an appropriate way.
Lunch is on the menu but will it be served in Sept? 00:09:12:07
So I think the way I, the way I heard, Chair Powell speech is he set the table for a probable rate cut in September, but he also left open the possibility that lunch will not be served, whereas I think the markets took it as lunch is almost surely going to be served. And what do you want for lunch.
Internal dynamics tell a story, too 00:09:56:17
How about, domestic migration of workers across states and between cities? What's going on now? That was one of the interesting things that came out from this research. And then the panels like for the paper I discussed, that was delivered by Karen Dynan, was on exactly that issue. And the picture there is mixed. So I think the central point of her paper with her coauthors was we don't see any big evidence that there's been a decline in the willingness of Americans to move across states in response to state specific labor demand shocks.
Some labor mobility issues may remain 00:10:29:22
So that sounds okay. That sounds reasonably reassuring. On the other hand, we have seen in other work that the differences in wages across local areas in the United States has spread out. One aspect of this is the kind of the well known rise of these high wage cities like Francisco, San Jose, New York, Boston and decades past that would have drawn a lot of people into those cities and helped arbitrage those wage differentials spatially. That doesn't happen as much in the US economy as it used to. So that's a concern. Another concern really, and this is feeds into why I think the political polarization in the United States. There are some places and people in those places who feel they've been left behind with some justification. There are neither enough jobs moving in, nor maybe enough people moving out, to kind of equalize things across different parts of the country.
A labor force remedy: reduce this rigidity 00:11:25:12
So I think we do need to continue to think about how can we facilitate job creation, especially in those parts of the country where there's a lot of underutilization of the labor force where young people leave because there's no good opportunities in the labor market, or facilitate the migration of the people in those areas to places where job opportunities are better.
Some workers trade amenities/flexibility for less pay gain 00:12:30:02
There's several things that this really is a big, profound change. As you said so early on, what happened is, many employers found it possible to, kind of ease their wage gains by offering some of their employees the opportunity to work remotely. Most people, not everybody. They really value the opportunity to work at home. And I don't mean full time remote, necessarily, even 1 or 2 days a week... just makes many aspects of life easier, especially for people who have young kids in the household. So, people - some people- took that deal and employers that were able to take advantage of that opportunity were able to slow their wage growth; that process is largely played out. But I think it had a beneficial effect in the United States.
Trading amenities for wages slowed wage inflation 00:13:15:22
It's one of the reasons we've had relatively slow, measured wage growth coming out of the Covid crisis, because people were taking some of the gains in the form of the amenities value they attached to work from home. It helped the fed bring down inflation, quickly without it. And it helped the Fed avoid a wage price spiral. Helped.
The long commute… 00:13:36:03
And so all that's all great. It's kind of in the past what's been building that more gradually though is as employers turnover their workforces. What you see in the data and I talked a little bit about this here in the conference is an increasing number of employees, especially people hired since 2020, who are living a long way from their employer’s worksite, like 50 miles or more. And, just to give you an idea of the number that was maybe 3 or 4% of employees before the pandemic, it's up to about 10% now. And it's probably headed to more like 12% or 13%. So that, that that's, interesting for a lot of reasons. It means employers can expand the geographic reach of their recruiting efforts. And it means that people who don't want to live in a dense urban area, but have the kinds of skills where the that's where the jobs are now. They can maybe live in the exurbs, but they only have to come, come in two days a week. Well, then you can probably live 50 miles away, but not if you have to come in five days a week.
AI a phenomenon of huge interest 00:14:41:17
Well, so, looking ahead, AI, artificial intelligence, and it's by people who are investing in it or the companies and many people who study it. They're big, big on it. Right. This was a very positive outlook of all the good it could do. There's still a concern, obviously, about the jobs that it will replace. I think too, that, I'm a little bit of a skeptic to this to the degree that I think there's a lot of hype and… Oh, boy, this is the greatest thing.
Pay-off may still be down the road 00:15:21:03
Put your money in it now. But this may, it may not turn out to be all that is expected. First I want to distinguish between the different kinds of AI. There's kind of generative AI, which is already here for many of us. You know, ChatGPT is just the most prominent example. It's here already. It's already having some effects on, say, entry level software, coding jobs and that type of thing. Okay, so that's in play already. But then there there's also the kind of thing that, Ruth Porat talked about in her remarks. And of course, Ruth Porat is the president and chief investment officer at Google. Not a bad job to have.
Productivity enhancing AI 00:16:51:15
Some forms of artificial intelligence are, are great at doing that and vastly reducing the cost. So that's, that's not generative AI. That is reducing the cost of certain kinds of scientific enterprise. Now, those things I don't have a good sense of how many of those there are, how frequent will come along.
A big deal but it still has a gestation period 00:17:15:13
But I think I'm reasonably confident that over the long term, those are going to matter a lot. And even generative AI is going to matter a lot. Maybe not in the next three years, but eventually. Yeah. So I'm kind of in the view of, yeah, this is a big deal, but don't expect it to all unfold. And next 3 to 5 years.
Who benefits from AI/Who gets hurt? 00:19:08:12
We could. And it's hard to say exactly who will get the most benefit from advances in AI, but, I think they will be spread widely. They have, but I'll just say we're not certain about this, but I'll give you some examples. There are, studies out there already that find evidence that generative AI, for example, is good at helping people with low levels of skills kind of reach the medium. If you think of like call centers, if you're if you're a customer service representative, you know, I can't bring you all the way up from the lower quartile of customer service quality, but they might be able to bring you up to the median by telling you, well, here's a suggestion on how you should answer this question or that question and so on. So that sounds like it would raise the productivity of, kind of moderate to medium-skilled workers. But there are other cases in which it looks like AI might actually boost the productivity of the most skilled workers. And then there's the question of, well, how much of the gains will flow to the developers of AI or the owners of the AI property rights as opposed to consumers and in the form of lower prices and, and better products.
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