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A “Just” AI Transformation

February 28, 2024

At a glance

      • Up to 60% of global jobs could be affected by AI integration over the years, some in positive ways and others in negative ways. Can we learn from other large-scale transitions?
      • Given that the energy transition also has a significant impact on workers in particular sectors, we look at how relevant Just Transition principles are for an impending AI transformation.
      • We share what responsible practices look like for corporate developers and adopters of AI technologies and provide recommendations to other investors.
Although public panic about a potential artificial intelligence (AI)-induced doomsday has died down a bit, experts agree that AI will change many aspects of our lives. This includes positive opportunities for growth, productivity and innovation. For example, Goldman Sachs predicts that AI adoption will lead to productivity growths of 1.5% a year and increase the value goods and services globally by 7% 1. Productivity growth also means shifts in the way we work. Businesses predict that in 2027 almost half (44%) of workers’ core skills will be disrupted. 2 As such, one of the key messages at the 2024 World Economic Forum in Davos related to the AI transformation was: upskilling and development are crucial to ensure an equitable future of work.
New research 3 by Deloitte surveying corporate leaders on AI, reported that close to 80% said they expect generative AI to significantly transform their company and industry over the next three years. They indicated both excitement and concern and other sources seem to agree. The International Monetary Fund in early 2024 found that 40% of employment globally is exposed to AI. This is even higher at 60% in advanced economies because of a higher prevalence of cognitive jobs. 4 Of that 60%, about half of jobs are predicted to be negatively affected, whereas the other half stand to benefit from AI enhancements.
Unlike previous significant automation advances which mostly affected the lower- and middle-class, job displacement risks from AI integration also extend to higher-wage earners. At the same time, higher paying jobs stand to benefit more from AI integration, which could lead to a competitive advantage and growth in salary for high earners learning how to use AI to enhance skills or outputs. As such, despite high-wage earners being at risk of job displacement, the International Monetary Fund still predicts AI to increase wealth inequality. 5 Similarly, McKinsey found that U.S. workers with lower-wage jobs in manufacturing, customer service, food services and office support are up to 14 times more likely to need to change occupations by 2030 because of AI displacement, while demand for higher-wage professions in healthcare, tech, and transportation will likely grow considerably. 6
If AI transformation will bring change at even half the scale of the agricultural and industrial revolutions, facilitating an orderly transformation with the minimal negative ramifications of these changes requires planning and thinking through unintended workforce and societal consequences. Such a transformation should not create greater inequalities or leave certain groups of people behind.

Where have we heard this before?

What is a Just Transition?

At the time of writing, French farmers have blocked Paris with tractors arguing they are being hit by falling income, environmental regulations, and red tape 7. Similar farmer protests against sustainability policies, increasing taxation, water risks and drought have occurred across Europe. As Chatham House notes: “The farmer protests are a prime example of where sustainability risks are being derailed because insufficient thought has been given to the need for a ‘just transition’.” 8
A just transition can refer to any transition that impacts workers, communities, and companies in a sector (or across sectors) where fairness, equity, employment creation and social justice need to be part of the transition strategy. Most recently the term refers to the shift towards a low-carbon economy. Broad support for decarbonization can only succeed if there are solutions and opportunities available for workers and communities most impacted by this shift. Just as during the industrial revolution, which had profound and sometimes detrimental impacts on farmers and factory workers, a transition to a low-carbon economy can negatively impact workers and communities dependent on high-emitting sectors. If transitions are not being adequately planned for, or the pace of change is happening too fast for policy and social interventions to keep up, this can lead to unemployment, opposition, and civil unrest. 9

Transitions need to bring people along, rather than push people out.

In 2021, BMO GAM signed on to an investor statement communicating investor expectations around Principles for Job Standards and Community Impacts. The five basic tenants were these:

  1. Provide a foundation for decent work, job benefits, and working conditions;
  2. Offer equitable opportunities for quality jobs;
  3. Invest in impacted communities;
  4. Facilitate transparency and accountability;
  5. Support just transition public policies at all levels.

Climate advocacy organization Ceres has also developed a 2030 roadmap to a just and inclusive future with echoes the spirit of these tenants. Just transition advocates often note that transitions involving workers often are most successful when workers themselves are actively part of the decision-making process, and that those affected get a chance to co-develop transition-related strategies.

Applying Just Transition to the AI Transformation

Similar to climate change and climate change mitigation efforts, AI has the potential to reinforce existing injustices and widen inequalities. 10 This includes a widening digital divide between developed and developing countries, reinforced biases in machine-learning systems, and displacement of workers in industries typically outsourced to developing countries, including call centres and IT troubleshooting. While new jobs are created every day to support the kind of data annotation necessary to train machine-learning models, such jobs tend to be precarious, low-wage and prone to human rights abuses. 11 For example, the labelling of photographs, text, audio and other data in different languages to improve AI systems is often subcontracted out to ‘ghost workers’ who perform unseen human labour to train technology systems used by people every day. 12 There have been reports that such contractors are paid below the minimum wage in countries where the minimum wage is already significantly lower than in North America, 13 and are often the first to lose contracts when larger tech companies introduce cost-saving measures.

As such, an AI transformation needs to be grounded in respect for human rights, decent work and bring people along through adequate investments by governments and companies in reskilling, support programs and ensuring equitable opportunities.

Within the AI space itself, work is being done to create guidelines in the absence of fast-moving public policy. ‘Partnership on AI’ is a coalition bringing together diverse voices working in AI to address questions about humanity’s future with AI. It has developed a set of guidelines 14 for AI grounded in the idea that to be able to achieve a better future with AI, the work must be put in today to ensure equitable outcomes, including AI’s impact on jobs. Key risks they identify in the near term include: the consolidation of wealth with a select few companies and countries; wage reduction for deskilled and lower-wage jobs; allocating fulfilling tasks to algorithms; disruptive unemployment patterns when reskilling or upskilling does not get adequately planned for.

Several of the key principles in their AI guidelines and tools share similarities with just transition principles, such as:

  1. Engage workers affected by AI transformations and bring them into development processes to represent collective worker interests;
  2. Seek shared prosperity and generate profits in a responsible manner; and
  3. Improve job quality or satisfaction.
Certain governments have also recognized more formally that an AI-driven technology transformation needs workers to be at the table. Spain as early as 2021 adopted its Digital Rights Charter which aims to protect the rights of citizens in a new era of the internet and AI, 15 addressing algorithmic non-discrimination, the right to request human oversight or intervention of technologies, and the right to participate and shape the public space. At the end of 2023, the Biden Administration in the United States issued an executive order on safe, secure, and trustworthy artificial intelligence, in which it refers to a U.S. blueprint for an AI Bill of Rights. 16 The order specifically touches on supporting workers’ ability to bargain collectively, invest in workforce training and development that is accessible to all, and strengthening federal support for workers facing labour disruptions from AI. 17
Several large unions in sectors already seeing AI-related impacts such as media, telecommunications and technology, have worked hard to enshrine worker rights related to AI into collective agreements. Examples include the Writers Guild of America, SAG-AFTRA and other media unions, and the Communication Workers of America who just recently signed a collective agreement with Microsoft covering workers at its ZeniMax video game studio that obligates the company to inform the union when AI or automation might impact unionized employees’ work, giving them a chance to negotiate over potential impacts. 18 And, Deutsche Telecom together with its worker council issued a manifesto stipulating that the use of AI systems must not have a negative impact on the safety, health and fundamental rights of employees. 19 This is getting ahead of more formalized regulation in the European Union under the “AI Act”20 which is currently going through the legislative process, and takes a risk-based approach to ensure use of AI does not negatively impact fundamental rights of workers, among other things.

Investors can engage with companies developing AI technology as well as companies using and adopting AI technology to ask about their strategy and encourage investee companies to adopt a “just AI transformation” mindset and come to co-developed strategies with workers.

Responsible investor action

At BMO GAM our stewardship work on responsible AI has mostly centered around facial recognition technology and its potential impacts on discrimination, surveillance and data privacy. For anyone interested in learning more about this work, reports on the engagement results can be found here. A main learning was, unsurprisingly, that because regulation is far behind, companies need to make voluntary commitments to uphold ethical principles and demonstrate human rights alignment, including by adopting the UN Guiding Principles for Business and Human Rights (UNGPs). We systematically encourage companies to adopt human rights due diligence practices aligned with the UNGPs, which positions companies to better understand adverse impacts their business conduct is having on people, including their workforce.

 

Going forward, we will be active in engaging companies on responsible AI creation and adoption through a just transformation lens, making use of sources such as the World Benchmarking Alliance’s data on digital inclusion and joining future relevant investor collaborations on the topic.

 

For more information on the potential positive and negative sustainability impacts of AI, please tune in to the BMO Sustainability Leaders podcast: Understanding the Inner Workings of AI | BMO Capital Markets

Footnotes

1 AI may start to boost US GDP in 2027 (goldmansachs.com)

2 6 work and workplace trends to watch in 2024 | World Economic Forum (weforum.org)

3 us-state-of-gen-ai-report.pdf (deloitte.com)

4 Gen-AI: Artificial Intelligence and the Future of Work (imf.org)

5 Gen-AI: Artificial Intelligence and the Future of Work (imf.org)

6 Jobs at Risk That AI Will Replace, Change the Most by 2030: McKinsey (businessinsider.com)

7 France protests: Farmers block major roads around Paris over falling incomes – BBC News

8 European farmers protests show the need for a just transition to Net Zero | Chatham House – International Affairs Think Tank

9 Just-transition-Approach-Report-February-2021.pdf (worldbenchmarkingalliance.org)

10 What We Need for a Just AI Transition (newamerica.org)

11 OpenAI Used Kenyan Workers on Less Than $2 Per Hour: Exclusive | TIME

12 Precarious conditions of AI ‘ghost workers’ revealed by Google termination of Appen contract, union says | Business | The Guardian

13 Millions of Workers Are Training AI Models for Pennies | WIRED UK

14 Guidelines for AI and Shared Prosperity – Partnership on AI

15 La Moncloa. 14/07/2021. Sánchez presents the Digital Rights Charter with which “Spain is at the international forefront in protecting citizens’ rights” [President/News]

16 Blueprint for an AI Bill of Rights | OSTP | The White House

17 FACT SHEET: President Biden Issues Executive Order on Safe, Secure, and Trustworthy Artificial Intelligence | The White House

18 Empowered workers are key for AI to reach its full potential | World Economic Forum (weforum.org)

19 Deutsche Telekom commits to AI ethics | Deutsche Telekom

20 EU AI Act: first regulation on artificial intelligence | Topics | European Parliament (europa.eu)

Disclaimers:

Any statement that necessarily depends on future events may be a forward-looking statement. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties, and assumptions. Although such statements are based on assumptions that are believed to be reasonable, there can be no assurance that actual results will not differ materially from expectations. Investors are cautioned not to rely unduly on any forward-looking statements. In connection with any forward-looking statements, investors should carefully consider the areas of risk described in the most recent prospectus.

 

BMO Global Asset Management is a brand name under which BMO Asset Management Inc. and BMO Investments Inc. operate. Certain of the products and services offered under the brand name, BMO Global Asset Management, are designed specifically for various categories of investors in Canada and may not be available to all investors. Products and services are only offered to investors in Canada in accordance with applicable laws and regulatory requirements.

 

®/™Registered trademarks/trademark of Bank of Montreal, used under licence.

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