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Don’t fear AI; Canada could benefit more than most

A version of this article appeared in the Globe and Mail on 3rd January, 2024. Read that version here.

The giant leap forward for artificial intelligence has inevitably led to concerns about the potential for mass unemployment. Tripping over themselves to capture the headlines, economic forecasters have been one-upping each other on the number of potential AI-related job losses to come.

The World Economic Forum estimated 83 million potential global losses in the next five years because of AI, for example. But this was quickly overshadowed by a report from Goldman Sachs heralding a 300 million figure, equivalent to 10 per cent of the global work force.

Worse still for Canadians, these estimates generally suggest that the professional services roles that form a large share of employment in this country are most at risk. Some studies argue that almost 50 per cent of jobs in advanced economies are exposed to automation by AI.

Dire warnings about the impact of new technologies on the ability of humans to earn a living are nothing new, with the loom smashing Luddites of 19th-century England perhaps the best-known historical example. While such concerns may seem misplaced from our vantage point, the far-reaching nature of AI and the sheer speed of recent progress means governments need to be well attuned to the risk of job losses.

More encouragingly, however, history also shows that new technologies almost always have large positive effects that are hard to foresee. One particularly striking example is the introduction of ATMs in the 1970s. Rather than replace bank tellers as most would have expected, those workers who no longer had to spend time simply distributing cash were able to provide more valuable financial guidance, and the number of customer-facing bank workers has continued to rise over time.

When it comes to the impact of AI, we need to think well beyond the implications for any single occupation or sector, because AI has the potential to be as transformative as railways, electricity, computers or the internet. Those technologies diffused throughout the economy and raised productivity in almost every sector. This led to a corresponding rise in demand for workers, which more than offset the narrow negative effects of the new technologies on certain individual occupations.

In short, AI will allow us to do more with less, freeing up scarce resources for other valuable aims. And Canadians could benefit more than most.

Canada is home to some of the best AI researchers outside of the U.S., has already attracted significant private investment in AI and is seeing more AI-related business startups per capita than most advanced economies. The recent AI, Economies and Markets report by Capital Economics (available on our dedicated AI page) also shows that there is scope for a faster rate of diffusion of AI systems throughout the economy than in many other countries.

For example, compared with many European economies, Canada stands to benefit from various factors including a higher share of science and technology graduates, higher propensity for companies to invest in new software, greater openness to high-skilled immigration, and a supportive policy backdrop more generally.

That said, there are still many challenges to overcome to make the most of these opportunities. Having some of the best researchers in the world means little if their innovations are commercialized by firms outside of Canada. So it’s encouraging that the government has made the commercialization of domestic AI research one the key pillars of its Pan-Canadian Artificial Intelligence Strategy.

The biggest challenge is likely to be the push and pull between different regulatory aims. Too little regulation risks the power of AI being concentrated in the hands of a few and misused. This could easily cause a public backlash that acts as a major hurdle to adopting the new technologies for more productive purposes. At the same time, too much regulation risks limiting Canadians’ access to important innovations developed elsewhere, hampering the diffusion of AI throughout the economy.

There are no easy answers, but it is clear that Canada can’t take its advantages for granted.