NEW YORK, NY – Artificial Intelligence has firmly established itself as a valuable tool in the global workplace. AI allows firms to learn better and faster from vast quantities of data, with the potential to significantly improve business decision-making. However the apprehension among workers regarding potential job displacement by AI, it’s critical to study how the workforce composition of a firm is affected. A recent study, co-authored by Columbia Business School Professor Tania Babina, finds that AI impacts the composition and organization of a company’s workforce. The research team finds that companies investing in AI are not seeing workers displaced. Instead, these companies are increasing their demand for workers with more years of education and for workers with data analysis and IT skills.
In the study, Firm Investments in Artificial Intelligence Technologies and Changes in Workforce Composition, Professor Babina and her co-authors, University of California Berkeley Professor Anastassia Fedyk, University of Maryland Professor Alex He, and AI For Good Foundation CEO James Hodson, analyze job postings from Burning Glass Technologies and employment profiles from Cognism, exploring the relationship between a company's AI investment and workforce composition. Their findings showed that from 2010-2018, the percentage of highly-educated workers increased by 3.7%, while the share of employees with no college education declined substantially – by 7.3% once a company started investing in AI. Their results suggest that AI-driven investment increases the demand for workers with undergraduate and graduate degrees. At the same time, the researchers found that AI-investing firms become less top-heavy in terms of their organizational structure, with increasing shares of junior employees and less emphasis on middle-management and senior roles. Overall, their findings suggest that investments in AI are associated with a broader shift toward more junior employees with high educational attainment and technical expertise.
“Our study paints a vivid picture of the evolving landscape shaped by AI investments, with a clear shift to highly educated, skilled professionals and a strategic move away from conventional organizational structures that value middle managers and senior roles,” said Columbia Business School Assistant Professor of Business, Tania Babina. “As more companies continue to invest in AI and similar technologies, highly educated and skilled professionals are positioned to benefit most as AI investment is not associated with the reduction in demand for high-skilled workers performing prediction tasks such as human resources and legal jobs.”
The team collected 42 million resumes and job postings from the two job search databases and matched the companies adding new employees with Compustat data on sales, employment, income, and R&D expenditures. In order to identify AI-related jobs, they looked for skills linked to fundamental AI concepts in job descriptions, including: “machine learning,” “natural language processing,” and “computer vision.” Researchers then compared investment in AI with multiple factors for workforce composition, including market-by-market wages and education from the Census American Community Surveys (ACS), industry-level wages, and employment data from the Census Quarterly Workforce Indicators (QWI).
Key Findings:
- Company’s Structural Overhaul: Companies that invest in AI technology tend to experience a decrease in mid-level and senior management employees, while the share of junior staff increases. Researchers argue that this could be because AI adoption improves individual employees’ decision-making abilities, leading to more worker independence and reducing the demand for managerial staff.
- STEM Degrees More Valued at AI-invested Companies: Increased AI investments are linked to a 1.4% increase in employees with STEM degrees and a decline in employees with social science and medicine backgrounds. Researchers believe this is because AI implementation requires specific STEM skills and knowledge, such as mathematics, statistics, data science, computer programming, and engineering that employers at AI-invested companies seek in potential employees.
- Increased Demand for Employees with Advanced Degrees: Companies investing in AI have shown a notable uptick in the proportion of employees holding master's or doctoral degrees. This suggests that AI investment impacts the level of advanced education employees have in a given field, not just what they choose to study.
“AI stands as the cutting-edge catalyst propelling skill evolution in our workplaces,” said Professor Babina. “While the study was done before the release of massive tools like ChatGPT and DALL-E, with these new innovative tools being available to all workers, workplaces investing in AI now have the possibility to supercharge the capabilities of their existing technology. This will likely accelerate the patterns we see in this study.”
To learn more about the cutting-edge research being conducted, please visit Columbia Business School.
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