AI alone cannot shorten the work week

{"text":[[{"start":null,"text":""}],[{"start":5.55,"text":"AI evangelists seem to agree: widespread adoption will lead to a shorter working week. OpenAI chief Sam Altman has called for a reduction to four days; JPMorgan Chase boss Jamie Dimon says three and a half. Microsoft co-founder Bill Gates goes as low as two."}],[{"start":24.05,"text":"But such a future is currently far-fetched. AI productivity gains do not immediately translate to fewer working hours. Assuming we do not see fundamental changes in the structure of the economy, higher costs and more consumption will prevent major increases in leisure time."}],[{"start":40.400000000000006,"text":"AI is already boosting some workers’ productivity and wages. Workers whose productivity is enhanced by the technology could have a short-run choice between enjoying more leisure or more consumption. That is, they can opt to work fewer hours while maintaining the same level of spending, or continue to work for the same amount of time and consume more. "}],[{"start":62.300000000000004,"text":"But this microeconomic story is not the full picture. In an economy where millions of workers simultaneously face this consumption-leisure decision, the macro story is more complex."}],[{"start":75.2,"text":"If some workers choose to work full time, higher consumption could cause aggregate demand to increase. This would push up prices for all consumers, including those who opted for a shorter working week. Ultimately, a higher price level erodes hourly wage gains, putting pressure on those who chose leisure over consumption to work longer hours just to keep up."}],[{"start":95.75,"text":"Of course, AI will also boost the aggregate supply of goods, which should push down prices. But it will do this for some types of goods more than others: software, graphic design services and bad romance novels. On the other hand, areas of work that require lots of human labour and are less impacted by automation, such as the building trades, sanitation and childcare, might not see immediate productivity gains. We could expect the cost of housing and services to increase."}],[{"start":124.55,"text":"If higher salaries in AI-supercharged roles attract workers away from lower-productivity sectors, employers would face pressure to raise wages to retain staff. These higher labour costs could be passed on to consumers: economists call these “Baumol effects”. For some workers, these passed-through costs could raise prices and necessitate more working hours."}],[{"start":145.7,"text":"We can see these Baumol effects in the historical data. In the US, goods such as apparel that have benefited from automation (and outsourcing) are cheaper to buy today than they were in 1970. Meanwhile healthcare, a labour-intensive service with lower productivity growth, has become considerably more expensive. "}],[{"start":166.35,"text":"Housing, transportation and healthcare make up a large share of workers’ consumption baskets. And AI integrations in these sectors might not cut costs enough to keep up with Baumol effects. In turn, some workers could become poorer in real terms. If forced to work more to maintain the same living standard, they would have less time for leisure."}],[{"start":null,"text":""}],[{"start":186,"text":"Perhaps the clearest evidence that higher productivity will not lead to more leisure is historical: in the past, it hasn’t."}],[{"start":194.2,"text":"Though productivity improved dramatically from 1900 to 2005, average leisure time in the US increased by less than one hour per day for younger and older workers, while declining slightly in the middle age bracket. Though real wages and living standards increased significantly, leisure time did not."}],[{"start":null,"text":""}],[{"start":212.75,"text":"Of course, it is possible for people to experience high weekly levels of leisure. History provides many examples of leisure classes in pre-industrial societies, from the aristocrats of Han Dynasty China to the citizens of ancient Athens. These groups, while relying heavily on systems of forced labour for production, eschewed longer hours for scholarly and leisurely pursuits."}],[{"start":237.1,"text":"High amounts of leisure were possible primarily because members of these classes lacked incentives to work more. Norms and technological underdevelopment deterred them from pursuing the cycles of higher production, prices and consumption we observe in the US today."}],[{"start":253.79999999999998,"text":"A feudal lord could not meaningfully boost crop yields by working more hours managing the farm, nor could he invest surplus into capital-intensive machinery. When societies lack the incentives or means to reward more work and production, members collectively choose more leisure. It was not merely the presence of serfs and slaves alone that enabled leisure classes to arise in the past, but a lack of more productive work available to landholders."}],[{"start":279.59999999999997,"text":"Similarly, AI will not automatically enable more leisure time. Technologies do not halt the structural forces that keep working days long and prices high. Without radically different institutions or norms that prevent higher consumption and prices, such as enforced weekly work limits or highly progressive taxes, a shorter working week remains unlikely in the US. "}],[{"start":301.2,"text":"If the AI evangelists believe in the shorter work week, they must also be committed to a future economy that looks very different from the one we have today. Higher levels of leisure could mean lower growth. Ultimately, it will be voters and policymakers, not tech barons, who will decide exactly what technology will augment — our possessions or our free time."}],[{"start":324.55,"text":"Other readables"}],[{"start":326.7,"text":"This piece explores the reality behind data centre capex."}],[{"start":331.09999999999997,"text":"Why aren’t oil prices higher?"}],[{"start":333.2,"text":"Have we solved the “vibecession” mystery once and for all? "}],[{"start":null,"text":"

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"}],[{"start":338,"text":"Free Lunch is edited by Harvey Nriapia"}],[{"start":null,"text":""}],[{"start":347.25,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1778907650_8267.mp3"}