Bank of Canada Governor Tiff Macklem on Friday expressed concerns about the potentially disruptive impact of artificial intelligence (AI) on the job market, cautioning that the technology could eliminate more jobs than it creates in the long run.
“As AI becomes more established in the economy and its impacts more transformative, it could end up destroying more jobs than it creates,” he told the National Bureau of Economic Research’s Economics of Artificial Intelligence Conference held in Toronto, Ontario.
“And the people who lose their work to automation may struggle to find new opportunities,” he added. “This is a concern for us all.”
Macklem stressed that understanding and shaping the labor market impacts will be increasingly important as AI continues to advance and diffuse through economies.
He added that AI may also affect how businesses set prices. “There is already evidence that digitally intensive firms change prices more frequently than less digitally intensive firms.”
AI, in addition, could also affect the level of competition in the economy, although its impact remains ambiguous, according to Macklem.
“Initially, AI-intensive start-ups could seize market share by undercutting incumbents. This would increase competition and lower prices. However, AI could also result in markets dominated by a handful of companies with monopoly power. In this scenario, AI would ultimately lead to less competition and higher prices,” he explained.
Macklem stressed that central banks need to closely understand how AI would affect inflation, both indirectly through overall demand and supply, and directly through price-setting behavior.
He urged academics to work with businesses and policymakers to better understand and predict the impacts of AI.