The case for AI as an engine of job growth, not a layoff machine

• A growing chorus of economists led by Torsten Slok is making the case for AI creating job growth.
• The Apollo chief economist argues that lower labor costs can actually increase demand and add jobs.
• Still, companies continue to cite AI as a reason for staff layoffs.

Since AI first emerged as a transformational force, one of the main worries has been the impact on employment. In an imagined dystopian future, the machines have taken over large swaths of jobs and left a large workforce void in their wake.

But that outlook has been increasingly challenged by those arguing the opposite: AI will help certain industries grow, offering more employment opportunities, as well as higher pay.

Torsten Slok, the chief economist at Apollo Global Management, has been one of the loudest voices in the "AI is additive" camp. In fact, he's penned five different blog posts on the subject in the past week alone.

At the center of Slok's view is the so-called Jevons paradox, under which declining labor costs cause the addressable market of work to expand. That, in turn, leads to an increase in the number of firms and workers in a field.

Slok cites the radiology industry as a perfect example of the paradox in action. A decade ago, AI was supposed to wipe out the field. Instead, radiologists now make more than $500,000 a year, and their employment continues to grow, Slok says.

"Reading scans is a task, not a job, and when the task gets cheaper, demand for the job grows," he wrote in a blog post.

Just yesterday Slok rolled out a new piece of supporting evidence — this time a historical comparison to the early-2000s era when China joined the World Trade Organization.

Slok recalls that the move was expected to be similarly disruptive to US employment. The only difference is that the "China shock" threatened manufacturing jobs, while AI is seen as more of a headwind to white-collar professions.

What ended up happening? Unemployment stayed low. Productivity gains created more new jobs than were replaced. The nightmare scenario didn't play out. Slok sees the US following the same playbook now.

While Slok's line of thinking is all well and good, it hasn't stopped companies from laying off employees and blaming AI in the process. So what gives?

First, a key caveat of Slok's must be considered. In an interview with Bloomberg TV on Tuesday, he conceded that AI will disproportionately impact companies in the software and programming industries. He compared it to "very regional-specific" disruptions felt in US manufacturing after the early-2000s China shock.

Wouldn't you know it, software companies — Salesforce, Atlassian, and IBM to name a few — have been well-represented among those announcing AI-driven layoffs. But under Slok's logic, these displaced jobs will be more than offset by newly created ones in AI-adjacent areas.

Second, it's entirely possible that underperforming companies are throwing AI under the bus. It's become a convenient scapegoat for firms looking to escape accountability for operational shortcomings.

In most cases, the line between new AI-driven efficiencies and corporate mismanagement is blurry. But if Slok is to be believed, it'll become clearer over time, for better or worse.