AI adoption spurs hiring and retraining, not layoffs: New York Fed

NEW YORK, UNITED STATES — A recent survey by the New York Federal Reserve has shed light on how artificial intelligence (AI) is impacting the labor market in the New York-Northern New Jersey region. 

The findings suggest that AI adoption may lead to more hiring and retraining rather than widespread job losses, contrary to popular concerns.

AI usage on the rise across industries

The report, titled “AI and the Labor Market: Will Firms Hire, Fire, or Retrain?,” 25% of service firms and 16% of manufacturers reported using AI in the past six months. 

The most common applications were in marketing, advertising, business analytics, and customer service. Looking ahead, about a third of service firms plan to use AI in the next six months, a 7% point increase from current usage.

Among the companies using AI, 80% relied on generative AI platforms, with about half using free services like ChatGPT.

Hiring outpaces layoffs as AI adoption grows

Among firms planning to use AI in the next six months, 19% of service firms and 7% of manufacturers expect to hire new workers. In contrast, only 12% of service firms and no manufacturers anticipate layoffs due to AI. This suggests a net positive impact on employment.

Interestingly, planned new hires would mostly require only a high school diploma, indicating AI’s potential to create opportunities for less educated workers.

Meanwhile, 54% percent of service firms and 47% of manufacturers planning to use AI in the future expect to retrain their workforce in the next six months. This far outpaces the number of firms planning to hire or lay off workers due to AI implementation.

Wage expectations remain stable amid AI integration

The survey also explored wage expectations due to AI adoption. Most respondents reported negligible expected changes across education levels, ranging from a 1.5% decline to a 1.4% increase. However, a larger share of firms expected wage increases rather than decreases.

These findings suggest that AI may not drastically disrupt the labor market in the near term, with firms focusing on retraining rather than downsizing their workforce. However, the long-term impact of AI will depend on its further integration into business operations.

“More changes might also come later when AI is more fully integrated into business processes. As such, we will continue to monitor the use of AI to improve our understanding of how AI will shape the labor market in the years to come,” the report concluded.