Generative artificial intelligence will lead to job cuts this year, CEOs say

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A quarter of global chief executives expect the deployment of generative artificial intelligence to lead to headcount reductions of at least 5 per cent this year, according to a survey unveiled as world and business leaders gathered in Davos, Switzerland.

Industries led by media and entertainment, banking, insurance and logistics were most likely to predict job losses because of cutting-edge AI tools, according to the poll of top directors conducted by PwC ahead of this week’s World Economic Forum. Engineering and construction firms were least likely to anticipate cuts because of automation, alongside technology companies.

Some 46 per cent of those surveyed said they expect the use of generative AI — systems that can spew out humanlike text, images and code in seconds — to boost profitability in the next 12 months, the survey added. However, 47 per cent said the technology will deliver little or no change.

The findings, based on interviews with 4,702 company chiefs spread across 105 countries, point to the far-reaching impacts that AI models are expected to have on economies and societies, a topic that will feature prominently at the annual meetings.

Executives at the forefront of AI, including Sam Altman, the recently reinstalled chief of OpenAI, and Satya Nadella of Microsoft are among those slated to attend. While many economists say they expect AI to lead to productivity gains as it becomes more pervasive, it will also lead to workforce upheaval.

The PwC survey showed that a rising share of executives envisage strengthening economic growth in 2024, but at the same time are exercised by the need to respond to revolutionary developments including generative AI and climate change.

“As business leaders are becoming less concerned about macroeconomic challenges, they are becoming more focused on the disruptive forces within their industries,” said Bob Moritz, global chair of PwC.

“Whether it is accelerating the rollout of generative AI or building their businesses to address the challenges and opportunities of the climate transition, this is a year of transformation.”

A growing number of executives are planning to deploy generative AI in the coming months, the survey showed, after 32 per cent reported they had adopted it across their company in the past year. Some 58 per cent said they expect it to improve the quality of their products or services in the next 12 months, while 69 per cent said their employees will need to learn new skills.

Last year Goldman Sachs predicted that the latest breakthroughs in AI could lead to the automation of a quarter of the work done in the US and eurozone, while sparking a productivity boom that will eventually lift annual gross domestic product around the world by 7 per cent over a decade.

When it comes to risks stemming from AI, the PwC survey showed executives are most worried about cyber security and the spread of disinformation.

In the shorter term, the study pointed to receding anxiety about the broader outlook, with less than a quarter of directors reporting that their firm is “highly/extremely” exposed to the threat of inflation, a steep drop from last year’s 40 per cent reading.

Some 38 per cent thought the global economy will enjoy better fortunes this year, double the 18 per cent who responded similarly in 2023. This is well below the optimism for growth that accompanied the ending of Covid lockdowns in previous years.

The findings reflect hopes that the worst of the inflationary upsurge that hit economies from 2021 onwards has now passed, and comes amid investor speculation that central banks led by the US Federal Reserve will start cutting policy rates as soon as this spring.

Of all the regions covered by the PwC survey, executives in Asia and North America were least concerned about inflation, with around 20 per cent reporting they are extremely or highly exposed to price growth, PwC said. Those in Africa were among those most anxious about how vulnerable their companies were to spiking prices.

Nevertheless, inflation and macroeconomic volatility trumped other threats, according to the survey, ahead of cyber risks, geopolitical volatility and climate change.