Government needs policy response to AI challenge for skilled workers - top official warns

The rise of artificial intelligence (AI) will create a new challenge for Government policymakers as it threatens to replace skilled workers who have not previously been vulnerable to technological change, a top official at the Department of Finance has warned.

The Government will need to “maximise the winners and help the losers” in the workforce as AI plays a greater role in day-to-day life, John McCarthy, the department’s chief economist, said on Thursday.

Speaking at the Economic and Social Research Institute (ESRI) Budget Perspectives 2024 conference in Dublin, Mr McCarthy said AI technological advances could be different from past industrial revolutions where “technology replaced hands, not heads” and was a compliment to labour overall.

“[AI] could potentially become a substitute for labour. Some of the most skilled jobs could be done by AI,” he said.

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“We need to think about the policy response, and how to upskill or reskill people to take advantage of AI. The policy challenge will be to maximise the winners, and help the losers” in the workforce, he said.

Speaking to The Irish Times, ESRI director Alan Barrett said that while economists tend to be relaxed about or even welcome technological advances as a positive for the economy, AI is “so overarching that we’re all trying to grapple with it”.

“Throughout human history technological advancement has tended to be positive. It has tended to do things like raise productivity, or jobs disappeared, but that labour tended to move and do other things and productivity would generally be improved by those other things,” he said.

“There’s always a concern that in the transition phase, you worry about people who lose their jobs,” he said. “It could be good for the economy in general, but you still need to look after the group of people who have lost jobs,” Mr Barrett said.

Speaking on the economic outlook for the rest of the year, Mr McCarthy said inflation has “undoubtedly peaked” in Ireland, as the Government expects it to “come back quite rapidly”.

Mr McCarthy’s comments echo Minister for Finance Michael McGrath who has previously forecast inflation to fall “more rapidly than previously assumed.”

“As inflation loses its grip on the economy, our baseline scenario is that disposable income begins to pick up from the second half of the year onwards, and that will then support consumer spending,” he said.

However looking to the wider euro area, he said the region is at the start of a recession, adding that “things don’t look particularly good for the second half of the year”.