685. How to Survive the A.I. Shock
Freakonomics Radio
Gina Raimondo, former U.S. Commerce Secretary and governor of Rhode Island, discusses the challenges and opportunities presented by artificial intelligence in
Key takeaways
- AI will likely displace some jobs before creating new ones, leading to a transitional period of instability.
- The current social safety net, particularly unemployment insurance, is inadequate and too rigid for modern workforce needs.
Main topics
- AI's impact on employment
- Workforce reskilling and transition support
Notable quotes
"For every job that may be, quote, eliminated by AI, there are theoretically other jobs that could be, quote, created by AI because there are new needs and humans just keep wanting new and different stuff."
"The problem is that the layoffs will come before the new jobs, and the folks who get laid off may or may not be the ones who get the new jobs."
Conclusion
Raimondo argues that while AI will disrupt jobs, it also holds transformative potential for
Transcript preview
Speaker 1 (0:04) All right, let's start with a statistic and then a few questions. Here is the statistic. Roughly 60% of the jobs that people do today did not exist in 1940. Now for the questions. Five years from now, do you think you'll have the same job you have today? Or do you think that maybe your job will be replaced by AI? And if so, what's your plan? These are increasingly common and urgent questions. So I wanted to hear from someone who's looking for answers. What I'm fundamentally trying to figure out working with companies and governors is how do we implement AI without triggering giant job losses? Gina Raimondo was Commerce Secretary in the Biden administration. One of her signature projects was the CHIPS Act, which we'll hear about later. Speaker 1 (0:59) Before running the Commerce Department, she was a two-term governor of Rhode Island. And now she is leading an unusual startup called Raise Us, which is what? Raise Us is a nonprofit, nonpolitical organization dedicated to making sure that the U.S. can both lead in the technology of AI, but also make sure that workers are brought along to an AI economy. For anyone who's been around for a while. This may sound like a familiar song. Think back to what economists now call the China shock, the offshoring of millions of American manufacturing jobs, a loss that can still be felt in our economy and our politics. And now, with the AI boom? I'm saying to these companies, come on, let's get ahead of it and be part of the solution and have an intentional transition. Speaker 1 (1:54) So what would this transition look like? Will there be job guarantees or wage guarantees? How about a universal basic income? We're opposed to universal basic income. And we are opposed to anything that looks and smells like a path towards socialism. I don't think job guarantees or wage guarantees are the way to go. I think that's too heavy handed and the market should set those things. I will say, you didn't probably have me on to talk about this, but you have me on, so I'm going to talk about it. It's your microphone. I can't stop you. I am strongly of the view that we need to do a better job tempering the way capitalism is playing out in America if we want to preserve capitalism, which I think we want to do. If that makes Raimondo sound like someone who might like to be president someday. Speaker 1 (2:51) Well, we can talk about that later, too. Today on Freakonomics Radio, how to survive the AI shock with Gina Raimondo. This is Freakonomics Radio, the podcast that explores the hidden side of everything with your host, Stephen Dubner. Speaker 1 (3:28) Gina Raimondo likes to refer to herself as a recovering politician, which seems to be a popular diagnosis these days. She is a solidly centrist Democrat known for playing well with Republicans. Her co-chair at the new nonprofit Raise Us is another recovering politician, the Republican Eric Holcomb, former governor of Indiana. Here is a bit of background on Raimondo. She studied economics as an undergrad, Harvard. then got a Ph.D. in sociology, Oxford, and a law degree at Yale. Before getting into politics, she co-founded the only venture capital firm in Rhode Island. Raimondo has come to see economic instability as perhaps the biggest driver of political instability. I think everything that we hate about our politics now Speaker 1 (4:19) more divisive, more partisan, more violent, less rational. People don't actually want to solve problems. They want to fight about them. A lot of that stems from, I believe, this worsening inequality or economic insecurity. When people are insecure and feel powerless to change things, it's only natural that you would... get angry and pissed off and it bubbles over. I see that corporate profits have been rising strongly, and this has been going on for some time. This predates the AI boom. But the share of national income going to workers is at, or maybe near, but I think at a record low. I'm curious what you see as the causes of this big... Speaker 1 (5:08) gap between wages and corporate profits? And I especially want to know what you see as the consequences. Like, are we already living in the consequences and do they continue to worsen? I think they will continue to worsen unless we do something about it. People and companies don't change out of the goodness of their heart. No one does. We all need to have the right guardrails and incentives. You can ask economists who will know more than I do about why. The vast majority of the gains have gone to capital and not labor in the past 20, 30 years. I think it's probably no one answer. I think it's a combination of declining power of labor unions. Workers have less bargaining power. Second thing I think is, frankly, free money in the form of very, very low interest rates and essentially no inflation has just massively fueled. Speaker 1 (6:02) Private equity, hedge funds, all forms of capital investment and capital formation. The 2019 tax cuts to wealthy people and businesses, companies just are more concentrated now. And that also hurts labor and helps capital. So I think what you've seen is just lots of pressure to keep wages down. The gig economy has done nothing to improve. people's economic security. So I look for data all over the place. And I have to say, when it comes to net job loss from AI, it's hard for me to be persuaded that anybody really knows what they're talking about. Because, you know, for every job that may be, quote, eliminated by AI, there are theoretically other jobs that could be, quote, created by AI because there are new needs and humans just keep wanting new and different stuff. That's the part that seems to get left out to me. Speaker 1 (6:59) Right now, the only data that I see that shows AI could be, quote-unquote, hurting folks in the workforce is with younger people. The data is now showing consistently that entry-level workers, college-educated folks in their 20s are, in fact, having a rough go of it to find jobs. I believe that AI will create new jobs. There are a lot of people who are saying there's going to be no work for humans to do because in some number of years, the AI is going to be so good. I can't imagine what human beings are going to do. And that's not you saying that at all. That isn't me. Like I gave a speech and Reed Hastings, who's the chair of Anthropic. The non-executive chair. Non-executive chair. Yeah. And I know him and I like him. He's a great entrepreneur. He ran Netflix. Speaker 1 (7:54) But he was teasing me after, and he's like, Gina, this reminds me of Jaws, like the boat's not big enough. There's not going to be work to do. Like this AI is going to be better than everything. Maybe he's right. I don't think so. I'm with the Dubner School of Economics, which is in some number of years, it's what you just said, right? There'll be new products, new companies, new services that AI enable. The problem is that the layoffs. will come before the new jobs, and the folks who get laid off may or may not be the ones who get the new jobs. The support that we give to workers when they lose job is old-fashioned and not very responsive, and so we're going to work with governors, with employers, to create this infrastructure so that America can do both. Speaker 1 (8:49) The whole damn point is to save America and our way of life, our economy and our politics, our democracy. We got to be there for all Americans, even the quote unquote losers. I do wonder, though, why you're persuaded that government, even state governments, should be the primary engine there. And maybe you'll tell me they're not meant to be the primary engine, that this really is a collaboration between government and firms and so on. We spoke with a few people in anticipation of this conversation with you. One of them was Michael Strain from the American Enterprise Institute. Speaker 1 (9:24) He said, you know, we've already got basic policy architecture for worker retraining and reskilling. And then there's social insurance for people who are involuntarily unemployed and a social safety net for people with low incomes. So he said we might have to turn some of those dials and adjust the parameters. But the basic system seems to be already in place. Why do you not agree with that? I just think that's completely wrong. If that were true. Then why do we have such sky-high unemployment for decades in Midwestern states that got crushed from loss of manufacturing, which led to an opioid crisis, which led to crazy, horrible politics? And there's other examples as well, other technological innovations. We actually have a terrible track record, or even the great financial crisis, frankly. If you look at Germany and other places, they did a much better job getting people back to work. Speaker 1 (10:18) The only social insurance we have is unemployment insurance. Unemployment insurance is not that effective. It's effective for a certain group of people, okay? I'll say that. It puts money in the pocket of lower-wage people for a period of time so they can pay their bills. It doesn't work for people who make more than $70,000 to $80,000 a year. It's incredibly rigid. If you start a business when you're on unemployment insurance, you get kicked off of unemployment insurance. If you go back to school when you're on UI, you get kicked off of UI. It needs to be fixed in so many different ways. We don't have any kind of wage insurance. There's almost no incentives for companies. Like what happens now? A company fires people today, their stock price goes up tomorrow. Speaker 1 (11:13) There's a tax credit to help companies to do job training. Think about $5,000 a year. It's rarely used because it's difficult. Last thing I'll say is you, okay, I'll pick on me, not you. I'm a 55-year-old woman. You can pick on me. I don't care. No, I'm a 55-year-old woman. The prime of your life. Prime of my life. That's not my children's day. Let's say I was in the same. sales job for the past 30 years. What would you be selling? I'm just curious. I don't know. Software. Pretzels on software. Sorry. Yeah. I had a retail job. OK, I'm now out of work. What do I do? Where do I get retrained and retooled? Probably I'll go to my community college. Chances are my community college will do a terrible job with me. Says the former governor who made community college free in her state, if I recall correctly. Correct. But making it free wasn't nearly enough. Speaker 1 (12:10) I had to get the employers to step up and create programs. We taught the people who went to community college what the companies needed, and there was a direct pipeline from school to work. My point is, we need to, in this country, tear down the wall between school and work. Are you talking about apprenticeships or something? Yes, all of the above. And in this regard, I think AI can be part of the solution. You can imagine, back to my 55-year-old laid-off worker, you could deliver career coaching or tailored education, tailored training, on-the-job training with AI in a way that is cheaper and much more effective. So, for example, in Arkansas, one of our first states, we have a pilot with Sarah Huckabee Sanders in Arkansas. It's a career navigation platform. So back to... Speaker 1 (13:07) unemployment insurance and the whole wraparound to your question. Right now, you lose your job in Arkansas, probably go collect UI, and, you know, good luck. What we're going to do, and this is the governor's leadership, she wants it to be that when you go collect UI, you're immediately given a skills assessment, which is AI delivered. Like, what are you good at, basically? So if this was you, you could say, I'm pretty good at understanding the software that I sell and yada yada, communicating that to potential clients. Speaker 1 (13:36) Exactly. I'm good at communicating. In my actual case, it'd be a challenge. I'm not sure what I'm good at, but in this hypothetical, I'm sure this woman would have actual skills. These would be assessed. Then I would be told these are the open jobs in your state. I can click on one. That looks pretty interesting to me. Good location, good salary. And they say, okay, for you to be qualified for that job, you would need this kind of training or coaching. You sign up for that for free. And then you have a better shot at applying for that job. There's really nothing like that. All these systems, they don't work together. They're not that effective. They haven't been updated forever. And here's the brutal reality. Our whole system routes everyone to college, basically. And we spend an enormous amount of money on subsidizing college. So when you get out of high school, you have... Speaker 1 (14:31) precious few options. You could go into the military, which is good and honorable, but only a certain number of people are suited for that or want to do that. You can go to a labor union and get a trades job, and that's great if you can and you can figure it out and you know that exists. Or you're pretty much routed to college. So one of our first projects, we're going to be building an advanced manufacturing apprenticeship. initiative in the Midwest. What state?