Another Promising Data Point on the Productivity Impact of AI

Here’s the (possibly) multi-trillion dollar question of the 2020s: What will be the economic and business impact of recent advances in artificial intelligence? We know there’s a lot of investment—and hype—happening, especially in America. A recent JPMorgan analysis notes that the US has dominated global private AI investment with some $430 billion invested over the past decade, significantly ahead of both China and Europe. In 2024, major US technology companies allocated $500 billion to capital expenditure and research and development initiatives.

But will all that investment, both here and abroad, pay big dividends? It’s an issue researchers continue to tackle as companies begin to implement various AI models. So, another data point for your perusal: “Use of Artificial Intelligence and Productivity: Evidence from firm and worker surveys,” an October paper from Japan’s Research Institute of Economy, Trade and Industry. Researcher Masayuki Morikawa looked at how AI affects businesses and workers in Japan by conducting surveys of 2,500 companies and 13,000 workers in recent years and tracking the results over time.

The key findings, thankfully, support the notion that AI is an important technology, especially generative AI:

• AI adoption is increasing rapidly among Japanese firms, particularly among companies with highly educated workers. However, robots show the opposite pattern—companies using robots tend to have fewer highly educated workers.
• Companies using AI tend to be more productive and pay higher wages than those that don’t. They also have more optimistic expectations for future growth.
• While companies expect AI to boost productivity and wages in the long run, they also think it might reduce employment levels. 
• Looking at individual workers, those with more education are more likely to use AI in their jobs. This indicates that AI currently tends to benefit highly skilled workers more than others.
• Workers who use AI report that it increases their productivity by about 20 percent on average, suggesting AI can significantly improve job performance.

That productivity impact highlighted in the final point is especially important for demographically constrained Japan where the economy needs to get more out of its workers. As Morikawa adds:

Because the number of people using AI outside of work is nearly twice that of those using AI for work, if such people were to also start using AI for work, it would increase the productivity of the economy as a whole by 2-3%. Because Japan’s economic growth rate remains low, this has a fairly large potential effect.

James Pethokoukis

Another Promising Data Point on the Productivity Impact of AI

January 17, 2025
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