Will artificial intelligence (AI) kill jobs? This is part of the narrative on AI in the West, whose demographic profile and market efficiency differ from India’s. So said Tata Sons’ chairman N. Chandrasekaran, adding that AI should be deployed for purposes that raise productivity but do not displace workers in the country. This makes good sense, given India’s problem of unemployment. The trouble is, it’s not clear if such advice can overcome the forces that act upon employers. For decades, production has been highly capital intensive despite the abundant availability of labour. In far too many cases, businesses find machines cheaper than putting people to work, and this often has to do with our labour restrictions.
As studies have long shown, rules that make it hard to let go of workers also act as a disincentive to hire more than the skeletal minimum needed to get various tasks done. The wage bill is a fixed cost, as salaries have to be paid even if sales are nil, and keeping overheads low is the key to retaining profitability in tough times. Also, workers need pay raises year after year, while software costs tend to fall. The divergence could grow. All this tends to price labour out of the reckoning.
What can be done? Regulatory flexibility on labour has been proposed by reformers who say that a lot more hiring will happen if companies lose the fear of a permanent burden. If businesses are able to expand or shrink their workforce as market conditions change, goes the argument, they might go slow on the mechanization of routine tasks. Testing this out, however, won’t be easy for policymakers.