New artificial intelligence technologies can help end our period of record inflation, the head of the world's largest asset manager argued on Wednesday.
A global slowdown in productivity is a “reason why we have such sticky inflation,” BlackRock CEO Larry Fink said during the company’s investor day event, according to Bloomberg.
“A.I. has the huge potential to increase productivity, and transform margins across sectors,” he predicted, which would “bring down the inflation," reports the Financial Times.
U.S. prices rose 4% year-on-year in May, which is the lowest rate of inflation reported in over two years. Yet core inflation—which excludes more volatile energy and food prices—came in at 5.3%, staying above 5% for the 18th consecutive motnh.
Fink warned a few weeks ago that inflation was “still too strong, too sticky,” and so would lead to two to four more interest rate hikes from the U.S. Federal Reserve. (The Fed on Wednesday held off on raising rates again, but forecast two more increases before the end of the year.)
A.I. and productivity
Companies hope that generative A.I.—a category of tools that include OpenAI’s viral chatbot ChatGPT—could automate a large swathe of knowledge work.
The new technology could add anywhere between $2.6 trillion to $4.2 trillion to the global economy, estimates McKinsey Global Institute in a report released Wednesday. Critically, the firm estimates that A.I. could “automate work activities that absorb 60% to 70% of employees’ time today,” and in turn grow labor productivity by between 0.2% to 3.3% each year.
Yet this improvement could come at the expense of higher-wage knowledge workers “previously considered to be relatively immune to automation,” the consulting firm warns.
Remote work
Fink might see A.I. as a way to reverse a fall in productivity caused by a very different phenomenon: The rise of remote work.
Last September, BlackRock’s CEO blamed the rising trend of working-from-home for sticky inflation. “We have to get our employees back in the office,” he said in a Fox Business interview.
At the time, the asset manager was pushing its employees to follow its mandate to come into the office three days a week. Fink said the request was “a key element in bringing down inflation: rising productivity.”
Labor productivity has continued to decline since then, dropping by 2.1% in the first quarter of the year, according to the Bureau of Labor Statistics.
Surveys find that managers often report lower or unchanged productivity from remote workers, and CEOs like Meta’s Mark Zuckerberg and Salesforce’s Marc Benioff argue that working-from-home is particularly harmful to new hires.
However, economists warn against tightly connecting declines in labor productivity and remote work. One reason for a fall in productivity could be imperfect hybrid work arrangements, such as when companies ask people to come in for a few days a week without determining how such a system would work in practice.
But increased labor churn from job-hopping individuals during the “Great Resignation” could also lead to reduced productivity, EY-Parthenon chief economist Gregory Daco previously suggested to Fortune.
“Because people were job-hopping so regularly, there wasn’t really a chance to bring them up to the speed, or productivity, that a former worker would’ve had,” he said.
