AI could boost foreign labor power and accelerate offshoring

AI For Business

Artificial intelligence could make offshoring more attractive for companies.
iStock; Rebecca Zisser/BI

  • By enhancing the capabilities of overseas workers, AI could make it more attractive for companies to relocate overseas.
  • The technology will increase the efficiency of foreign workers and enable them to perform more highly skilled jobs.
  • Andrew Yen predicts the emergence of an “army of overseas talent equipped with AI tools.”

One of the common clichés about artificial intelligence is that AI won't take over humans' jobs, but humans who know how to use AI will.

But there's another possibility: someone based overseas who knows how to use AI could take on your job.

AI-enabled offshoring could pose a threat to workers in major economies by making people in cheaper markets more efficient and available for more highly skilled jobs.

Due to the dual whammy of AI superpowers and low-cost labor, the types of jobs at risk of offshoring range from repetitive tasks such as data entry to Industry experts told Business Insider that AI is shifting away from the tasks traditionally thought to be replaceable by it and toward more fulfilling roles like agile engineering, high-end customer service, and marketing.

Andrew Yen, a former product leader at Google and Meta, predicted in May that overseas workers who benefit from AI will take over many jobs in the future.

“In a few years, every courageous founder and powerful executive will have top talent overseas equipped with AI tools that completely replace the need for traditional engineers, designers, marketers and assistants,” he wrote in X.

His theory seems to be backed up by Sagar Khatri, co-founder and CEO of Multiplier, whose platform enables employers to hire workers from anywhere by automating functions like payroll and labor law compliance. He told BI that companies will face more pressure to globalize — not to grow sales, but to find the skilled workers they need.

Thanks to the productivity gains brought about by AI, a New York company might find it easier to hire accountants in the Philippines, customer success representatives in Mexico and customer support teams in India, Khatri said.

“AI can help customer support representatives do their jobs more efficiently,” he said.

Everyone is educated

Coursera CEO Jeff Majoncalda said online learning was making it easier for overseas workers, especially young people in developing countries, to gain skills.

He told BI that workers would face increasing competition from overseas companies that are using technology to automate and improve efficiency.

And it's not about learning about AI, it's about learning from AI. Majoncalda said the technology will enable workers in emerging regions to get up to speed faster and compete with higher-paid workers in developed countries. For many workers, a big factor will be what he called “talent agility” — essentially, how quickly they can learn new things and add value to the business model.

“It may sound a little vulgar, but that's what it comes down to,” Majoncalda said.

He added that workers in low-cost regions who previously took five years to become as skilled as workers in higher-paying labor markets can now do so much faster. Workers overseas don't necessarily have to be better, Majoncalda said.

The threat, he said, simply comes from “people who are a match for you but at a lower cost.”

Majoncalda added that in many developing markets, it's easy to hire, fire, and transfer workers. He said many of those workers are young and eager to gain skills that will help them in their careers. So give them AI.

“They now have the tools to have a massively positive impact on their productivity relative to their peers,” he said. “The only question is how quickly this will happen.”

Judging by Coursera's numbers, that could be soon: In 2023, the company enrolled one student in a Gen AI class every minute. In 2024, he said, four students will enroll every minute.

52% of enrollments in Coursera's Gen AI classes are from emerging markets such as India, Pakistan, Brazil, Vietnam and Egypt.

AI is also making it cheaper to offer lessons on AI and other topics in languages ​​other than English: Two years ago, it would have cost Coursera $10,000 to translate a course into another language. Now, thanks to GenAI, the company can do it for $20, Majoncalda said.

The huge cost savings have enabled Coursera to translate its 4,500 courses into 22 languages, he said.

“Anyone can learn this because language is no longer a barrier,” Majoncalda said.

AI can provide real answers

Multiplier's Khatri said AI is helping more workers get trained for software development and other high-paying jobs in countries with aging populations, such as the U.S., Britain, Japan and Germany, he said.

Khatri also said AI technology could make companies less hesitant to look overseas to fill their needs for customer service representatives and other personnel, as it could provide agents with “real answers” to give callers faster. This would shorten conversations and reduce the risk of customers getting frustrated and hanging up because they have difficulty getting the information they need or have language or other barriers.

That's because even if AI provides the answers, “customers still want to talk to a human,” he said.

Daron Acemoglu, a professor of economics at the Massachusetts Institute of Technology, told BI that AI could also open up new possibilities for places like India and the Philippines that have previously been unable to become offshoring hotspots due to language barriers.

“We are unable to provide some services to Indonesian workers as they are not fluent in English. Perhaps with better AI translators, that would be possible,” he said.

Acemoglu also warned that there was a risk that AI would become so good that it would diminish the need for overseas workers.

“It has to be a pretty narrow path where AI is good enough to do translation but not good enough to do these fairly low-skill tasks,” Acemoglu said.

“This is not a cotton gin.”

Scott Vincent, CEO of Digital Futures, a UK company that helps people from diverse backgrounds land jobs in the tech industry, told BI that the global experiment with remote work brought on by the pandemic has proven to companies that employees don't need to all be together to stay productive. As a result, more organizations are looking for lower-cost locations to leverage their workforce, he said.

Vincent said there has been a “real acceleration” of offshoring offerings across the industry since the pandemic.

“This is a big threat to the labor market,” he said.

Vincent said the threat goes beyond a worker from an expensive market like the UK or the US being priced out by someone in a developing market: Offshoring can make it harder for companies to develop home-grown talent that can move up within the organisation, he said.

“Generative AI can impact or even replace a lot of the foundational skills we learn early in our careers, so it's a double whammy,” Vincent said.

He said many large companies see two promises for first-generation AI. One is the immediate impact on the workforce — a sudden excitement about increased productivity. But he believes the other, more significant impact is a “human capital drain” as AI eventually becomes able to do much more than it can do today.

“It's an exponential trend if you look at how quickly it's moving,” he said.

Previous technologies such as automation and robotics took longer to reshape the labor market than what we'll see with the AI ​​generation, Vincent said.

He expects companies to increase spending on overseas workforces. A Digital Futures study of spending by the top 100 listed U.K. companies found that, on average, they spend about 750 million pounds ($951 million) a year on their overseas offices. Vincent said that equates to about 1.2 million U.K. jobs and about 16 billion pounds in lost tax revenue.

But short-term gains abroad may not translate into long-term employment. Drew Cesario, a revenue operations and marketing systems consultant and founder of the Botanical Group, told BI that the fate of some of the overseas workers who might work alongside AI could be similar to that of the drivers who were riding with the self-driving taxis during the testing phase. “They're training themselves and finding themselves out of work,” he said.

Cesario predicts that the multitude of tasks that AI can perform will lead to widespread job losses both domestically and internationally.

“I'd like to say there's no difference, but this isn't a cotton gin,” he says. “This is general technology versus specific technology.”

How to use technology

Vincent said governments and businesses in developed countries needed to work together to deal with coming changes in the job market. Companies that say they are moving overseas because they can't find the skilled workers they need need to improve their education systems to produce better talent, he said.

Vincent said the government could consider regulating the percentage of a company's workforce that can be sent overseas.

Coursera's Majoncalda noted that when buying a car from another country, you often have to pay customs duties.

“Maybe if you pay wages to other countries you'll have to pay a wage tariff,” he said.

Majoncalda said this could be a way to help smooth out labor costs.

Meanwhile, workers need to think about “how they can add real value in a world where more and more parts of their jobs are going to be automated,” he said.

“The thing to think about is, 'How can I use technology to automate some of my work?'” Majoncalda says, “Because if you don't do it, someone else, somewhere in the world, will.”

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