Artificial intelligence is making it easier to start businesses. Contrary to the future envisioned by doomers, AI will drive more independence in the labor market by reducing the costs to owning your own business.
That’s the hypothesis presented in a compelling new paper by Liya Palagashvili of the Mercatus Center, a think tank at George Mason University. She found a surge in self-employment among professions most affected by AI right around the time that AI products became widespread.
Part of the reason that people work for corporations rather than being self-employed is economies of scale. It’s easier for customers to contract with a corporation that includes lots of workers than for each worker to contract individually with every customer.
That’s truer for some professions than for others. It’s hard to see how someone could be a self-employed worker on an assembly line. But a self-employed accountant, where the worker has one-on-one relationships with clients anyway, could make sense.
There are already many American workers outside of the traditional employer-employee context. As of 2023, 11.9 million workers were independent contractors as their sole or main job.
Palagashvili posits that solo self-employment could be growing due to AI. The paper considers the industries with the highest AI adoption rates and likelihood of AI exposure: professional services, information, education, finance and insurance. It uses construction and wholesale trade as control groups, since...
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