Rethinking AI’s future in an augmented workplace

“Our findings suggest that continuation of the status quo, the basic expectation of most economists, is actually the least likely outcome,” Davis says. “We expect AI to have a greater impact on productivity than PC. We expect that a scenario in which AI transforms the economy is much more likely than a scenario in which AI disappoints and fiscal deficits dominate. The latter is more likely to lead to slower economic growth, higher inflation, and higher interest rates.”

Implications for business leaders and workers

But Davis doesn’t sugarcoat it. Although AI promises economic growth and productivity, it will be disruptive, especially for business leaders and knowledge workers. “AI is likely to be the most transformative technology to change the nature of our work since the personal computer,” says Davis. “People of a certain age may remember how the widespread availability of computers reshaped many jobs. It did not eliminate jobs so much as it allowed people to focus on higher-value activities.”

The team’s framework allowed them to examine the risks of AI automation in more than 800 different professions. The research indicated that while the potential for job loss exists in over 20% of occupations as a result of AI-driven automation, the majority of jobs – likely four in five – will result in a combination of innovation and automation. Workers’ time will increasingly be transformed into higher value and uniquely human tasks.

This introduces the idea that AI can act as a co-pilot for different roles, performing repetitive tasks and generally helping with responsibilities. Davis argues that traditional economic models often underestimate the potential of artificial intelligence because they fail to consider the deeper structural impacts of technological change. “Most ways of thinking about future growth, such as GDP, don’t take AI into account enough,” he explains. “They fail to link short-term differences in productivity to three dimensions of technological change: automation, increased productivity, and the emergence of new industries.” Automation improves worker productivity by handling routine tasks; Augmentation allows technology to act as a co-pilot, amplifying human skills; The creation of new industries creates new sources of growth.

Implications for the economy

Ironically, Davis’s research suggests that the reason for the relatively low productivity growth in recent years may be a lack of automation. Despite a decade of rapid innovation in digital technologies and automation, productivity growth has lagged since the 2008 financial crisis, reaching its lowest levels in fifty years. This seems to support the view that the impact of AI will be marginal. But Davis believes automation has been adopted in the wrong places. “What surprised me most was how little automation there was in services like finance, healthcare, and education,” he says. “Outside of manufacturing, automation has been very limited. This has held back growth for at least two decades.” The services sector represents more than 60% of the US GDP and 80% of the labor force, and has seen some of the lowest rates of productivity growth. Here, Davis believes that artificial intelligence will make the biggest difference.

One of the biggest challenges facing the economy is demographics, as baby boomers retire, immigration slows, and birth rates decline. These demographic headwinds reinforce the need for technological acceleration. “There are concerns that AI will be miserable and cause massive job losses, but we will soon have very few workers, not too many,” Davis says. “Economies such as the United States, Japan, China and those across Europe will need to step up their work on automation as their populations age.”

For example, consider the profession of nursing, a profession in which empathy and human presence are indispensable. AI has already shown the potential to enhance rather than automate this field, simplifying data entry into electronic health records and helping nurses regain time to care for patients. Davis estimates that these tools could increase nursing productivity by up to 20% by 2035, a critical gain as health care systems adapt to aging populations and rising demand. “In our most likely scenario, AI will offset demographic pressures,” says Davis. “In five to seven years, AI’s ability to automate parts of work will be roughly equivalent to adding 16 million to 17 million workers to the U.S. workforce.” “This is the same as if every person who turns 65 in the next five years decided not to retire.” It is expected that more than 60% of professions, including nurses, family doctors, high school teachers, pharmacists, human resources managers and insurance sales agents, will benefit from AI as an augmentation tool.

Implications for all investors

As AI technology spreads, the strongest performers in the stock market will not be its producers, but its users. “This makes sense, because general-purpose technologies enhance productivity, efficiency and profitability across entire sectors,” says Davis. The adoption of AI creates flexibility for investment options, meaning diversification beyond technology stocks may be appropriate as indicated in Vanguard’s 2026 Economic and Market Outlook. “And when that happens, the benefits extend beyond places like Silicon Valley or Boston to industries that apply technology in transformative ways.” History shows that early adopters of new technologies reap the greatest productivity rewards. “We’re clearly in a learning-by-doing experience,” says Davis. “Those companies that encourage and reward experimentation will get the most value from AI.”