Image from Igor Omilaev via Unsplash.
At Fourth Economy’s 2024 Fall retreat, we discussed how broader economic and technological trends will shape the future of the economic development industry. Conversations focused on:
Downtown Collapse and Reinvention
Aging Population and Shifting Demographics
AI Takeover
Influx of In-Migration
In this blog post, we discuss what the ‘AI Takeover’ is, how it will affect communities and economic developers, and what shifts to expect within our economies as this technology becomes increasingly prevalent.
The AI Takeover is Here
Artificial intelligence (AI), and specifically Generative AI, is progressively commonplace in commerce at a global scale. The technology is becoming ingrained into nearly all facets of life, from smartphones and search engines to routing airplanes and diagnosing medical conditions. The International Data Corporation projects that AI will have a $19.9 trillion (!!) global economic impact by 2030, with every dollar spent on the technology catalyzing $4.60 in economic growth. This wildfire-like industry growth will inevitably have an impact on economic developers and the industry as a whole, re-shaping the profession and the economies we serve.
To get a better sense of the impacts AI will have on economic developers and the industry, we asked our AI friend at Microsoft CoPilot a few questions. The following Q&A includes information directly produced by CoPilot, along with additional commentary from the Fourth Economy team.
Ask AI (and Fourth Economy)
Why is this a good time for a small, economic development consulting firm to discuss the ramifications of AI on our clients?
According to CoPilot…
Rapid Technological Advancements: AI technologies are evolving quickly, offering new tools and capabilities that can significantly enhance productivity and decision-making processes. Staying ahead of these advancements can provide your clients with a competitive edge.
Industry Disruption: Many industries are experiencing disruption due to AI. By discussing these changes, you can help your clients anticipate and adapt to shifts in their markets, ensuring they remain resilient and competitive.
Policy and Regulation: Governments are increasingly focusing on AI regulation and its implications for privacy, security, and ethical considerations. Keeping your clients informed about these developments can help them stay compliant and mitigate risks.
According to Fourth Economy, economic development-focused organizations that are actively discussing AI’s ramifications, and evolving to make best use of these technologies, are best positioning themselves to succeed moving forward. AI is a rare opportunity for economic development organizations - the technology can increase capacity for a low cost, allowing for increased productivity and organizational impact. From an economic perspective, the technology’s impacts are complex to comprehend and predict. However, those most informed on
AI’s innovations, uses, and ripple effects will have the upper hand in catalyzing wins within their geography.
Tell me more about these economic impacts. What are 3 specific data points that highlight the expected economic impacts of AI on economic development?
According to CoPilot…
Productivity Boost: AI is projected to increase global productivity by up to 1 percentage point annually by 2030. This boost comes from AI’s ability to automate routine tasks, optimize processes, and enhance decision-making.
Economic Growth Contribution: AI could contribute an additional $13 trillion to the global economy by 2030. This growth is driven by improvements in efficiency, innovation, and the creation of new markets and industries.
Job Market Polarization: While AI is expected to create new job opportunities, it may also lead to the displacement of certain jobs. By 2030, up to 375 million workers (14% of the global workforce) might need to switch occupational categories due to AI and automation. This highlights the importance of reskilling and workforce adaptation.
According to Fourth Economy, it is increasingly important for economic developers at the local to state level to understand impacts of AI on their specific economies. AI is an economic disruptor and opportunity wrapped into one. To adequately understand how AI may impact local jobs, industries, and workers at a nuanced level, increased analysis is crucial. Whereas every economic developer wanted to understand how COVID impacted their economy in 2020, they should now look to better understand the ramifications of AI on their local markets.
Image from Possessed Photography via Unsplash.
Imagine I am the leader of a regional economic development organization in Pittsburgh, PA. What are the 3 main things I should be considering when thinking about AI's impacts on my organization and economy?
According to CoPilot…
Workforce Development and Reskilling: AI and automation can lead to job displacement in certain sectors while creating new opportunities in others. It’s crucial to understand which industries in Pittsburgh might be most affected and which ones could benefit from AI advancements.
Attracting AI-Driven Investments: AI technologies can attract significant investment and drive economic growth. Pittsburgh, with its strong tech and research presence, is well-positioned to become a hub for AI innovation.
Ethical and Inclusive AI Implementation: The deployment of AI technologies raises ethical considerations, including data privacy, bias, and the potential for increased inequality. Ensuring that AI benefits are distributed equitably is essential for sustainable development.
According to Fourth Economy, it's hard to argue that the biggest incoming impact of AI will be on the workforce. In fact, this is something we have already studied extensively through our portfolio of work. The demands of the job market and skills needed to pursue specific careers will shift dramatically in the coming decades. To remain competitive, economic developers must help lead this conversation surrounding new priorities in the talent and workforce development space.
AI is also a market opportunity for regions with existing competitive advantages. Similar to advanced manufacturing, life sciences, data centers, and semiconductor facilities, AI is an emerging industry that can be successfully attracted and grown to support local economies. Jobs within this industry will likely be high-paying, with the ability to support community growth and prosperity. Regions with strong capacities for high-tech research and development can look to attract AI as an industry and reap the benefits of these economic development wins.
Are you looking to better understand the economic impacts of AI within your locality? Looking to prioritize AI as a target industry for your economy? Fourth Economy works with clients across the country to help them understand the impacts and potential of emerging technologies within their geographies of focus. Please reach out to [email protected] to get the conversation started.