Chart of the Week: AI Is Reshaping the Labor Market

On Monday, we looked at what happens when AI systems start hiring people.

Today, we’re looking at what happens when companies stop needing to hire as many people in the first place.

Because if you want to see how AI is changing work, you don’t need to focus on dramatic headlines or mainstream talking points.

You can simply look at the hiring data.

Customer Support Hiring Has Collapsed

Take a look at this week’s chart.

Image: A16Z

In just two years, the share of new hires going into customer support roles has fallen from roughly 8.3% to 2.9%.

That’s a steep 65% drop.

Customer support has long been one of the easiest ways for companies to scale. More customers meant more support requests. More support requests meant more agents answering emails, chats and help desk tickets.

AI has changed that calculus.

Today, large language models can handle FAQs, refunds, password resets, tracking updates and basic troubleshooting almost instantly. Artificial intelligence doesn’t need weeks of training, and it doesn’t need to take breaks. What’s more, AI gets better as the data improves.

Last year I wrote about how Microsoft saved $500 million by replacing customer service with AI.

The company was able to make those cuts because customer support work is highly structured. The same questions come in thousands of times a day, and the answers already exist in knowledge bases and internal scripts. That gives AI exactly what it needs to learn patterns.

And this is why companies don’t need to add new support reps at the same pace. Because AI is increasingly able to handle routine requests, leaving experienced agents to deal with the complex problems.

That’s exactly what we’re seeing in the hiring data.

And it’s having a significant impact on the labor market.

In the United States alone, over 2.8 million people currently work as customer service representatives. It’s one of the largest single job categories in the labor market.

But that workforce is losing ground as AI takes over the repetitive parts of jobs. And as AI continues to improve, we’re likely to see this same trend play out across other white-collar roles.

Some executives are already restructuring their companies around that idea.

Jack Dorsey just fired 40% of his employees at Block, the company behind Cash App and Square. It was the largest AI driven layoff in corporate history, with 4,000 workers losing their jobs.

To be clear, Block is a profitable company with growing revenue. But Dorsey noted that: “Intelligence tools have changed what it means to build and run a company.”

In his own words: “A significantly smaller team, using the tools we’re building, can do more and do it better.”

And he sees this same dynamic coming for other businesses.

So do I.

Here’s My Take

To me, today’s chart is a harbinger of what’s to come.

Because if a task can follow a flowchart, software can usually learn it.

And as software gets good at these repetitive tasks, companies can simply stop hiring as many people to do them.

As we saw last week, software is now creeping closer to the center of the decision-making process.

That doesn’t mean work goes away.

But it does mean that the nature of work is changing.

Customer service roles are declining while RentAHuman, a marketplace where AI systems can post tasks and pay people to complete physical-world work, is starting to take off.

Put these two trends together and you get a clearer picture of where labor is heading.

In some areas, AI will continue to reduce the need to hire. In others, it will step into the role of coordinating human labor directly.

Routine tasks will move to software, while work that requires judgment and experience will stay with people.

Customer support just happens to be one of the first large job categories where we can see that shift happening in real time.

But it won’t be the last.

Regards,

Ian KingChief Strategist, Banyan Hill Publishing

Editor’s Note: We’d love to hear from you!

If you want to share your thoughts or suggestions about the Daily Disruptor, or if there are any specific topics you’d like us to cover, just send an email to [email protected].

Don’t worry, we won’t reveal your full name in the event we publish a response. So feel free to comment away!