All kinds of industries have been taking hits on Wall Street lately, as investors begin to worry that new artificial intelligence tools have the potential to disrupt them. In the last week alone, it’s happened to software companies, brokerages, and even trucking firms.

The flipside of all of this is that the workers who’ll end up using these AI might be able to make and do more stuff in less time. In other words, AI could make the labor force more productive. That said, the link between AI and increased productivity, at least at this point, is murky at best.

About a year and a half ago, a bike parts manufacturer near Minneapolis called Wolf Tooth Components started dabbling with AI. Co-owner Brendan Moore said the company thought it might be able to help doing research on the market for new products.

“We want to design a trinket ‘A,’” Moore said. “What’s the competitive landscape of trinket ‘A’ out in the world, and what does the broader internet think about product offerings, and where are the weaknesses?”

Moore said the tools did a good job. So the company started using AI to improve its website, and to help brainstorm names for new products. It’s also using AI to help automate some of the menial jobs real people used to have to do with its manufacturing software.

“If you think about an administrative task of a human doing 10 clicks, to just move material from here to here to here, so we know where it is in the manufacturing process — we just automated that,” Moore said.

Moore said some of that work used to take half a day. So now, his staff can use that time to focus on other stuff that requires an actual human brain.

“Developing supply chains for a new product,” Moore said. “Looking at costing, looking at even material certifications; all of these things that you have to do that are complex and require a lot of nuanced thinking.”

As a result, Moore said the company can develop more products, more quickly, at a better price.

“How much better, it totally depends on the product,” Moore said. “But, essentially, it’s going to be a better experience for our customers, and it’s going to be better for our business, because of the efficiencies we’re going to have.”

That is the definition of higher productivity: more output in less time. But while it’s easy to see AI’s impact on one firm, it’s not so easy to see how it’s affecting the economy as a whole.

“We’re not going to know for some time what the productivity impacts of AI are, in part, because it’s going to be really hard to measure,” said Erika McEntarfer, research scholar with the Stanford Institute for Economic Policy Research. 

McEntarfer is also the former commissioner of the Bureau of Labor Statistics, which keeps track of productivity. She said it’s hard to distinguish what AI is doing from all of the other factors that have been boosting productivity recently, such as better business practices, investments in research and development, the creation of new and innovative companies — even the loosening jobs market.

“If firms aren’t hiring, but output continues to grow, labor productivity is going to increase just mechanically,” McEntarfer said.

McEntarfer said many of those other factors were boosting productivity growth well before AI tools started to become mainstream.

“We start to see this uptick in productivity around late 2022, early 2023,” McEntarfer said. “And AI investments for firms in late 2022 were actually pretty low.”

McEntarfer said many companies are simply experimenting with AI right now, which means it could take a while for the technology to actually make those firms more productive.

George Pearkes, macro strategist with Bespoke Investment Group, said that’s what happened when PCs became widespread in the early 1990s.

“We didn’t see the full benefits of that boom in compute availability and communications ease until really the early 2000s, mid 2000s even,” he said.

Pearkes said it’s clear that AI will have a positive impact on productivity. But it’s unclear how big, since the “S” economy is so complex.

“You’re talking about hundreds of millions of people, doing at least that many, if not more, discrete tasks every day,” Pearkes said. “You’re talking about a huge number of complicated relationships between businesses, between businesses and consumers, you’re talking about incredibly complex supply chains.”

Pearkes said for AI to have a measurable impact on the entire economy, the technology will have to become basically ubiquitous.

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