Nordic nations less anxious about AI due to strong safety nets, says economist

The future of work hinges on human political choices, not just technological advancements, according to economist Carl Benedikt Frey. In an interview ahead of the 5th Hankyoreh People and Digital Forum, Frey, a professor at Oxford University, emphasized that society decides what to automate and what kind of future to build.

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The results of automation are not determined by technology alone. What we want to automate, and what kind of society we want, depends on human choices.

Frey, known for his 2013 report predicting the automation of 47% of U.S. jobs, clarified that the study focused on automation exposure rather than outright job loss. He identified complex social interaction, creativity, and adaptability to unpredictable situations as enduring human advantages. While AI has expanded the boundaries of creativity, Frey noted it primarily recombines existing concepts, still requiring human oversight for output validation.

Addressing anxieties about AI's impact on the labor market, Frey highlighted that effects vary by country due to different systems and regulations. He pointed to the U.S., where the youth labor market is worsening, partly due to massive AI investment diverting capital and increasing borrowing costs for other sectors, leading to layoffs and hiring freezes.

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The barriers to automation that we pointed out in 2013 are still valid today. We still need humans to validate the output within that loop.

To mitigate these impacts, Frey advocates for the Nordic model of "flexicurity," which provides a strong safety net for job seekers while maintaining flexible hiring and firing. This model, he explained, reduces anxiety about automation, as seen in Nordic countries. He also stressed the importance of fostering new job creation and supporting startups, which are often at the forefront of developing innovative products and new employment opportunities, contrasting with large corporations that typically use AI for cost reduction and process improvement.

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The Nordic 'flexicurity' model provides a strong safety net while allowing for flexible hiring and firing. This is why they are much less anxious about automation and AI than other countries.

Regarding the impact of physical AI on blue-collar jobs, Frey acknowledged the challenge, especially in countries like South Korea facing population decline. He argued that automation and robotics are essential for productivity gains needed to support aging populations and maintain living standards. While acknowledging workers' desire for direct benefits from productivity gains, he stressed the need for systems that share these benefits. He cautioned against excessive barriers to technology adoption, noting that new industries and jobs emerge from technological progress, offering new opportunities for workers if the transition is managed inclusively. Frey concluded that while inclusivity is crucial, it should not stifle creative destruction, as a lack of technological advancement can lead to societal stagnation.

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We must not let the pursuit of inclusivity lead to the cessation of creative destruction itself.