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The next productivity frontier

July 24, 2023

According to the latest paper by McKinsey & Company, generative AI is poised to unleash the next wave of productivity, bringing a big economic impact. The analysts took a first look at where business value could accrue and the potential impacts on the economy and the workforce.

The report estimates that generative AI could add the equivalent of $2.6 trillion to $4.4 trillion annually across the 63 use cases we analyzed—by comparison, the United Kingdom’s entire GDP in 2021 was $3.1 trillion. This would increase the impact of all artificial intelligence by 15 to 40 percent. And more: the authors estimate that it would roughly double if they include the impact of embedding generative AI into software that is currently used for other tasks beyond those use cases.

The numbers also show that all industry sectors will feel a significant impact from the development of generative AI. Banking, high-tech, and life sciences are among the industries that could see the biggest impact as a percentage of their revenues. “Across the banking industry, for example, the technology could deliver value equal to an additional $200 billion to $340 billion annually if the use cases were fully implemented. In retail and consumer packaged goods, the potential impact is also significant at $400 billion to $660 billion a year,” McKinsey reports.

The study highlights that generative AI can substantially increase labor productivity across the economy, but that will require investments to support workers as they shift work activities or change jobs. Generative AI could enable labor productivity growth of 0.1 to 0.6 percent annually through 2040, depending on the rate of technology adoption and redeployment of worker time into other activities. 

“Workers will need support in learning new skills, and some will change occupations. If worker transitions and other risks can be managed, generative AI could contribute substantively to economic growth and support a more sustainable, inclusive world,” the authors conclude.

Source: McKinsey