Technology and Wisconsin’s labor market

Michael Hochholzer

Guest Columnist

February 10, 2025

Investors looking to gauge the long-term sustainable growth rate of an economy have countless theories and principles to guide their analysis.

One approach starts with the assumption that total economic output is the result of two primary inputs – capital and labor.

Capital, stated simply, is the physical investments – roads, factories, machines, data centers – that are part of the overall economy.

In this context, labor represents the workers – the time and effort people spend producing goods and services.

Another critical variable to this equation is a multiplier applied to the total labor force – Total Factor Productivity.

This factor, though tricky to measure, represents in broad terms the amount that technology can enhance the output and efficiency of a labor force.

Capital spending and labor productivity

A review of the evolving economic landscape provides evidence of a staggering amount of capital being deployed to artificial intelligence (AI), and by all accounts, that amount will continue to increase in the coming years.

Recent announcements have been made in the hundreds of billions of dollars (Stargate), as well as a multi-billion dollar build-out right here in Wisconsin (Mount Pleasant).

All this investment has a far-reaching impact on not only the sale of advanced semiconductors (NVIDIA Corp.) but also on industries that support data center buildouts.

The construction of infrastructure to support these massive investments can have an immediate benefit to economic output through intricate planning, the building of physical structures, specialized utility and HVAC work and countless other needs.

Furthermore, once completed, the new data centers create massive, stable demand for electricity.

The direct spend on the technological components, as well as the required support industries, has been a theme many investors have been following and assessing carefully over the past several years.

The often-cited, high-level justification for these massive investments in AI is the promise of productivity.

As AI models become more advanced and sophisticated, there is not only the hope, but the expectation, that they will be able to enhance the efficiency with which individuals and companies operate.

What were once rote or mundane tasks could potentially be done with an automated system and require minimal human input.

This has the potential to drive a sizable increase in the previously mentioned Total Factor Productivity and allow for a labor force to increase its output, all else equal, without requiring a substantial increase in the total labor pool.

What impact will AI have on work in Wisconsin?

Research prepared by the Wisconsin Governor’s Task Force on Workforce and Artificial Intelligence in June 2024 seeks to address this challenging and rapidly changing issue.

Regarding the economic impact on the Badger State, the researchers state, “Notably, when looking at the employment-weighted share of businesses using AI, Wisconsin ranked at the top of all U.S. states, with an estimated 15% of employees in Wisconsin companies working for businesses that currently report using AI, with an additional 5% working for businesses that anticipate adopting AI within six months.”

Regarding productivity, the report offers, “AI has the potential to offer large gains in productivity from increasing output per worker. Such gains could benefit the workers who continue to be employed by AI-adopting firms and have positive downstream effects on the local economies that support those workers.”

The fact that Wisconsin companies are considering the broader impacts of AI on the state economy is reassuring.

Will AI technology replace jobs?

The “lump of labor” fallacy assumes that an economy has a specific, set amount of labor to be done and that advancements in technology able to accomplish that work will eventually lead to the loss of jobs and unemployment.

This is referred to as a fallacy, or untrue, because history has demonstrated that the amount of work may increase, leading to increased productivity, and ultimately driving increases in demand and consumption.

Though no one can be certain how AI will affect the labor force, workers will likely evolve and change while encompassing different, more interesting, value-added tasks, while leaving some day-to-day items to the advanced systems.

In the immediate future, AI is likely a positive for the broader economy, as well as Wisconsin specifically, as companies located here have shown an eagerness to embrace some of the latest advancements.

“Will technology replace jobs?” is not a new question, and laborers even as far back as the Industrial Revolution wondered if the latest and greatest machines would replace them in the factories and mills across the globe.

Optimistically, jobs should continue to evolve and become more specialized, allowing people to focus on more interesting and fulfilling work.

Some jobs may ultimately go away – much like blacksmiths and carriage drivers – however, the opportunities to change how people work could ultimately lead to more openings and new roles not currently imaginable.

For workers in Wisconsin, whether it is in financial services, health care, education, government, construction or manufacturing, the productivity gains may likely start appearing soon, if they have not done so already.

The views expressed in this article are solely those of the author and do not necessarily reflect the views of Associated Bank, N.A., its affiliates or any other entity.