E1 Company staff

Topic

The model analyzes the economic impact of the potential substitution of human labor with artificial intelligence, based on the specific composition of a company's workforce. Each role or occupation is characterized by the number of people employed and an estimate of the fraction of its tasksor workforce componentthat could be replaced by AI. This exposure is not viewed as a fixed, immutable property of the role, as different sources may provide varying estimates for the same occupation. Consequently, it can be treated as a scenario input, allowing for the exploration of different hypotheses regarding the future scope of automation.

However, the technical feasibility of substituting labor does not imply that the company will actually do so; the decision also depends on economic viability. For each occupation, the cost of implementing AI per potentially replaceable worker is estimated and compared against the associated wage savings. This relationship yields an investment payback period, which can be measured against a tolerance threshold defined by the company. Substitution becomes economically attractive when the time required to recoup the investment falls below that threshold.

Even when technical and economic conditions are met, adoption does not necessarily occur instantaneously. The process is modeled as a gradual diffusion, constrained by a maximum adoption rate per period. The substitution achieved is considered cumulative: once AI is implemented to perform specific tasks, the model assumes that this adoption is irreversible. This approach allows for projecting the evolution of the human workforce, labor costs, and AI-related costs over time, preventing an economically favorable decision from artificially triggering a complete replacement within a single period.

The final effect is incorporated into the company's economic outcome by explicitly considering both its sales and its intermediate consumption. These are represented by vectors linked to the various sectors or markets with which the company interacts, following an input-output structure. This makes it possible to track the various revenue and cost streams linked to production activity.

This formulation assumes that the economic environment remains constant and that production and sales volumes do not change during the simulation. Consequently, the impact on the firm's financial outcome stems exclusively from changes in labor costs and new costs associated with AI. This condition allows for isolating the direct economic effect of technological substitution. Potential consequences regarding demand, prices, production, aggregate employment, or inter-sectoral relationships fall outside the scope of this analysis but could be incorporated later by linking it to a complementary macroeconomic model.

ID:5048