Rethinking AI’s future in an augmented workplace

Rethinking AI's Future in an Augmented Workplace

A Nuanced Path to Productivity and Growth

Joseph Davis, global chief economist at Vanguard, and his team have developed a new framework, The Vanguard Megatrends Model, to examine the impact of artificial intelligence (AI) on the economy. Based on a proprietary data set covering the last 130 years, their research suggests that AI has the potential to be a general-purpose technology that lifts productivity, reshapes industries, and augments human work rather than displaces it.

Implications for Business Leaders and Workers

AI promises economic growth and productivity, but it will be disruptive, especially for business leaders and workers in knowledge sectors. "AI is likely to be the most disruptive technology to alter the nature of our work since the personal computer," says Davis. "Those of a certain age might recall how the broad availability of PCs remade many jobs. It didn't eliminate jobs as much as it allowed people to focus on higher value activities."

The team's framework allowed them to examine AI automation risks to over 800 different occupations. The research indicated that while the potential for job loss exists in upwards of 20% of occupations as a result of AI-driven automation, the majority of jobs—likely four out of five—will result in a mixture of innovation and automation. Workers' time will increasingly shift to higher value and uniquely human tasks.

AI as a Copilot

This introduces the idea that AI could serve as a copilot to various roles, performing repetitive tasks and generally assisting with responsibilities. Davis argues that traditional economic models often underestimate the potential of AI because they fail to examine the deeper structural effects of technological change. "Most approaches for thinking about future growth, such as GDP, don't adequately account for AI," he explains. "They fail to link short-term variations in productivity with the three dimensions of technological change: automation, augmentation, and the emergence of new industries."

Implications for the Economy

Ironically, Davis's research suggests that a reason for the relatively low productivity growth in recent years may be a lack of automation. Despite a decade of rapid innovation in digital and automation technologies, productivity growth has lagged since the 2008 financial crisis, hitting 50-year lows. This appears to support the view that AI's impact will be marginal. But Davis believes that automation has been adopted in the wrong places.

The Services Sector

The services sector accounts for more than 60% of US GDP and 80% of the workforce and has experienced some of the lowest productivity growth. It is here, Davis argues, that AI will make the biggest difference. One of the biggest challenges facing the economy is demographics, as the Baby Boomer generation retires, immigration slows, and birth rates decline. These demographic headwinds reinforce the need for technological acceleration.

Augmenting Human Work

For example, consider nursing, a profession in which empathy and human presence are irreplaceable. AI has already shown the potential to augment rather than automate in this field, streamlining data entry in electronic health records and helping nurses reclaim time for patient care. Davis estimates that these tools could increase nursing productivity by as much as 20% by 2035, a crucial gain as health-care systems adapt to ageing populations and rising demand.

Implications for All Investors

As AI technology spreads, the strongest performers in the stock market won't be its producers, but its users. "That makes sense, because general-purpose technologies enhance productivity, efficiency, and profitability across entire sectors," says Davis. This adoption of AI is creating flexibility for investment options, which means diversifying beyond technology stocks might be appropriate as reflected in Vanguard's Economic and Market Outlook for 2026.

Forward-Looking Thoughts

Looking globally, Davis sees the United States and China as significantly ahead in the AI race. "It's a virtual dead heat," he says. "That tells me the competition between the two will remain intense." But other economies, especially those with low automation rates and large service sectors, like Japan, Europe, and Canada, could also see significant benefits. "If AI is truly going to be transformative, three sectors stand out: health care, education, and finance," says Davis. "For AI to live up to its potential, it must fundamentally reshape these industries, which face high costs and rising demand for better, faster, more personalized services."

Conclusion

The future of AI is not a binary choice between marginal hype and dystopian disaster. Instead, it offers a nuanced path to productivity and growth, one that will reshape industries and augment human work. As AI technology spreads, the strongest performers in the stock market won't be its producers, but its users. This adoption of AI is creating flexibility for investment options, which means diversifying beyond technology stocks might be appropriate. The future of AI is bright, but it will require careful planning and execution to unlock its full potential.

Source: https://www.technologyreview.com/2026/01/21/1131366/rethinking-ais-future-in-an-augmented-workplace/