AI’s Impact On Labor Market: Skills Acquisition And HR Strategies

February 19, 2024


This article first appeared in February’s print edition of Business Monthly.

Artificial intelligence (AI) tools have become an indispensable business component, significantly reshaping the labor market dynamics. Saadia Zahidi, managing director at the World Economic Forum (WEF), noted that in 2023, “labor market transformations driven by technological breakthroughs, such as the coming of age of generative artificial intelligence (GenAI) [which can generate bespoke content], were being compounded by economic and geopolitical disruptions and growing social and environmental pressures.”

While the first idea associated with AI is that it might replace people in workplaces, the WEF report says AI will create 97 million jobs globally between 2020 and 2025.

That will require employees to embrace new skills to adapt to the changing employment landscape. A global study from IBM Institute for Business Value (IBV) in 2023 said executives believe they need to re-skill around 40% of their workforce in the next three years. Meanwhile, a study by McKinsey Global Institute says that by 2030, at least 14% of employees globally might need to change careers due to digitization, robotics, and AI.

Those significant shifts mean HR departments need to identify and quickly hire those with the correct skills to help the company cope with and benefit from the transition to AI. HR would also need to manage the upskilling of existing top employees to be AI-ready from technical and mental perspectives.

HR experts also need to reliably predict the organization’s “new workforce” needs to develop plans to attract fresh talent and retain and motivate their top employees. That means HR departments should embrace AI faster than the rest of the organization to build a future-ready company.

New Era

Implementing AI tools in human resources management activities can elevate and transform HR teams’ operation and structure. “In practice, AI technology has the potential to automate repetitive and time-consuming tasks, help HR teams analyze data, and support improved decision making – and therefore improve productivity and cost-effectiveness,” said Pete Cooper, director of people partners and analytics at Personio, a German software company.

Businesses embrace different AI tools within their HR departments to streamline talent acquisition and management processes. A study by Engagedly, a talent management software platform published in 2023, showed that 45% of human resource management leaders already incorporated AI to manage their workforces.

While integrating AI and GenAI technologies in HR departments brings profound advancements, that does not mean AI will replace HR professionals. According to Cenk Sidar, co-founder and CEO of Enquire AI, “The only workers who will be replaced by AI are those who don’t learn how to utilize it in their work.”

Knowing how to benefit from AI is vital, as human input will always be crucial to ensure that AI produces the desired outcomes. “The value will remain in having a human in the loop to develop prompts to guide the technology and double-check that AI-generated content truly aligns with the needs of the task, role, and/or organization,” said  McKinsey & Company in July.

Global change

What AI and GenAI systems will likely do in practice is “improve operations and outcomes [from HR departments],” said the Engagedly report. Accordingly, HR managers should focus on developing AI strategies that align with their organization’s objectives while addressing AI integration concerns and challenges.

A case in point is Deloitte LLP, which uses AI to “evaluate staffers’ skills and map out plans that would shift employees away from quieter parts of the business and into roles that are more in demand.” That system is part of Deloitte’s plan to use technology to minimize hiring growth. “It is obviously a great objective to be able to avoid large swings of hiring and layoffs,” Stevan Rolls, Deloitte’s global chief talent office, told Bloomberg in December 2023.

“You could always be more efficient and effective about finding the right people.”

Another function of AI is ensuring “objectivity, as well as transparency and fairness, in the applicant selection process,” noted Felix Hensel, head of rentals at Mr. Lodge GmbH, a real estate sales company. He added that will “lead to a noticeable reduction in workload” as employees focus more on “strategic tasks.”

Personalization of candidate communications is another benefit AI offers HR managers during hiring. “Generative AI makes it easier to personalize communications to acknowledge each applicant, explain why they weren’t selected, and highlight any other opportunities that may be a better fit for them within the organization,” Bryan Hancock, a partner at McKinsey & Company in Washington DC., noted in a July 2023 research note.

He also stressed that the best application of GenAI is in large skill pools. Hancock explained that while HR managers are trying to fill well-known jobs, they need a more productive and efficient way to navigate applicant profiles.

GenAI can also assist HR managers while onboarding and quickly bringing new hires up to speed. Hancock noted that research by Stanford and MIT found that GenAI functionality “was incredibly helpful with new folks because they were able to get that institutional knowledge much more quickly.” He explained that new hires can easily get answers to their questions using generative AI, which can get them 80% to 90% of the way to full proficiency.

Local practice 

In an event titled “Unlocking HR Potential in Turbulent Times,” organized by the AmCham HR and Talent Management Committee in June, HR executives shared and discussed challenges and the digital tools companies use to manage workflow.

Ahmed Salama, head of Microsoft Cloud Solutions in Egypt, said AI in HR departments can leverage and analyze the vast amount of data stored over the past 10 to 20 years. That can be done using ready-made programs like “learning management solutions and applicant tracking systems,” Salama said. “Now is the time for organizations to leverage AI because we now have huge data stored about the business over the past five, 10, or even 20 years.” He added that AI can significantly advance the entire organization if used properly and ethically.

Reham El-Kady, people experience director at Pfizer, said digital tools were “embedded in the fabric” of the company even before COVID-19 forced everyone to work from home and use different technologies.

She said her company utilizes AI in HR in the form of a chatbot named Olivia that acts as a personal assistant to employees. The chatbot highlights the needed job descriptions, tracks applicants, filters them, and schedules interviews. El-Kady added that her company uses another AI tool named Viva that helps employees track their well-being.

Rania Selim, IBM’s HR lead, said her company uses an automated compensation adviser. The Watson AI solution is an algorithm based on elements of compensation strategy that helps managers make informed decisions. She said such a tool provides the organization with transparent communication and conversation with employees; furthermore, it helps give the proper compensation to each employee.


Egyptian businesses are likely to be slow to embrace AI tools. El-Kady emphasized that fear of change is a significant challenge to integrating AI into HR. She explained that layoffs are the first thing that pops into people’s minds when it comes to incorporating AI.

This fear is common throughout the world. According to a whitepaper by Personio released in December titled “Playtime is over: AI has reinvented HR,” 51% of surveyed HR managers rank the fear of job loss as the primary challenge in implementing AI in their organizations.

The other “challenge HR managers face is understanding AI’s capabilities and the potential impact on their processes,” noted NextGenAI Staffing Group, an HR consultancy, in October in a LinkedIn post. “A lack of understanding can lead to unrealistic expectations, resulting in disappointment and underutilization of AI’s potential.”

Another is the need for robust access rules and regulations and protection from cyber threats. “The use of AI in recruitment often involves processing large amounts of personal data. This raises concerns about data privacy and security,” noted NextGenAI Staffing Group. “Organizations must continually refine their strategies to keep data safe and ensure its integrity,” futurist author Bernard Marr wrote on the Forbes website.

To safeguard sensitive and confidential information, the Personio whitepaper recommends implementing a data classification framework. This framework categorizes data into various categories, such as internal and external data, confidential data, and public data.

Third, “if the training data is biased, AI will perpetuate these biases in its decision-making process,” said NextGenAI Staffing Group. “This can result in unfair hiring practices and a lack of diversity in the workforce.”

For companies to mitigate bias in AI, “special attention must be paid to decontaminating the outcome variables AI is trained to predict,” said Tomas Chamorro-Premuzic, chief innovation officer at ManpowerGroup, a global workforce solutions company. He explained that AI models should include desirable or ideal indicators of future value for the business instead of historical individual success factors.

Regardless of the reason for slow adoption, it is essential to provide relevant training to HR professionals to effectively leverage AI tools. The Personio whitepaper found that “96% of HR managers across Europe say at least some training will be necessary to successfully implement generative AI in HR processes.”

The last reason for slow adoption, mainly in less educated nations and societies, is that humans will remain at the helm. Tom Cheese Wright, an author and applied futurist, sees that, for better or worse, human intervention is indispensable. “The more technology we introduce and the more we use AI, the more we’re going to value people and the qualities that are uniquely human,” he said.