AI is affecting demand for freelancers

The impact of generative artificial intelligence (AI) on Egypt's job market could be substantial. A new study from the German Institute for Economic Research (DIW Berlin) suggests that AI technologies, such as ChatGPT, have led to a notable decrease in demand for digital freelance services. The research found that, within the first eight months following ChatGPT's launch in late November 2022, jobs vulnerable to automation saw an average reduction in demand by 20%. Writing-related tasks, including proofreading and ghostwriting, experienced the sharpest decline at 30%, while software, app, and web development services saw a 20% decrease. Similarly, there was a 17% reduction in freelance roles related to graphic design and 3D modeling after the release of these AI tools.

"Tools like ChatGPT and AI-driven image creators have quickly disrupted the freelance job market in various sectors. Generative AI is still in its early stages, so the landscape of work is likely to evolve even more dramatically," explains Jonas Hannane, from DIW Berlin’s Companies and Markets department. Hannane, alongside Ozge Demirci from Harvard Business School and Xinrong Zhu from Imperial College London Business School, reviewed over a million job listings on a major freelance platform between July 2021 and July 2023 for this study.

Generative AI refers to a class of artificial intelligence capable of producing text, images, music, and other digital content autonomously, learning from vast datasets to generate new material. Examples of such AI tools include ChatGPT, which can generate texts and codes, and image generators like DALL-E 2, Midjourney, and Stable Diffusion, which create visuals based on text prompts. "Digital freelance work, known for its short-term and flexible contracts, is already feeling the impact of automation driven by generative AI technologies," adds Hannane.

Need for Focused Training and Education to Prevent Exclusion

The decline in demand highlighted in the study surpasses usual seasonal variations on the platform and even the job losses caused by industrial robots in manufacturing. The influence of generative AI extends beyond reduced demand for freelance work; the remaining tasks are becoming more complex, and the budgets for these jobs are also increasing. Despite this, the overall drop in demand for roles that can be automated is reducing earning potential for freelancers in the short term. Although the long-term effects of generative AI on the regular job market are still uncertain, initial evidence from recent studies suggests significant productivity gains in fields like programming, writing, and customer service, which could fuel economic growth.

The study's authors underscore the need for companies to invest in employee training and embrace technological innovation to stay competitive and reap productivity benefits. Additionally, education policies must focus on creating suitable programs in schools, universities, and further education centers. "Ensuring that no one is left behind is crucial," Hannane emphasizes. "Providing equitable access to educational opportunities is key to achieving economic progress in a work environment increasingly dominated by AI."

This research offers insights into the growing influence of generative AI on the freelance market, both globally and in Egypt. Egyptian freelancers, in particular, may feel the impact of these technological advancements, highlighting the importance of enhancing their skills and diversifying their services to stay competitive in a rapidly changing market landscape.

A version of this article was published in marketing boerse.