AI Technology and Labor Supply Constraints Analysis

This technical report by Mizuho Bank's Industry Research Department examines the role of artificial intelligence (AI) in addressing labor supply constraints. It outlines three key technologies that constitute AI: models (algorithms), data, and computing, emphasizing the importance of scaling these technologies for improved performance. The report discusses the challenges AI faces, including the 'black box' problem and the need for adequate training data and computing resources. It presents potential solutions, such as hybridizing classical AI with foundation models and utilizing federated learning to enhance data integration across companies. The report also projects the economic impact of AI on labor markets, estimating that the labor substitution market could reach approximately 34 trillion yen by 2050. Additionally, it highlights the significance of developing resource-efficient AI applications to overcome barriers posed by Japan's industrial structure and delayed digital transformation. The findings aim to inform stakeholders about the future of AI in various industries.