Artificial Intelligence or Intelligence Augmentation? Unravelling the Debate through an Industry-Level Analysis

The tenet of artificial intelligence (AI) is to use machines to replace humans in performing tasks while the conviction of intelligence augmentation (IA) is to use machines to assist and enhance humans in performing tasks. This study examines whether information technology (IT) substitutes for or complements human labor in the production process. It argues that the relationship between IT and human labor is more nuanced than what has been conceptualized in literature — IT not only can substitute for human labor (the AI effect) but also can complement it (the IA effect); the exact nature depends on the tasks to be performed and the education levels of the employees. We test these predictions using an industry-level dataset covering 60 US industries from 1998 to 2013. Elasticity of substitution and organizational complementarity theory are adopted to examine the substitution/complementarity relationship between IT and labor with different levels of education. The findings reveal co-existence of the AI and the IA effects during the sample period, and that education plays a critical role for workers to benefit from the massive adoption of IT by the US industries