Jevons paradox foreshadows growth in the CX labor market

In 1865, economist William Stanley Jevons made a paradoxical observation: when steam engines became more efficient at using coal, the total coal consumption didn’t go down—it actually went up. The reduced cost and greater convenience drove more consumption. This phenomenon, known as Jevons Paradox, foretells an optimistic outlook for the CX labor market.

Generative AI services—like the ones powering the Crescendo Technology Platform will improve the efficiency of CX operations, lowering the cost and improving the quality of customer service.  A static view of the CX industry might suggest a pending decline in the CX labor market; but let’s consider the possibility of how Jevons Paradox fits our industry.

A Thought Exercise: Jevons Paradox Applied to CX

The demand for CX Coverage and Access has always exceeded supply.  There are very few (if any?) businesses where consumers find it too easy to access service.  Consumers always want more coverage hours and less wait time.  With declining costs, I believe that real time customer service fronted with AI and backed up by CX professionals 24x7 will become a realistic model for most businesses.

How many more CX professionals would the world require if all customer service was available 24x7?  Approximately 20% of service is available 24x7 according to ChatGPT.  This estimate seems a bit high to me but it’s helpful to be conservative for this exercise.  Modeling the percentage increase in CX Labor needed for all customer service to be 24x7 is a complex analysis.  Fortunately, there are AI reasoning tools that can help you work this out in a few minutes.  I got an answer of approximately 150% increase in labor (let me know if you try this and what you come up with).  To restate: if all businesses offered 24x7 service the world would need 150% more CX professionals (agents, team leads, CX operations leaders).

To fully articulate Jevon’s paradox; consider the possibility that AI doubles productivity therefore halving the number of CX professionals needed to deliver like-for-like care.  Responding to the new economics of dramatically less expensive CX, the market extends service to 24x7 care and the net impact to the labor market is: no impact.  To be clear, the nature of this CX work would have changed quite a bit, from handling conversations, to coaching AI and dealing with exceptions; this is the Crescendo Augmented-AI approach, but the overall number of jobs is unchanged.

Let’s continue with some other labor growth possibilities.

Smaller businesses that may have relied entirely on email/ticket based support due to cost, will be able to afford full Omnichannel CX.  AI automations for phone and chat can be backed up with a small number of CX professionals, making this type of omnichannel CX operation possible for smaller businesses. 

A quick AI analysis suggests that about a third of businesses are email/ticket only and if they expand service offer to include chat and email the global CX labor market would grow ~20%.

What would happen if every business offered High-Quality CX.  Premium product and service companies offer premium CX but mid-tier providers often take service shortcuts and budget providers will offer the bare minimum CX.  We all experience mass market consumer products, “free” ad-supported products or free tiers of Freemium products, that offer almost no customer service due to costs (not a lack of demand).  As costs decline and CX becomes an increasingly small portion of overal operating costs, I believe high quality CX will become common for all market participants.  How would this impact the labor pool?

An analysis here might split the global service economy into Premium, Mid-Tier, and Budget (my AI used 20%, 50%, 30%) and then make an assumption about the proportion of CX professionals to whom Mid-Tier and Budget apply to care relative to Premium (60% and 30%).  These highly creative assumptions and some basic math  show a ~100% increase in the size of the CX Labor pool if all CX was premium.

To summarize the thought exercise:

• All CX organizations going to 24x7 would grow labor 150%
• All CX organizations going Omnichannel would grow labor 20%
• All CX organizations offering Premium level care would grow labor 100%

This stage of the thought exercise is to consider how much headroom there is for demand of CX labor.  The constraining factor on customer service is cost and lowered cost will increase consumption.  Jevons Paradox

The cycle will go like this:

1. Generative AI will increase CX productivity (shrinking CX Labor demand)
2. Cost of CX will drop
3. Market participants expand coverage, channels, quality (growing the CX Labor demand)

Imagine a world where every product or service comes with high quality CX.  This is a CX Renaissance

Conclusion: A Paradox That Drives Growth

So what’s going to happen to the CX Labor market?  I’m not sure, but I’m not worried about a collapse.  Jevons Paradox predicts a comforting ballast effect to the increase in productivity.

It’s also relevant to consider the global economic consequence of AI.  In a recent interview, Satya Nadella reframed the Artificial General Intelligence (AGI) timeline debate as a milestone where we achieve a 10% growth rate for GDP.  For sure, this will change the nature of work but a trillion dollars per year in new economic activity is going to require a lot of additional CX.

Curious to Learn More?

Reach out at Crescendo.ai today to discover how we can help you leverage AI-driven efficiency and increased engagement for game-changing customer experiences—and a new era of growth.