26th May 2023

Is RecTech innovation and competitive advantage threatened by the EU’s AI Act?

AI, Recruitment

Regulation could stifle commercial development

Most would agree that we cannot let technologies which herald great change be allowed to run away without effective control over their development and uses.

However, it’s likely that many also agree that too much legislative and regulatory interference stifles innovation and progress. So where is the line?

Around the world regulatory bodies of leading economies, including the UK, Australia, the US and Canada, are wrestling with the issue, and it is a question that has been occupying the time of many in the field of artificial intelligence (AI) for some years now.

On 11 May 2023, the EU’s comprehensive AI Act passed a committee vote. This law has been in development since 2021, but our growing awareness of the dizzying acceleration of AI technology since ChatGPT went public in November 2022, has caused EU regulators to scramble and rewrite the law in the last few months.

Their framework is built on four risk layers regarding how AI is used:

Not every nation is focused on commerce and jobs

From both sides – the tech industry and governments, there is a race to get there first and set the global standard. The winning tech company or companies may have a competitive advantage for the foreseeable future. For regulators, assuming the global lead in control – and getting it right – is likely to be highly influential in shaping human societies for the rest of the century.

One of the main causes of concern is jobs and the employment market. Speculation here has caused widespread fears for the future, with one leading business, Goldman Sachs, recently estimating that in the coming decade, the technology will wipe out 300 million jobs – one in every 11 positions globally.

But some nations are also prioritising the protection of their ideologies. In this respect, the giant of APAC, China, has been quick to set out draft regulations for fast-developing generative AI technology. For Beijing, the priority appears to be domestic security. For instance, it suggests any generated content should reflect China’s socialist core values.

This is not a million miles away from the attempt by many regulators around the world to force social media platforms to remove inappropriate content that may have a corrosive effect on society, such as terrorist or violent sexual content. Both these examples seek to shape society by preventing the proliferation of content and ideas that may ultimately be harmful to their respective cultures.

We should not be afraid of ‘high risk’ RecTech

Employment-focused AI, including the RecTech category of software widely used across the recruitment sector, is classed as high risk. This is because AI systems have displayed gender and racial bias.

In 2020, for example, the UK’s automatic passport photo technology was shown to be biased against people with darker skin. And brief testing of Amazon’s recruitment algorithm didn’t recommend any women for an interview. Such bias is attributed to the data originally used to train the systems.

It’s in everyone’s interest that AI RecTech is unbiased. However, the high-risk categorisation of RecTech within the EU AI Act should not be allowed to stifle its development, lowering AI’s value to the recruitment sector and reducing competitive advantage for agencies that are early adopters.

Organic, natural development of technologies is nothing to be afraid of, because it is the ‘mother of invention’, the normal creative process that has been used by humanity since the invention of stone tools and the wheel. The most serious risks are posed by irresponsible development, widespread proliferation, and their inappropriate use by ‘bad actors’ in the form of cybercriminals or those that seek to spread misinformation and disinformation to disrupt democratic processes, such as free and fair elections.

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ETZ’s leading timesheet and invoicing solution streamlines the back office processing of your recruitment agency. Our complementary solutions, ETZ Comply for onboarding and document management and Caspian for business intelligence give agencies further capability to streamline and uncover opportunities. To find out more, call us on 0800 311 2266 or book a demo.



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