The Impact of Artificial Intelligence on Employment: Navigating a Global Transition

The rapid and impressive advances in artificial intelligence (AI) have led to renewed concern about technological progress and its profound impact on the labor market. This new wave of innovation is expected to reshape the world of work, potentially arriving more quickly than previous technological disruptions because much of the necessary digital infrastructure already exists. The central debate remains: Will AI primarily benefit or harm workers?

AI’s effect on employment is theoretically ambiguous, involving both job destruction and creation. On one side is the substitution effect, where employment may fall as tasks are automated. Estimates suggest that if current AI uses were expanded across the economy, 2.5% of US employment could be at risk of related job loss. Occupations identified as high risk include computer programmers, accountants and auditors, legal and administrative assistants, and customer service representatives. AI adoption is already impacting entry-level positions, with early-career workers in the most AI-exposed jobs seeing a 13% decline in employment.

However, the opposition is the productivity effect, where AI can increase labor demand by raising worker productivity, lowering production costs, and increasing output. Historically, new technologies have tended to create more jobs in the long run than they destroy.

When looking at cross-country evidence from 23 OECD nations between 2012 and 2019, there appears to be no clear overall relationship between AI exposure and aggregate employment growth. But the impact varies significantly based on digital skill levels:

• High Computer Use Occupations: In fields where computer use is high, greater exposure to AI is positively linked to higher employment growth. Highly educated white-collar occupations—such as Science and Engineering Professionals, Managers, and Business and Administration Professionals—are among the most exposed to AI. This positive trend is often explained by workers with good digital skills being able to interact effectively with AI, shifting their focus to non-automatable, higher value-added tasks.
• Low Computer Use Occupations: Conversely, there is suggestive evidence of a negative relationship between AI exposure and growth in average hours worked among occupations where computer use is low. This occurs because workers with poor digital skills may be unable to interact efficiently with AI to reap its benefits, meaning the substitution effect outweighs the productivity effect. This drop in working hours may be linked to an increase in involuntary part-time employment.

This transformative period is expected to increase the dynamism and churn of the labor market, requiring workers to change jobs more frequently. Policymakers must adopt a worker-centered approach, focusing on steering AI development to augment workers rather than automate them entirely, preparing the workforce for adjustment, and strengthening safety nets for displaced individuals. Governments must plan now to ensure workers are equipped to benefit from this coming wave.