AI threatens wages, not jobs – ECB report

Research published by the European Central Bank indicates that the rapid adoption of artificial intelligence (AI) has the potential to reduce wages, but so far it is creating, not destroying jobs, especially for the young and highly skilled.

According to the research, despite concerns about the future impact on employment, companies heavily investing in AI are experiencing a shortage of qualified workers, contrary to the typical labour market trends during a recession.

The research shows that across 16 European countries, the employment share in AI-exposed sectors has risen, with low and medium-skill jobs largely unaffected, while highly skilled positions see the most significant increase, as reported in the ECB’s Research Bulletin.

Here are excerpts from the report:

“Using data for occupations at the 3-digit level in Europe, we find that on average employment shares have increased in occupations more exposed to AI. This is particularly the case for occupations with a relatively higher proportion of younger and skilled workers.

“This evidence is in line with the Skill Biased Technological Change theory. While there exists heterogeneity across countries, only very few countries show a decline in employment shares of occupations more exposed to AI-enabled automation. 

“Country heterogeneity for this result seems to be linked to the pace of technology diffusion and education, but also to the level of product market regulation (competition) and employment protection laws. In contrast to the findings for employment, we find little evidence for a relationship between wages and potential exposures to new technologies.”

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However, the study also notes “neutral to slightly negative impacts” on earnings, which may escalate over time.

The findings were in contrast to previous “technology waves,” it said, when computerisation decreased the relative share of employment of medium-skilled workers, resulting in “polarisation”.

The report noted that the results obtained so far do not amount to an acquittal. It added that as AI-enabled technologies are still being developed and adopted, their full impact on employment, wages, growth, and equality remains to be seen.