ECB study warns, rapid AI adoption could impact wages, not jobs

A recent ECB study indicates that while the rapid adoption of AI could reduce wages, it is currently generating jobs, particularly for the young and highly skilled. Despite the ongoing recession, a shortage of qualified workers persists, challenging the conventional wisdom that economic downturns alleviate labour market pressures.

‘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.’

Why does it matter?

The research, examining 16 European countries, shows that AI adoption has increased the employment share in sectors exposed to it, with highly skilled positions experiencing the most significant boost. However, the study also notes potential ‘neutral to slightly negative impacts’ on earnings, emphasising the need for continued scrutiny as the full consequences of AI on employment, wages, and equality are yet to be fully understood. The current phenomenon contrasts with past technology waves, suggesting that AI adoption fosters a more balanced distribution of employment opportunities across skill levels.