Executive summary
The robust recovery from the COVID-19 recession lost momentum since 2022 while a cost of living crisis took hold as Russia’s war of aggression against Ukraine contributed to decades-high inflation in many countries. However, employment has held its ground, while unemployment rates have reached their lowest levels in decades. With few exceptions, inactivity rates are below pre-pandemic levels, including among older adults. Labour markets remain tight in most countries, yet there are some signs of easing as the number of vacancies per unemployed has decreased slightly from historically high peaks.
Despite a pick-up in nominal wage growth, real wages are falling in virtually all OECD countries. In many countries, profits have increased more than labour costs, making an unusually large contribution to domestic price pressures, and leading to a fall in the labour share. While public transfers and fiscal support have provided some relief, the loss of purchasing power is particularly challenging for workers in low-income households who have less leeway to deal with price increases through savings or borrowings and often face higher effective inflation rates because a higher proportion of their spending goes to energy and food.
Several policy levers can be activated to limit the impact of inflation on workers and ensure a fair share of the costs between governments, companies, and workers. The most direct way to help workers is via an increase in their wages, including statutory minima, which are under government control. On average across OECD countries, nominal statutory minimum wages have kept pace with inflation thanks to discretionary increases or indexation mechanisms. In contrast, wages negotiated in collective agreements have declined in real terms, as they are reacting with some delays due to the staggered and rather infrequent nature of wage bargaining.
To guide policy makers in developing an appropriate response, this edition of the Employment Outlook reviews the emerging evidence on the impact of artificial intelligence (AI) on the labour market, while highlighting the significant level of uncertainty that surrounds the current and especially future impact of AI in the labour market, as well as the most suitable policy actions to promote a trustworthy use of AI.
AI appears to be different from previous digital technological changes in several ways: i) it significantly expands the range of tasks that can be automated beyond just routine, non-cognitive tasks; ii) AI is a general-purpose technology, meaning that nearly every sector and occupation will be affected; and iii) the speed of development is unprecedented.
Based on the current literature (which mostly predates the latest wave of generative AI), there is little evidence of significant negative employment effects due to AI so far. This may be because AI adoption is still relatively low and/or because firms so far prefer to rely on voluntary workforce adjustments. Any negative employment effects of AI may therefore take time to materialise. At the same time, AI creates new tasks and jobs, particularly for high-skilled workers who have the right competencies to work with AI. Monitoring the distribution of job loss and creation will be important with an eye on inclusiveness.
The biggest impact highlighted by the literature so far has been on job quality. Workers and employers report that AI can reduce tedious and dangerous tasks, leading to greater worker engagement and physical safety. However, there are risks too. There are reported cases of AI automating simple tasks and leaving workers with a more intense, higher-paced work environment. AI can also change the way work is monitored or managed, which may increase perceived fairness, but also poses risks to workers’ privacy and autonomy to execute tasks. AI can also introduce or perpetuate biases.
The risks of using AI in the workplace, coupled with the rapid pace of AI development and deployment (including the latest generative AI models), underscore the need for decisive action to develop policies to reap the benefits AI can bring to the workplace while addressing risks for workers’ fundamental rights and well-being. Existing legislation – e.g. on discrimination, data protection or workers’ rights to organise – is an important foundation for managing AI use in the workplace, but it is still uncertain to what extent it can be applied to AI because relevant case law remains limited. As a result, countries are also developing AI-specific legislation and soft law (e.g. AI strategies, ethical principles, standards).
The impact of AI on tasks and jobs will engender changing skills needs. While companies using AI say they provide training for AI, a lack of skills remains a major barrier to adoption. Public policies will therefore have an important role to play, not only to incentivise employer training, but also because a significant proportion of required training takes place in formal education. AI itself may present opportunities to improve the design, targeting and delivery of training, notably the opportunity of providing tailored training solutions at scale. Yet the use of AI in training could exacerbate inequalities and perpetrate human biases and these challenges must be addressed.
Collective bargaining and social dialogue also have an important role to play in supporting workers and businesses in the AI transition. AI adoption tends to result in better outcomes for workers when their representatives are consulted on the matter. Yet, the specific characteristics of AI and the way it is implemented, such as its rapid speed of diffusion, its ability to learn and the greater power imbalance it can create, put further pressure on labour relations. While AI technologies have the potential to assist social partners to pursue their goals and strategies, the lack of AI-related expertise among social partners is a major challenge.