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Ala-Too Международный
International Университет
University Ала-Тоо

IMPACT OF ARTIFICIAL INTELLIGENCE ON LABOR MARKET

1. Introduction
Advancements in Artificial Intelligence(AI), a computer’s ability that can stimulate human intelligence in tasks,
such as making decisions, problem-solving or reasoning, has brought discussions about the AI replacing and
their effects on the economy. According to recent studies by the World Economic Forum, AI is expected to
automate 75 million jobs worlwide, creating 133 million new jobs in their place, by 2025. Facing such labor
market changes workers and employers having to deal with the challenges and opportunities.
In the history, worries about job losses due to the technological advancements date back to the end of 1920s and
early 1930s. Nevertheless, through history, many people were losing jobs, society overall has benefited from
technological progress. Besides, specific jobs were replaced by machines, overall job growth and living
standards increased.
Development of AI, especially in machine learning since the year 2011, have led to a huge changes in various
industries, like the ones that are revolutionary such as electricity or steam engines nowadays. Economists and
policymakers generally agree that automation in the past have not led to a decrease in labor demand overall, but
rather created new positions in other fields, and that humans were improving new technologies, and the
productivity therefore increased and new jobs were created.
However, AI differs from previous automation technologies in its ability to automate a broader range of tasks,
including complex ones previously thought to be exclusive to humans. While previous technologies primarily
automated routine tasks, AI can make predictions, recommendations, or decisions based on data, with the
capacity to learn and improve over time. This versatility raises concerns that AI may render previously human-
dominated tasks susceptible to automation.
The chapter assesses empirical evidence on how AI may impact labor demand, considering theories of
automation and measures of AI exposure to predict its effects on various occupations and groups. While
previous automation mainly affected middle-skill occupations, AI is expected to impact a broader spectrum of
jobs. Vulnerable groups may be particularly affected by AI exposure, as it extends beyond routine tasks.
2. Literature Review
Artificial Intelligence (AI) nowadays is pointed as the major advancement field in technology that is likely to
reshape different economy sections in the near future. AI as a general-purpose technology has spread to
numerous sectors. This has broadened its potential to influence the labor supply and demand, hence becoming a
factor of note in labor market dynamics. The main purpose of this review literature is to overview the different
adverse effects plus emerging jobs as a result of AI, allowing for disruption as well as creation of new
openings.
Technologically advancements, while occurring always, are a cause for worries since replacement of jobs by
machines has a long-time history that is traced back to the Industrial Revolution. The protoscience period
brought about the introduction of machines, which began replacing human labor with technological methods
thus leading to increases in productivity owing to more efficient ways of working. While tech unemployment
fears continue to haunt us, there is a divided opinion between optimists and pessimists as to whether technology
boosts or hinders employment, with Keynes' classic punchline (Keynes, 1930).
The meanwhile the application of AI, scholars still debate on that, and they look at its impact as skill-bias
theory and task -bias theory . The so-called skill-bias theory states that AI impacts mainly the jobs of medium-
skilled workers, and, therefore, provoking a polarization of employment, including a decrease in medium-
skilled jobs (Autor et al., 2020). Such polarisation results from automation of procedural duties, more prone to
AI automated implementation, as opposed to the non-procedural and manual ones less vulnerable to it (Goos &
Manning, 2020).
While the relevant reports have identified a number of different dangers related to the implementation of AI to
the routine activity of many enterprises. At this point, the advent of AI can result in the lowest position in the
employment pyramid becoming obsolete and unavailable (as Fleming has stated in 2021), leaving only workers
with high-level know-how. This also leads to injustice for workers who are displaced in the industries that were
replaced while the reallocation cost of human capital may contributed to the prolongation of unemployment
crisis (Trajteburg, 2021).
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In spite of these disadvantages, the AI is a field for creating new job positions and the emerging of new
industries too. AI industry is also going through exponential growth as could be discovered by the large number
of vacancies on offer (Robots. Jobs, 2022). Furthermore, AI relevant skills are likely to be highly valued in
various sectors, thus leading to the creation of roles such as Artificial Intelligence Data Scientists, Artificial
Intelligence Research Scientists, and Artificial Intelligence Software Engineers (Amazon & NVIDIA, 2023).
The facts continue to reinforce the potential of this technology to change the employment space. As an
example, in the research done by Oxford Professors Carl Benedikt Frey and Michael Osborne, it was estimated
that 47 percent of workers in the United States are vulnerable to automation (Fey & Osborn, 2020). Though the
actual number of job displacements may fall in the range of debate with researchers suggesting that social
policy make a difference to the employment results (PBS NewsHour, 2022).
Since the 1980s, machine learning has garnered increasing attention in AI research, as evidenced by a steady
rise in publications (Microsoft Academic via OECD:However, the socio-economic repercussions of widespread
AI integration remain unclear. The topic of machine learning became more relevant in the last decade when
neural networks, a particular class of machine learning algorithms, became one of the most frequently used
methods. These algorithms are based weighted connections and activation functions which in turn transform
data inputs into predictions estimating the weights iteratively until they reach the max error prediction is
minimized. Primarily, the innovations in neural networks have ushered in the age of deep networks made up of
multiple layers which enhance the performance of deep learning algorithms in handling tasks that involve
hierarchical decision-making and complex relationships.
The foundations of machine learning were established in the 1960s, but at that time practical applications had
little chances due to the restrictions on computational power. Nevertheless, while the pace of computing power
growth due to Moore's law and availability of big data is a driving engine of the growth of machine learning
generally speaking, it becomes a breast so widely spread in recent years. For instance, Chinese enterprises,
which hold government contracts for data, gain huge amounts of AI software from commercial sector (Beraja,
Yang and Yuchtman, 2022). Several AI milestones demonstrate its unimaginable opportunity. The example
given in the ImageNet Challenge, which was Incubated by Stanford University, shows drastic reduction of the
winning error rate over the period of time , from 25% to 2.3 % using traditional coding techniques in 2010 to
deep learning and innovative approach in 2017 (Russakovsky et al., 2015). In an analogous manner, AlphaGo, a
software developed in order to perform the game of Go, swiftly acquired immense skill and defeated the top-
ranking player in the world back in 2016 (Silver et al., 2016). Besides that, DALL-E, which is one of the
models trained to generate images from text descriptions, is able to prove AI can do much beyond the normal
artistic tasks (Ramesh et al., 2021).
AI, despite its enormous potential, not only drives economic growth, but yet comes with enormous challenges.
The privacy risk, uncompetitive practice, and the job replacement is amongst the issues which should be
addressed very carefully through the regulation and ethical consideration. Moreover, AI's impact on the labor
markets stimulate various debates on unequality and spurs the working conditions. In an effort to maintain
equilibrium, innovation and ethical considerations must remain on equal footing with rules and regulations
which promote fair benefits.
The most recent projections suggest that AI implementation may be capable of causing high job displacement
with the assumption that more than 20% of jobs may be lost within ten years due to being automated
(Acemoglu, Autor, Hazell & Restrepo, 2020). Nevertheless, the net effect on the employment pattern and wage
has thus far, been less pronounced as stars Acemoglu, Autor, Hazell, and Restrepo (2022) could barely point to
a noticeable AI-labor substitution impact.
One thing that needs to be covered is how the integration of AI leads to differentiation in competence
requirements and income distribution. Research evidences show emerging technology tends to bring
disproportional rewards to highly skilled workers and hence aggravating wage gap across societies (Berg,
Buffie, and Zanna, 2016). On the other hand, high-skilled workers will generally embrace the changes created
by AI, although middle-skilled workers are likely to experience challenges, while those with low skills may
find their situation worsens (Hassel, Ozkiziltan, & Weil, 2022). However, the pivotal issues still remain, and AI
technology brings substantial changes utterly to several sectors. AI has indeed left an upper hand in sectors such
as finance, healthcare, manufacturing and productivity thereby ensuring of job role transitions (Dwivedi et al.
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2021). As well, the situation gets better as the workers in the service industries are more stable in employment
and have a higher pay growth (Genz et al., 2021).
As well, the gender relationships of AI in the labor market are worth giving a thought. However, the technology
progress has not resulted into big reduction in wage differences, as a matter of fact it may deepen the gender
disparities (Cortes, Oliveira, & Salomons, 2020). This means that the inclusion of a gender perspective in the
discussions of AI effects on labor market is paramount.
COVID-19 pandemic helped the AI and automation industry to get ahead of time, especially in those sectors
which are dependent on a physical contact. Such a rapid digitalization brings along consequences for job
retention, skills requisites, and the remote work prospects future (Carbonero & Scichhitano, 2021)
2.1 Artificial Intelligence Nowadays
Artificial intelligence (AI), therefore, is considered a general-purpose technology (GPT), because its wide range
of applications are cutting across various industries and occupations (Rugaber, 2024). Hence, AI will have
major influence on the labor market since it is highly flexible in diverse sectors. On the other side of the
situation, AI restructuring results in job cuts since it has been shown previously that 3,900 people were out of
job to be substituted by the AI advancement in May (Challenger Gray & Christmas, 2023). As an example, the
company "Dropbox" is moving to reshape its workforce to comply with AI demands, that translates to layoffs
and reorganization in the direction of AI skills (Houston, 2023).
On the contrary, AI is a driving force behind the creation of a new industry and job, respectively. It is clear that
the rise of artificial intelligence in the modern era is reflected by an increase in the number of job openings with
a gain of more than 500% reported in early 2022, according to the Robots. Jobs (2022). By illustration, a firm
such as OpenAI iss providing various job positions, for instance in the applied AI engineering (OpenAI, 2022).
Also, other non-AI industries such as Amazon and NVIDIA do not even need just AI skills as AI related jobs
on Glassdoor in 2022 go to show (Glassdoor, 2022). The spots in demand in these positions are AI data
scientist, AI research scientist, AI software engineer, and AI software development engineer among others
(Glassdoor, 2022).
Economic Impact of Labor Market Changes:
Machine learning like ChatGPT is used for language translation and question-answering. Such machines could
replace some job functions for example, programming, and translation (Autor & Dorn, 2013). This
displacement effect, which is identical to steam engines when they were introduced, affects white collar jobs in
accounting and consulting, a domain where AI has succeeded in its natural language understanding. (Autor,
David & Dorn, David, 2013). Indeed, AI will create new labourer lands while at the same time raise the
demand for such specialised roles as AI trainers and sustaining actors (Bessen, 2016).
The replacement effect, which takes the place of the loss of jobs and enhances the productivity, complements
the displacement effect. It becomes a way to balance the employment changes in the market as a whole
(Brynjolfsson &McAfee, 2014). The AI market size has undergone considerable expansion over the time,
which signifies the reemergence effect and the coming into view of AI-related industries (Brynjolfsson &
McAfee, 2014). AI also makes the workers more productive in the non-automatable jobs, the data from the
National Bureau of Economic Research (NBER) showing that workers became 14% more productive when
they utilized AI tools like ChatGPT (CB Insights, 2024).
Sociological Implications:
AI's availability gives rise to the implication of misapplication, for instance, in making deep fake videos where
speech and facial expression are mimicked to tell untruthful stories. This entails two broad levels of risks,
which are individual and social, in the process distorting confidence in institutions and democratic participation
(Chesney & Citron, 2018). On the other hand, if biases like these are embedded in AI algorithms, they can lead
to a situation where the distribution of resources would be affected and could exacerbate socio-economic
disparities (O’Neil, 2016).
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Besides AI having an tremendous potential for advancement and yielding long-term productivity, it also comes
with challenges including job displacement, ethical issues and societal bias. Solving the problems indicated
needs a holistic regulatory system to have responsible AI use, to avoid the harmful social effects.
2.2 Impact of AI in the Future
The prospects for the labor markets revolutionizing by the emergence of artificial intelligence (AI) is a matter
of great importance and discussion. Studies have shown that AI is able to transform the nature of work across
occupational domains almost irreversibly. Often, occupations such as interpreters, translators, survey
researchers, writers, mathematicians, web designers, accountants, auditors, journalists, blockchain engineers,
tax preparers, and financial managers are among those most affected by the advent of AI as many of the tasks
that they do are easily replaced by generative AI (Eloundou et al., 2023).
Surprisingly, the final effect of AI on these jobs is still up for debate. How will AI workers be generated by a
robotic system, or will it lead to an increase in human productivity? The IMF has devised a very extensive
approach to AI, which takes into consideration the scale of automation of jobs and the capacity of AI to interact
with or substitute human work.
This is manifested through the IMF approach that considers not only the specific jobs but also the social, moral
and psychological aspects of occupations, the kind of skills needed, and the level of expertise required.
Occupations are classified into three groups: high relationship, high complementarity; high relationship, low
complementarity; and low relationship. AI high-exposure, high-complementarity occupations usually involve
heavy potential for AI support, in which case AI might be helpful to workers by leading to decision-making and
performing tasks. Surgeons, attorneys as well as judges, are occupations in the categories. Staff-exposed and
machine-repetitive jobs are likely to lose out as AI take over human tasks, resulting in job displacement and a
slowdown of wage growth. Telesales professionals form the first group (IMF, 2023).

The impacts of the artificial intelligence (AI) on advanced economies would be more significant than those on
the emerging economies. Around 40% of the world's workers are in high-exposure occupations; 18% of those
positions are in the high-exposure, high-complementarity job category, and 21% are in high-exposure, low-
complementarity occupations. It is assumed the that about 90 million Europeans and 100 million US citizens
will directly be exposed by to AI (IMF, 2023).
Nevertheless, AI is creating challenges in the work market, but it is not simple. Some jobs will be replaced but,
on the other hand, new jobs will be created or they will eventually move to new, higher levels. Job holders will
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need to learn new skills, adjust to a waning sector, and bring digital savvy to the area of work. The skill of
reconfiguration of the workforce amounting the AI-induced changes, will be different from the one to another
worker if the former are digital skilled and the latter can adapt or not to the new technologies (Felten et al.,
2019).
As AI is consequently thought to inevitably result in job displacement on a large scale, massive unemployment
is not projected by AI. Immplementation procedures may take some time, so the transformation of labor market
may not only occurformly rightway. Moreover the issue of demand for labor added to the supply of labor needs
attention. Demographic changes like a growing unproductive age segment will become imperative for AI
implementation to meet the requirements of labor shortages by 2023 (IMF, 2023).
Summing up, while AI can probably redefine the prospect of work markets by a large extent its effect will
actually depend on a number of factors; such as the speed of implementation, workers' adaptability and
demographic trends. While public authorities and other relevant entities should be mean towards providing
solutions to the challenges presented by AI as well as embracing its opportunities; thereby the development of a
smooth transition and inclusive growth is made possible.
3. Methedology
The review involved studying academic research on how Artificial Intelligence (AI) impacts jobs. The search
for these studies occurred in databases, focusing on those published between 2010 and 2024. Relevant research
was identified using keywords such as "artificial intelligence" and "labor market."
Important information, including findings and statistical data, was gathered from these studies. This information
was then organized into different categories based on the topics discussed. For instance, analysis covered how
AI affects job availability, creates new job opportunities, influences the economy, and impacts society.
Findings were structured into various themes, including how AI changes the types of jobs people do, affects
wages, and influences overall economic growth. Additionally, consideration was given to how AI impacts
different industries and various groups of people in society.
It's important to note that the review mainly focused on academic studies. Additionally, due to the rapid
evolution of AI technology, the gathered information may not remain relevant indefinitely. Therefore, caution
is necessary when interpreting findings, recognizing that circumstances may change over time.
4. Analysis
Artificial Intelligence (AI) is a rapidly advancing field with profound implications for the economy. This
research examines the dual impacts of AI on employment: its potential to displace traditional jobs and its
capacity to generate new opportunities.
Historically, technological advancements have triggered concerns regarding job displacement, during the
Industrial Revolution. Presently, AI's automation capabilities raise fears of job loss, particularly among
medium-skilled workers engaged in routine tasks. Studies indicate that AI-related automation could potentially
affect up to 47% of workers in the United States (Frey & Osborne, 2020), highlighting the scale of potential
disruption within the labor market.
Conversely, AI also is creating new kinds of jobs. The AI industry has witnessed exponential growth, with job
vacancies in AI-related fields surging by over 500% in recent years (Robots. Jobs, 2022). Specialized roles such
as Artificial Intelligence Data Scientists, Research Scientists, and Software Engineers are in high demand
(Amazon & NVIDIA, 2023), underscoring the need for individuals to acquire relevant skills to capitalize on
emerging job prospects.
Economically, the impact of AI on the labor market is many-sided. While it enhances productivity and
efficiency in certain sectors, there are apprehensions about job displacement in others. Research suggests that
AI-induced changes could lead to the displacement of around 20% of jobs within a decade (Acemoglu et al.,
2020). Policymakers struggle with the challenge of formulating regulatory frameworks to mitigate potential
adverse effects on employment patterns and wage levels.
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Societal implications of AI extend beyond economics, encompassing ethical concerns and social repercussions.
Issues such as deepfake videos and biased algorithms highlight the imperative for responsible AI governance to
safeguard individual rights and societal well-being (Chesney & Citron, 2018).
Looking ahead, the future of work will be significantly shaped by AI. However, the extent and nature of these
changes are contingent upon various factors, including the pace of technological implementation and workforce
adaptability. Therefore, it is crucial to prepare for both the opportunities and challenges presented by AI in the
labor market.
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Introduction