AI use in Irish firms likely to lead to job losses

A study from the Economic and Social Research Institute (ESRI) has found that artificial intelligence (AI) adoption among Irish firms is likely to lead to job losses, concentrated among highly educated workers.

This reflects the strong exposure of high-skilled occupations to AI technologies.

According to the research, around 7% of current jobs could be displaced in the short-to-medium term.

The joint report from the ESRI and Department of Finance found that the adoption of AI in Ireland is likely to lead to moderate increases in income inequality.

This change will be driven by job displacement among workers whose jobs can be partially carried out using AI, wage increases for workers who become more productive through the use of AI and increased capital income such as returns from investments in businesses.

For those who remain in work, average wages are likely to rise, reflecting productivity gains from AI tools.

"Returns to capital are also expected to increase, modestly on average, but with disproportionate benefits accruing to the highest-income households who hold most capital assets," the report said.

"Taken together, these forces produce an overall decline in average household disposable income in the short-term."
The report examined both the challenges and opportunities posed by AI for income inequality and the public finances.

"AI adoption will create winners and losers, at least in the short to medium-term," the study found.

"For Ireland, a country with a highly educated workforce and a strong technology sector, AI adoption presents a unique challenge and opportunity."
"The research focuses on the current occupational structure and could not take into account what new jobs or increased opportunities AI might generate in certain sectors," the ESRI said.

Physically demanding jobs least at risk
In terms of the roles most at risk, the report highlights occupations consisting of tasks that can be efficiently and reliably performed by AI technology such as image recognition and translation.

Roles facing higher levels of job losses include information and communications technicians, customer service clerks and clerical support workers.

The report found that roles that are customer-facing or physically demanding face little risk of substitution.

Occupations facing lower levels of job losses include health professionals, agricultural workers, builders and refuse workers.

"All AI adoption scenarios considered result in a small to moderate increase in household income inequality as job losses, wage increases and capital income increases together widen the gap between rich and poor," the study said.

The report found that Ireland's tax and welfare system is well-placed to absorb most of the income losses for lower-income households in the short-term through increased welfare entitlement and reduced tax liability.

It also concluded that the fiscal impacts are highly scenario-dependent.

If employment losses are small or re-allocation of workers is fast, Exchequer revenue may increase due to productivity gains.

If job displacement is large, however, income tax receipts will fall relative to the baseline and welfare spending will rise, putting significant pressure on the public finances.

"The effect of AI on the labour market and the distribution of income is still highly uncertain," said Karina Doorley of the ESRI.

"Income inequality, measured by the Gini coefficient, is likely to rise in any AI adoption scenario as job losses and wage and capital income increases result in income polarisation."
"Ensuring a speedy digital transition will minimise the inequality effects."
Sorcha O’Connor of the Department of Finance said the findings highlight the importance of upskilling, retraining and lifelong learning to smooth the AI transition.

"The widespread adoption of AI will likely boost productivity and raise living standards in the long-term," Ms O'Connor said.

"However, it’s important that these benefits are widely dispersed and that everyone benefits.

"This research offers valuable insights for consideration into how this transition is managed."
Read more: The 'winners and losers' in the adoption of AI