AI and the Labor Market [BOK Issue Note 2023-30]

Macro Economy
AI Labor Market Occupation Replacement Employment
Research Department(02-759-5393)

1. Artificial intelligence (AI) has been making remarkable advances over the last decade, being employed across various sectors of the economy and is expected to have an even greater impact in the future. While AI holds the potential to improve productivity, create new job opportunities, it also raises concerns about job displacement. This report examines which occupations are highly susceptible to being replaced by AI and the implications of AI for the the labor market.

2. Using AI patent information, we construct occupational AI exposure indices, revealing that approximately 3.41 million workers in South Korea (12% of the workforce) face a high potential for replacement by AI technology. Unlike conventional technologies

like robots and software, higher-educated and higher-income occupations are more exposed to AI, primarily due to its tendency to replace non-routine cognitive (analytic) tasks.

3. Jobs with higher AI exposure are more likely to experience a decline in within-industry employment share and a decline in wages. This projection is based on the observed decline in both employment shares and wages over the past 20 years for jobs with high exposure to robots and software. Specifically, a 10 percentile increase in the AI exposure index could potentially lead to a 7%p decrease in employment share and a 2%p decrease in wage growth over the next 20 years.

4. While new technology may displace existing jobs (displacement effect), it can also create new employment opportunities (productivity effect). Moreover, significant changes in the way tasks are performed within existing jobs may occur. The benefit

of AI as a whole will depend on the adaptability of workers‘ skills, and how policymakers choose to support the groups that are hardest hit by these changes.

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