How will AI affect jobs and wages?

How could it affect jobs?

There is still considerable uncertainty about the answer.

Surveys by the Bank of England and the Office for National Statistics show that more businesses are using AI. So far, nearly 90% of firms in the Bank’s survey said it had made no noticeable difference to the number of people they employed.

Looking ahead, businesses expect AI to reduce employment slightly over the next few years. However, the overall effect remains uncertain. AI could also create new businesses and jobs, which may offset some of the losses elsewhere.

Historically, new technologies have tended to change jobs rather than simply eliminate them. Electricity, computers and the internet are known as general purpose technologies because they can be used widely across the economy. They have supported economic growth and the creation of new jobs, even though some existing ones became obsolete. AI could also become a general purpose technology and radically change the way we work, but it is still too early to know how widespread or significant its effects will be.

For example, the spread of computers reduced demand for some clerical tasks but also created new roles in software, data and digital services. But AI is generally expected to automate specific tasks rather than entire occupations. Some tasks may become quicker or easier to complete, while new jobs, skills and industries may emerge. The balance between these forces remains uncertain.

Chart: UK's unemployment rate over time

What could happen to graduate and entry-level jobs?

Some have suggested AI could have a greater impact on graduate and entry-level roles because many junior employees perform tasks that AI systems can assist with, such as producing first drafts, summarising information, basic research and data analysis.

Some organisations are experimenting with using AI to support or automate these activities. This has raised questions about how entry-level workers will gain experience and develop skills if some traditional learning opportunities become more automated.

However, it is still too early to draw firm conclusions. Many organisations are still deciding how best to combine human skills and AI tools, and the long-term effects on career development remain uncertain.

What about wages?

The impact of AI on wages is also uncertain.

If AI makes workers more productive, businesses may be able to produce more output and potentially pay higher wages over time.

However, AI could affect different workers in different ways. Demand for some skills may increase, while demand for certain routine tasks may decline. As a result, wage growth could vary across occupations, industries and skill levels.

At present, there is limited evidence that AI is having a significant effect on overall wage growth in the UK's economy, but this is another area that economists and policymakers are monitoring closely. 

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