How AI is affecting productivity and jobs in Europe (cepr.org)

Recent studies highlight the complex impact of AI adoption on productivity and employment across Europe, revealing crucial insights for the AI/ML community. While optimists see AI as a driver of significant productivity gains—potentially adding multiple percentage points to annual growth—skeptics point to barriers like skill shortages and unequal technology diffusion that could exacerbate economic inequality. A comprehensive study of over 12,000 European firms shows that AI adoption increases labor productivity by approximately 4% without reducing jobs in the short term. This suggests that AI primarily enhances worker efficiency rather than displacing labor. However, the benefits of AI adoption are unevenly distributed, favoring larger firms that can more easily absorb integration costs and make complementary investments in infrastructure and workforce training. For instance, an extra percentage point of investment in workforce training can amplify productivity gains by nearly six times. These findings indicate that European policymakers should focus on supporting small and medium enterprises in scaling up and investing in essential skills to harness AI effectively, rather than solely subsidizing AI technology. Given the evolving nature of AI, ongoing monitoring and proactive policy measures are critical to ensure equitable growth and mitigate potential job displacement in the future.