The European Central Bank (ECB) has warned that the spread of artificial intelligence could weaken the hand of euro area workers in pay talks, even without any rise in unemployment.
Philip Lane, the ECB’s chief economist, said in remarks to the International AI Summit in Dublin on October 13 that the scope for AI to replace some types of worker might also moderate wage growth and reduce the labour share in total income.
He said the ECB did not yet see a major change in aggregate employment trends, though hiring plans were muted, which weighed in particular on the prospects of new graduates.
Its surveys showed wide variation across industries. Workers in sectors benefiting from the build-out of AI infrastructure were more optimistic than those in knowledge-intensive sectors facing a greater risk of substitution.
The net effect on jobs would also depend on the evolution of “labour costs versus token prices”, Lane said.
Adoption was already significant and growing quickly, he added. The share of workers reporting that they used AI at work had doubled in two years to 52 per cent, from 26 per cent in 2024, while firms were set to devote about 10 per cent of their total investment to AI this year.
Even so, the European AI surge was of a different order to the boom in the United States and East Asia, he said. Digital investment in the United States had grown twice as fast as in the euro area over the past two years, and American workers spent two to three times as much of the working week using AI as their counterparts in the largest euro area economies.
The Stanford AI Index counted 59 notable AI models produced in the United States and 35 in China, against one each from France, whose flagship Mistral unveiled a new model this month, and the United Kingdom. The United States hosts 75 per cent of global AI computing capacity, Lane said, and Europe just 5 per cent.
He also tied the global investment boom to the cost of money in Europe. Because the European boom was far smaller, the global rise in long-term interest rates had spilled over into the euro area bond market and amounted to a material tightening of financial conditions.
That was a relevant factor for the ECB in deciding its monetary policy stance, he said. High equity valuations at AI firms and a surge in AI-related debt also carried risks to financial stability if investor sentiment turned.
Lane closed by saying Europe had much to gain by seizing the AI opportunity, and that the ECB was committed to making sure the transformation was underpinned by price stability and financial stability.
