Adoption of AI will see Irish job losses

Highly-skilled occupations are exposed, says ESRI and Dept of Finance report

The increased adoption of artificial intelligence (AI) by Irish firms will lead to job losses, with highly educated workers hardest hit, a new report warns.

The increased adoption of artificial intelligence (AI) by Irish firms will lead to job losses, with highly educated workers hardest hit, a new report warns.

High-skilled occupations are strongly exposed to AI adoption, according to the joint report from the Economic and Social Research Institute (ESRI) and Department of Finance. The report predicts that AI is likely to lead to “moderate increases in income inequality in the short to medium term”. “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 returns to capital investment,” the report said.

Last month, the Government published a new national digital and AI strategy setting a target of 75% of enterprises in Ireland using AI by 2030. It is also targeting 100% of key public services digitalised by 2030, and 90% consumed online.

The ESRI and Dept of Finance study published on Thursday examined how AI may affect employment, wages, and capital income in Ireland over the short to medium term.

The research focused on Ireland’s existing occupational structure and simulated a range of AI adoption scenarios. “The effect of AI on the labour market and the distribution of income is still highly uncertain. Income inequality ... 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,” said report co-author and ESRI professor Karina Doorley.

The report predicts that 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. Taken together, these forces produce an overall decline in average household disposable income in the short-term."

The researchers say all of the AI adoption scenarios result in a “small to moderate” increase in household income inequality as job losses, wage increases, and capital income increases widen the gap between rich and poor. “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 will also absorb roughly half of the losses for the highest-income households.” 

The impacts on Ireland’s tax take also vary. “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.” 

Co-author Sorcha O’Connor of the Department of Finance said the report’s findings highlight the importance of investment in skills, lifelong learning, and retraining to help workers transition into other jobs and sectors.

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