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AI and Labour Market Inequalities

This programme brings together research on labour market inequalities, technological change and public policy to examine how governments can respond to these challenges. Through interdisciplinary research and engagement with policymakers, it seeks to improve understanding of the relationship between AI and inequality and to identify policy approaches that can support more inclusive labour market outcomes.

Artificial intelligence is expected to transform labour markets across the world, creating new opportunities while also raising important questions about employment, inequality and economic security. The effects of these technologies are likely to vary across workers, sectors and countries, with potentially significant implications for wages, job quality, social protection systems and the future of work.

The programme will be co-led by Nobel Laureate Professor Sir Christopher Pissarides, Regius Professor of Economics at the LSE’s Department of Economics and Professor Kirsten Sehnbruch, Distinguished Policy Fellow and Deputy Director for Impact and Engagement at the III. Building on the IFoW Pissarides Review into the Future of Work and Wellbeing and the Institute’s wider expertise in inequality, the research theme will collaborate closely with the Institute for the Future of Work to generate new evidence on how AI is affecting labour markets, tax revenues, public services and specific groups of workers, including young people, NEETS, women, older workers and people with lower levels of education.

The research programme focuses on the following five priorities:

  1. Labour market inequalities: We will build on our existing work on multidimensional measures of labour market performance that account for the quantity and quality of jobs and relate these to the observed impact of AI. This includes further developing our conceptualisation and measurement of good- and poor-quality employment, including through new methodologies such as behavioural experiments.
  2. AI-labour market observatory: The current generation of data on labour markets is too slow for the pace at which AI develops. By the time a survey of labour markets has been designed, undertaken and published, any results relevant to the adoption and use of AI will be significantly out of date. Real time administrative data is therefore necessary to track the impact of AI in much more granular detail than present estimates permit. We intend to use our existing contacts with governments to monitor labour market trends, fiscal revenue from employment and patterns of social security expenditure.
  3. Horizontal inequalities: Young adults transitioning into the labour market should be a priority focus in this context as they are already finding it increasingly difficult to find transition from education into employment in an age of AI. Not being in education, employment or training has the potential to scar their employment trajectories going forwards and to deepen inequalities. They should therefore constitute a key subgroup of focus in the analysis of the above points. The same goes other subgroups in the labour force such as women, older workers, or workers with lower levels of education. A key advantage of working with administrative data is that the differential impact of employment trends can also be observed by income percentiles.
  4. Policy impact: We will model and propose policy measures that would help governments support workers through the imminent process of technological transformation taking into account their impact on labour market inequalities, including through experimental evidence. We will examine policies related to (un)employment insurance; life-long learning infrastructure; social dialogue and worker representation; regional and local inequalities; structural changes to tax systems; and the role of the welfare state. We will build on our existing relationships with the Department of Work and Pensions, other government departments, MPs, think tanks and NGOs to ensure that our work achieves significant policy impact (mention JRF – TBC).
  5. Theoretical challenges: Working with LSE colleagues who are thinking about a new political economy and alternatives to capitalism, we will examine whether our existing theoretical frameworks adequately address how questions of social justice intersect with labour market transformations, including the potential effects of technological change.