The Role of AI in Transforming Labor Markets: Productivity Gains Versus Job Displacement

Abstract

Artificial Intelligence (AI) is reshaping labor markets globally, acting as a dual-edged force of transformation. While it promises unprecedented productivity gains and economic growth, it simultaneously raises concerns about job displacement and workforce polarization. This research examines the role of AI in transforming labor markets, analyzing its impact across industries and demographic groups. By evaluating case studies and leveraging econometric modeling, the study highlights the dichotomy between automation-driven efficiencies and the socio-economic challenges of technological displacement. Key findings reveal the potential for AI to enhance productivity, drive innovation, and create new job categories, while also exacerbating skill mismatches and income inequality. The study underscores the critical importance of proactive policies, including re-skilling initiatives, equitable AI adoption frameworks, and collaborative efforts between stakeholders, to mitigate adverse effects and ensure inclusive growth in an AI-driven economy.