Executive Summary
Agentic AI – capable of autonomous decision-making and executing complex tasks without human intervention –marks a significant leap in artificial intelligence, with the potential to profoundly reshape economies and labor markets across the globe. The economic promise is considerable, with projected global gains of USD2.6-4.4trn over the next two to five years, driven by productivity and innovation. But the key question is whether this productivity growth will come at the cost of widespread unemployment. Historically, the labor share of national income remained relatively stable throughout most of the postwar period, suggesting that technological advancements complemented rather than replaced labor. In recent years, however, this trend has shifted downward, raising concerns about the increasing substitutability of labor with AI systems. Compared to earlier AI technologies, including generative AI, agentic AI poses a greater risk to employment, with recent estimates suggesting that up to 60% of jobs in advanced economies and 40% of global employment could be either augmented or automated by AI. The scale of this disruption could mirror the transformative effects of the Industrial Revolution, fundamentally challenging existing models of labor, income distribution and economic growth.
To assess the relationship between labor and capital, we analyze labor demand across several countries. While in Germany, Spain, Italy, and Poland, gross fixed capital formation and labor appear to be clear complements, with Poland and Italy showing the strongest positive effect Austria, France, and the Netherlands show no statistically significant relationship. However, when focusing on assets that serve as AI proxies, such as software and R&D, a substitution effect emerges. In all countries studied, increased software investment is associated with reduced employment, ranging from 0.22% to 0.29% per 1% increase in investment. R&D investment also shows a negative impact on employment, though smaller (0.01% to 0.08%), and not statistically significant in Italy and Spain.
Software investments are found to reduce labor in all industries except for agriculture, with the strongest decrease in finance and real estate. Gross fixed capital formation is positively correlated with labor demand across all industries, increasing employment by 0.15% to 0.35% per 1% investment. The strongest effects are in agriculture, arts, construction and manufacturing. However, for software investments we find that a 1% increase reduces labor in all industries bar agriculture, from 0.04% to 0.18%. with the strongest decrease in finance and real estate. Similarly, an increase of 1% in R&D investments tends to reduce labor demand across most industries, with the greatest substitution in real estate (0.30%), finance (0.30%) and ITC (0.17%). Our findings indicate that AI, and in particular agentic AI, may drive more substitution than previous technological waves.
Against this backdrop, a holistic public policy approach will be essential to mitigate labor market disruptions, redistributing displaced workers into new occupations and industries through retraining and reskilling, and incentivizing companies to hire displaced workers. The unique risks posed by the pace, scale and nature of AI-driven job displacement also justify the creation of new forms of social initiatives to share AI gains with those affected, such as cash transfers, AI displacement insurance or a universal basic income, financed by an AI-usage contribution system, a minimum corporate tax like that promoted by the OECD or preemptively tackling the issue with employee profit-sharing programs.