Enterprise AI Analysis

Impact of Robots and AI on Labor and Skill Demand: Evidence from the UK

Over the past four decades, automation technologies have replaced routine tasks performed by medium-skilled workers, and contributed to increased labor market polarization. With the advent of artificial intelligence, this dynamic may have shifted, extending task substitution to non-routine tasks performed by high-skilled workers. Using textual analysis and descriptions of technology found in patent texts, we construct novel occupational exposures to robot and artificial intelligence technologies. These occupational exposures are then used to analyze changes in labor and skill demand over the last decade in the United Kingdom. We find that the middle part of the income distribution is primarily exposed to robot technology, while exposure to artificial intelligence increases monotonically across income percentiles. Second, we find that exposure to robots is strongest among high school dropouts and declines monotonically with education, while artificial intelligence automation has a limited impact on the same workers, with a pronounced exposure among college graduates. Third, our findings suggest asymmetric effects of automation technologies across skill groups. Robot automation reduces demand for low-skilled workers, while AI technology shifts demand away from high-skilled workers, with the direct effects consistently negative despite the presence of several compensating mechanisms. Fourth, despite significant effects on wage bill, we find no robust relationship between automation exposure and changes in the employment-to-population ratio. Finally, a joint estimation of the effects of robot and AI automation shows that robot automation is positively associated with an increase in demand for skilled workers, while AI automation is weakly associated with a decrease in demand for skilled workers.