TECH

AI could reduce workers' bargaining power, says ECB

Artificial intelligence could diminish the bargaining power of workers in the Eurozone, even before causing significant shifts in employment. This warning comes from Philip Lane, Chief Economist at the European Central Bank (ECB), who suggests that the potential for certain roles to be replaced could weaken workers' ability to negotiate wage increases.

This assessment arrives at a time when inflation remains under pressure from energy costs, and companies are maintaining modest hiring plans. According to Lane, the threat of automation could introduce a new factor that restrains wage growth—even if artificial intelligence has not yet triggered substantial changes in overall employment levels.

How AI might affect workers' bargaining power... In a speech delivered on October 13 in Dublin, during the International AI Summit, Philip Lane explained that artificial intelligence has not yet significantly altered general employment trends in the Eurozone. Nevertheless, hiring plans remain cautious, which particularly affects individuals seeking their first job.

The economist argues that the possibility of replacing certain functions with AI systems could limit workers' ability to demand better pay. This pressure could temper wage growth and reduce the share of economic income that goes to labor.

This mechanism does not necessarily require layoffs. If workers believe their roles could be automated, they may have less leverage to negotiate salary increases or seek better conditions elsewhere.

However, the analysis does not demonstrate that this dynamic is already producing measurable effects. Lane presents it as a possibility that helps in understanding the evolution of the labor market. The official had already raised this possibility on October 5, linking the potential replacement of workers by AI to a cooling in labor demand and the difficulty in securing wage increases that could offset rising energy prices.

Half of the surveyed workers already use AI...Concerns regarding the effects of automation arise at a time when artificial intelligence is being rapidly adopted by European companies.

According to a study published by the ECB in August 2026, the share of surveyed workers who use AI in their professional activities doubled over two years—from 26% in 2024 to 52% in 2026.

These findings are based on the ECB’s Consumer Expectations Survey, which collects monthly responses from approximately 20,000 individuals across 11 eurozone countries.

Participants who use these tools reported time savings; however, these gains are concentrated in specific sectors and specialized tasks, such as programming. Despite this rapid adoption, the ECB believes it is still too early to discern any significant impact on the economy's aggregate productivity.

Furthermore, this transformation does not affect all professions in the same way. Some roles may see increased demand for skills that complement artificial intelligence, while others face a higher risk of being replaced.

This disparity underscores the importance of professional adaptation. As discussed in our article on the use of AI in the workplace, the automation of tasks does not necessarily mean the elimination of entire professions; rather, it may shift the skills required and change how companies organize work.

Investment in AI also exerts pressure on interest rates. The economic consequences of artificial intelligence extend beyond employment and wages. Philip Lane considers it plausible that the global growth in AI investment, coupled with expectations of future productivity gains, is contributing to the rise in long-term interest rates.

Developing models, building data centers, and expanding computational infrastructure require substantial investment. Financing these activities has contributed to an increase in debt within the technology sector, particularly in international markets.

Although the scale of investment in Europe is smaller than that seen in the United States and other regions, the rise in international interest rates is also spilling over into the euro area.

For the ECB, this development represents a tightening of financial conditions. Higher long-term interest rates can reduce corporate investment, increase financing costs, and dampen economic activity.

These effects are relevant to monetary policy decisions, as tighter financial conditions can help reduce inflationary pressures over the medium term.

Lane also warned of the risks associated with the high valuations of AI companies and the increased issuance of debt to finance the sector. A revision of growth expectations could affect financial markets and call into question some of the investments already made.

The ECB acknowledges the potential of AI for the European economy...Despite the identified risks, Philip Lane believes that artificial intelligence could boost productivity and help offset the economic effects of Europe’s aging population.

The technology could enable companies to produce more with the resources at their disposal, but the outcomes will depend on how AI is integrated into work processes and on the ability of organizations and workers to adapt.

The main uncertainty lies in the distribution of these gains. An improvement in productivity does not, in itself, guarantee proportional wage increases—especially if automation reduces the demand for certain skills.

For now, the ECB does not see a widespread transformation of employment driven by artificial intelligence. The possibility that the technology may be limiting workers' bargaining power remains an economic hypothesis that will need to be tested against trends in wages, hiring, and productivity.

Artificial intelligence can reduce workers' bargaining power by automating routine tasks, shifting the balance from labor toward capital, and muting hiring plans.

Key factors in AI's impact on bargaining power:

• Muted Hiring and Leverage: Slow or cautious hiring limits employees' ability to switch jobs for higher pay or use competing offers as leverage.

• Risk of Replacement: The threat of AI replacing specific worker roles lowers the pressure on companies to raise wages during high inflation.

• Shift to Capital: As firms invest more in automation and software tools, their direct dependence on individual workers decreases.

• Increased Productivity Demands: Many organizations use AI to extract more output from existing employees rather than increasing headcount or raising compensation.

• Algorithmic Management: Data-driven oversight and monitoring can intensify workloads, shrink worker autonomy, and complicate collective organizing.

Artificial intelligence reduces workers' bargaining power by shifting economic leverage toward employers through several core mechanisms:

• Threat of substitution: The potential for AI and automation to replace routine, medium-skill, or specialized human tasks makes firms less dependent on individual workers or labor supply, lowering employees' confidence and leverage to demand higher pay.

• Muted hiring and mobility: When companies scale back or freeze general hiring—relying instead on AI to extract more output from existing staff—workers have fewer alternative job openings or competing offers to use as leverage in wage negotiations.

• Algorithmic management and surveillance: Employers increasingly use data-driven systems to track productivity, set workloads unilaterally, and anticipate or disrupt union-organizing efforts, weakening collective voice.

• Shifting labor share of income: As capital is funneled into intelligent infrastructure and automation platforms rather than human wages, the overall labor share of total income shrinks, dampening wage growth even during periods of high inflation.

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