ABSTRACT

Recent advances in artificial intelligence (AI) have elevated concerns about the impact of technological progress in the labor market, especially the displacement of workers. This study examines the labor market effects of AI in the Philippines, a developing country with significant engagement in cognitive services. To translate existing AI-related measures that were constructed using the O*NET database to the Philippine context, we implement a two-step matching process: assessing semantic similarity between occupational task sets and performing manual review to ensure contextual consistency. We then estimate the long-difference regression between 2019 and 2024 of labor market outcomes on the AI occupational exposure measure. Overall, we find that occupational exposure to AI is linked to lower real wage growth, but it does not appear to have a significant relationship with employment growth and change in unemployment risk. However, in occupations with low complementarity with AI, greater exposure to AI is associated with lower employment growth and increased unemployment risk. Labor market outcomes connected to higher exposure to AI also vary by an occupation’s exposure to the IT-BPM sector. These findings highlight the heterogeneous effects of AI under nuanced labor market conditions in a developing economy. – with Ralph Joshua P. Macarasig.