Executive Summary

Artificial Intelligence (AI) is set to have a huge impact on the labour market. However, the exact effects of the introduction of AI are still being debated as it is still unclear whether jobs created will outweigh the number of jobs that will become redundant. The one thing that is certain is that legislation needs to be introduced to regulate the use of AI, and reskilling needs to take place on an enormous scale to adapt to the changing nature of the labour market. The use of AI raises multaiple ethical questions regarding discrimination and equal opportunity that have not been addressed in European legislation. In addition, 44% of European citizens aged 16-74 lack basic digital skills, which are desperately needed to function in an increasingly digital world.

The EU has slowly started adapting to the developments surrounding AI, introducing a general strategy to help develop AI, retrain the European workforce, and protect workers’ rights. However, concrete plans are still mostly lacking, and the competences of the EU limit their ability to influence the course of the European labour market and the education of its workforce because the decisions of the EU regarding education and employment policy do not have to be directly adopted by Member States.



The World Economic Forum predicted in 2018 that 27% of jobs in 2022 do not yet exist while 22% of current jobs will be made redundant. These developments are the result of the rapid emergence of AI on the global stage. While AI investments in 2018 totalled only $12.4 billion, it is expected that investment will have grown to $232 billion by 2025.

It can already be said that AI will have a large impact on the labour market. The question remains whether this impact will be positive or negative. While some firmly believe that increased computerisation and technological innovation will be detrimental to the economy as a lot of jobs will be lost and economic polarisation will increase, others argue that historic and preliminary evidence either suggest the contrary or suggest that the damage will not be as severe as some projections. Either way, the positive effects of AI cannot be ignored. While most research on this topic is also speculative, it is expected that the introduction of AI in the workforce will greatly increase productivity

The lack of concrete answers regarding the positive and negative effects of AI on the labour market raises questions for national and European policymakers. Does action need to be taken? If so, what steps must the EU take to ensure job security for the millions of Europeans whose jobs might be in danger? 


European Commission (EC)

The EC is the executive branch of the European Union. It is responsible for introducing laws, enforcing the laws of the EU and managing the EU’s policies. The EC has introduced multiple programmes and frameworks to develop the labour market, such as the European Skills Agenda and European Pillar of Social Rights (see ‘Legal framework’). 

European Investment Bank (EIB)

The EIB is a non-profit institution of the EU that provides financial means in the form of loans and assistance to projects that are expected to further the policy objectives of the EU. The policy and decision-making are governed by Member States. 

Member States

As employment policy is a shared competence of the EU, and labour markets are different across the EU, it is difficult for the EU to adopt legislation that covers all areas that need to be covered. Because of that, there still lies some responsibility on the Member States to implement laws and policies relating to their specific countries. In addition to that, education is a supporting competence of the EU. This means that the EU has no definitive power to pass legislation regarding education and can only support Member States by, for example; doing research or taking up a more advisory role.

International Labour Organisation (ILO)

The ILO is a United Nations agency responsible for dealing with employment-related issues across the world. The main aims of the ILO are to promote rights at work, encourage decent employment opportunities, enhance social protection and strengthen dialogue on work-related issues through the setting of international labour standards.

Labour Unions

Organisations which protect and represent the collective interests of the workers. They serve as a means for employees to negotiate working conditions, such as wages, hours and other benefits, with employers. 


Companies are heavily influenced by changes in labour laws and employment policy. Additionally, their interest in increasing organisational productivity and efficiency by adopting emerging technologies like AI could contravene the interests of the EU and Member States.

Legal Frameworks

One of the most important legal frameworks of the EU on employment policy is the European employment strategy (EES). The EES is a soft law mechanism[/su_tooltip] used by the European Commission to influence and coordinate European employment policy. The employment guidelines that the EES proposes, forms the basis for the country-specific policy advice that is given to individual Member States. The main goals of the EES and its employment guidelines are: 1) boosting job demand by influencing job creation and wages, 2) improving labour and skills supply by improving education and decreasing (youth) unemployment, 3) improving the functionality of labour markets by i.e. reducing labour market segmentation, and 4) reducing labour market inequality and poverty. 

The European Skills Agenda is a plan aimed at improving the education and digital skills of European citizens in the wake of the digital revolution. The new European Skills Agenda further builds on the old 2016 agenda and is organised around four building blocks. These are: 1) a general call to collective action, 2) ensuring that people have the right skills for jobs, 3) promoting lifelong learning, and 4) improving investments in skills development. 

Finally, the European Pillar of Social Rights forms a foundation for social reform based on its three objectives. These objectives are: 1) equal opportunities and access to the labour market, 2) fair working conditions, and 3) social protection and inclusion. Unfortunately, the EU does not have the ability to directly deliver upon these three objectives, as a lot of the tools to do so lie in the hands of Member States. However, the European Commission can propose legislation and guidelines to be adopted by Member States.


As new technologies become increasingly prevalent in the labour market, so does the gap between supply and demand of skills increase. This gap is created because of the fact that new technologies cause a change in the types of skills that are in demand. On average, companies estimate that around 40% of workers will require reskilling with a duration of six months or less and 94% of business leaders report that they expect employees to pick up new skills on the job. Worryingly, in 2019, between 20% and 25% of young people and working-age adults lack basic skills and 44% of adults aged 16-74 lack basic digital skills. In an increasingly digital labour market, people lacking these skills will fall behind without receiving proper retraining. Additionally, these skill gaps are hindering businesses from adopting new technologies, preventing them from harnessing the full potential of said technologies. 

However, retraining workers poses several challenges for businesses and governments alike. Firstly, businesses are often unsure in which area retraining is required, as it is still unsure how jobs will change in the future.

Additionally, government funding is lacking, as only 21% of businesses report being able to use public funding to finance their retraining programmes.Moreover, some studies suggest that governmental training programmes for lower educated workers only have a modest effect on the labour market and cannot pass a cost-benefit test. However, returns on private on-the-job training for educated workers are shown to be high, in contrast to training lower-educated workers in governmental programmes. As lower-educated people are more likely to lack basic and digital skills, their need to be reskilled is hampered by the difficulty of training them. 

Besides the concrete impact that AI has on the labour market, it also raises ethical questions. While AI is rapidly being adopted into the workforce, ethical and legal frameworks are being introduced less rapidly. Research shows that an AI can behave in a discriminatory manner, for example when used to hire candidates, either due to the programmer or implicit bias in the data used to train the AI. This emphasises the need to quickly introduce legislation to deal with these ethical issues.

Measures Ahead

Following the publication of the Strategy on Artificial Intelligence in 2018, the European Commission published a white paper in 2020 outlining their vision for the future regarding AI. In this white paper, the Commission pledges to both promote the use of AI in Europe and address the risks associated with AI. To achieve this, a policy framework is outlined covering multiple areas ranging from the development of AI to the development of skills. Most of these topics are not covered very concretely, although an updated Coordinated Plan on Artificial Intelligence is set to be published in the first quarter of 2021, which should give more concrete policy options regarding AI. This plan will also provide more concrete ethical and legal guidelines for the use of AI. Interestingly, almost no attention is paid to a policy framework specifically for the impact of AI on the labour market in either paper.

Furthermore, the Digital Education Action Plan aims to prepare the European labour market for the increasing need for digital skills. This plan focuses on stimulating digital education systems throughout Europe and educating European citizens about an increasingly digital world. However, the EU only has a supporting role when implementing the action plan, as education is a supporting competence of the EU.

Finally, in light of the damages caused by the coronavirus, the EU plans to rebuild with the largest stimulus package ever financed. The goal of this recovery plan for Europe is not only to recover from damages caused by the Covid-19 pandemic but also to make the EU more sustainable and digital in the future. A lot of the funding from the recovery plan will be used to invest in skills according to the new European Skills Agenda. Additionally, the European Commission will cooperate with the European Investment Bank to explore options to stimulate private investments in reskilling workers

Committee Podcast

Essential Reading

The Future of Jobs Report from the World Economic Forum is a report that analyses the expected and measured effects of emerging technologies on labour markets around the world:

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Consultancy agency McKinsey has surveyed around 1500 business executives asking them about the reskilling of their workers: 

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The EU has published multiple papers and a general strategy on AI: 

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The European Skills Agenda lays the foundation for reskilling the European workforce: 

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The EU conducted an analysis of the education and skills level of the current workforce: 

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The Digital Education Action Plan attempts to prepare Europe’s young people for a digital world by reshaping European education: 

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