AI is weakening workers' salary bargaining power, ECB warns
The European Central Bank warns that AI is reducing workers' ability to negotiate better pay, even without causing mass job losses.
Salaries · Source: Reuters
What happened
The European Central Bank says artificial intelligence is changing how workers negotiate pay. Chief economist Philip Lane spoke at a Dublin summit about this shift. He noted that AI's ability to replace certain tasks is weakening workers' bargaining power. This is happening even without a major rise in overall unemployment right now.
Hiring plans across the market remain muted. This slowdown is especially hard on new graduates looking for their first roles. The central bank does not yet see a major change in aggregate employment trends, but its surveys show wide variation across different industries.
Workers building AI infrastructure feel more optimistic about their jobs, while those in knowledge-intensive roles face a higher risk of substitution. The net effect on jobs will depend on how labor costs compare to the price of using AI. The AI boom in the United States is moving much faster, with American workers spending two to three times as much of their week using AI compared to European workers.
By the numbers
- 52 percent — Share of workers reporting they use AI at work, up from 26 percent in 2024.
- 10 percent — Portion of total investment firms plan to devote to AI this year.
- 75 percent — Share of global AI computing capacity hosted in the United States.
Why it matters
Job seekers and current employees will find it harder to demand higher wages. Companies now have the option to use AI for certain tasks instead of paying a premium for human labor. This means your ability to negotiate depends heavily on how easily a tool can replicate your daily work. If a company knows they can substitute your output with software, your leverage drops.
The rapid adoption of AI is also shifting corporate budgets globally. Firms are planning to devote about ten percent of their total investments to AI this year alone. As companies pour money into technology and AI-related debt, they have less budget available for aggressive hiring or large salary bumps. High equity valuations at AI firms also carry risks to financial stability if investor sentiment turns.
Who this hits
New graduates
Hiring plans are currently muted across the broader market. The central bank specifically noted this slowdown is weighing heavily on the job prospects of recent graduates trying to enter the workforce.
Knowledge workers
Professionals in knowledge-intensive sectors face a much greater risk of substitution from new technology. They are reporting less optimism about their job security compared to those in other fields.
AI infrastructure workers
People working in sectors that build AI infrastructure are benefiting directly from this shift. They report higher optimism as companies heavily invest in building out these new technologies.
US tech workers
American workers are adopting these tools rapidly, spending two to three times as much of their week using AI as European workers. The United States currently hosts seventy five percent of global AI computing capacity, driving massive local investment.
What to do this week
- Focus your job search on roles that involve building, managing, or overseeing AI systems rather than tasks that AI can easily generate.
- Highlight your ability to use AI tools to increase your own output when interviewing or asking for a raise.
- Prepare for longer job searches if you are a recent graduate, as overall hiring plans remain muted across many sectors.
- Track the cost of AI tools in your specific industry to understand when companies might choose software over new hires.
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My take
I always tell job seekers that the market shifts before the actual job losses hit. The data shows companies are using AI as leverage to keep salaries flat and slow down hiring. You need to position yourself as someone who controls the AI, not someone who competes with it.