Page 17 - The Annual AI Governance Report 2025 Steering the Future of AI

The Annual AI Governance Report 2025: Steering the Future of AI

Theme 2: AI and Socioeconomic Impact

2.1 Labor Market Transformation

Displacement of Labor

The displacement effect of AI is particularly pronounced in roles involving routine and repetitive
tasks, where automation technologies can substitute for human labor. Workers in sectors such
as manufacturing, clerical work, and low-skill services are especially vulnerable, as AI systems
become more capable of performing structured, rule-based tasks efficiently and at scale. This
can lead to significant job losses or restructuring, particularly for workers with limited digital
or adaptive skills. While some jobs may be redefined rather than eliminated, the net effect
without adequate reskilling and transition support is likely to deepen labor market inequality
and exacerbate economic vulnerability among lower-income groups. 23

We have already seen the effects of AI on the labor market. Generative AI has led to a measurable
decline in the number of posted tasks and earnings for freelancers on online labor platforms,
particularly in categories such as writing, translation, and graphic design. Importantly, prior
strong performance does not appear to shield freelancers from these impacts; in fact, top-rated
workers may be disproportionately affected. Similar effects are found in implementations of AI
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in customer service; AI assistance increases worker productivity, measured by issues resolved
per hour by 15% on average, where less experienced and lower-skilled workers improve both
skill and quality, while most experienced and skilled workers see small gains in speed and small
declines in quality.
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Anthropic's analysis of 500,000 coding-related interactions revealed that 79% of Claude Code
conversations involved automation, where the AI directly completed coding tasks, rather than
augmentation where AI collaborates with the user to perform a coding task. This indicates
a strong trend toward AI taking over routine programming work, especially in front-end
development, with implications for job disruption in roles focused on building user interfaces
and simple web applications. 26

23 Acemoglu, D., & Restrepo, P. (2019). Artificial Intelligence, Automation, and Work. In Ajay Agrawal, Joshua
Gans, and Avi Goldfarb, editors, The Economics of Artificial Intelligence: An Agenda (pp. 197–236).
24 Hui, X., Reshef, O., & Zhou, L. (2024). The Short-Term Effects of Generative Artificial Intelligence on
Employment: Evidence from an Online Labor Market. Organization Science.
25 Brynjolfsson, E., Li, D., Raymond, L., (2025) Generative AI at Work, The Quarterly Journal of Economics
26 Anthropic Economic Index. (2025).

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