Large Language Models, Small Labor Market Effects

Abstract reproduced here since loading times of ssrn.com were abysmal on my last click:

We examine the labor market effects of AI chatbots using two large-scale adoption surveys (late 2023 and 2024) covering 11 exposed occupations (25,000 workers, 7,000 workplaces), linked to matched employer-employee data in Denmark. AI chatbots are now widespread—most employers encourage their use, many deploy in-house models, and training initiatives are common. These firm-led investments boost adoption, narrow demographic gaps in take-up, enhance workplace utility, and create new job tasks. Yet, despite substantial investments, economic impacts remain minimal. Using difference-in-differences and employer policies as quasi-experimental variation, we estimate precise zeros: AI chatbots have had no significant impact on earnings or recorded hours in any occupation, with confidence intervals ruling out effects larger than 1%. Modest productivity gains (average time savings of 3%), combined with weak wage pass-through, help explain these limited labor market effects. Our findings challenge narratives of imminent labor market transformation due to Generative AI.

I am thinking about work from home recently. The shift to work from home only happened because of the pandemic, but it could have happened years earlier. Telecommuting was a thing since the early 2000’s, but widespread adoption of work from home policy lagged due to various frictions and the inertia of the past. I think ai adoption will be the same, a step function where there’s nothing, nothing but then all at once the major shift comes.