Displacement or Complementarity? The Labor Market Impact of Generative AI

Generative AI is poised to reshape the labor market, affecting cognitive and white-collar occupations in ways distinct from past technological revolutions. This study examines whether generative AI displaces workers or augments their jobs by analyzing labor demand and skill requirements across occupations. Our findings reveal a heterogeneous effect: generative AI-driven automation reduces labor demand and skill requirements in structured cognitive-task jobs, while increasing both demand and skill complexity in positions that involve human-AI collaboration. These results highlight the importance of understanding generative AI’s nuanced impact on the labor market and designing targeted policies to mitigate job displacement while supporting skills development for human-AI collaboration.