Industrial & Innovation Policy

European Policy

Working Paper
EN
10.02.25

AI Will Reshape Work — Policy Will Decide Who Benefits

Countries that invest in skills, innovation, and infrastructure will gain from AI. Others risk falling behind.

Executive Summary

AI is transforming Europe’s labour markets — but unequally. In “Diverging paths: AI exposure and employment across European regions,” we show that occupations more exposed to artificial intelligence experienced faster employment growth between 2012 and 2022, contradicting fears of widespread job destruction. Yet these gains are concentrated in innovation-rich economies, while moderate and emerging innovators are being left behind.

AI complements labour where innovation ecosystems are strong. Employment gains are concentrated in non-routine cognitive occupations, especially in countries that invest heavily in R&D, digital infrastructure, and workforce skills. Routine and manual jobs, by contrast, show little connection with AI exposure — signalling that automation is not the main risk, but exclusion.

Europe’s innovation divide drives the AI divide. The positive employment effects of AI are confined to Innovation Leaders (Belgium, Denmark, Finland, the Netherlands, Sweden) and Strong Innovators (Austria, Cyprus, France, Germany, Ireland, Luxembourg). In contrast, Moderate (e.g. Italy, Spain, Portugal) and Emerging Innovators (e.g. Poland, Romania, Slovakia) do not experience significant AI-driven employment gains, suggesting their limited ability to harness the potential these technologies.

Without investment, AI will widen territorial inequalities. Rather than a technological inevitability, Europe’s AI employment gap reflects unequal readiness — in innovation systems, skills, and institutional support. Bridging this gap is essential to ensure that AI-driven growth benefits all Member States.

Policy implications

  1. Enhance countries’ innovation systems by investing in R&D, knowledge diffusion, and the ability of firms to adopt new technologies.

  2. Support education and training policies that raise the supply of high-skilled labour able to complement AI technologies.

  3. Strengthen industrial capabilities so manufacturing regions can move into higher-value, innovation-intensive activities.

  4. Address regional disparities by tailoring national and regional policies to local economic structures and innovation capacities.