Philip Lane

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   ECB's Lane: AI may weaken euro-area workers' wage bargaining power

   European Central Bank chief economist Philip Lane said in a Dublin speech on October 13 that wider AI adoption by euro-area firms could displace some workers, further weakening their bargaining power, dampening wage growth and reducing labour's share of total income, according to Reuters. He said AI has not yet changed overall employment trends, but weak hiring intentions make it harder for workers to recoup losses from high inflation through pay demands — possibly one reason inflation remains elevated while wage growth is slowing. Lane also said heavy global corporate borrowing to fund AI investment has pushed up overall borrowing costs, feeding into euro-area bond markets and higher long-term rates, noticeably tightening financial conditions; over the longer term, however, AI could raise potential output and trend growth, which he said is especially valuable for Europe given its expected shrinking working-age population.

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