Generative AI and Labor Market Outcomes: Evidence from the United Kingdom
By Bouke Klein Teeselink
Abstract:
This paper examines the effects of large language models (LLMs) on UK labor market outcomes. We use a difference-indifferences design that compares outcomes across firms and occupations from 2021 to 2025 based on their differential exposure to LLM capabilities. Our results show that highly exposed firms reduce employment, particularly in junior positions. These firms sharply curtail new hiring, with technical roles (software engineers, data analysts) experiencing the steepest declines. At the occupation level, roles more exposed to LLMs also show substantial reductions in job listings, as well as in posted salaries. The observed effects concentrate almost entirely in high-wage segments: high-compensation firms and occupations experience pronounced employment losses, while low-compensation segments remain largely unaffected. Hence, our findings suggest that LLMs may compress wage inequality.
