Key facts
- AI use by euro zone companies may curb workers' wage bargaining power, ECB's Philip Lane said.
- Heavy investment in AI may be tightening financing conditions, according to Lane.
- Lane suggested AI's potential to replace workers could moderate wage growth.
- Global borrowing for AI is pushing up borrowing costs and tightening financial conditions, Lane said.
- The increase in long-term interest rates in the euro area constitutes a material tightening of financial conditions.
- AI could boost Europe's potential output and trend growth, offsetting a declining working-age population.
FRANKFURT, Oct 13 (Reuters) - The increased use of artificial intelligence by euro zone companies could curb workers' ability to demand higher wages, while heavy investment into the new technology may be materially tightening financing conditions, ECB chief economist Philip Lane said on Tuesday.
With inflation now running at nearly twice the ECB's 2% target on expensive energy, policymakers are searching for signs of second-round price effects, but have so far concluded there are none, especially in wage growth.
While AI has not changed employment trends, hiring plans are muted and this limits workers' ability to demand compensation for high inflation, Lane said, offering a potential explanation for why wage growth is slowing, despite high inflation.
"The potential for AI to replace some types of workers may also weaken the bargaining power of workers, moderating wage growth and reducing the labour share in total income," Lane said in a speech in Dublin.