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Job Transformation, Specialization, and the Labor Market Effects of AI

Authors

Lukas Freund
Lukas FreundVisiting Scholar, Institute
Lukas Mann
Lukas MannVisiting Scholar, Institute
Job Transformation, Specialization, and the Labor Market Effects of AI

Abstract

A central effect of automation is to transform jobs—shifting their task content. We develop a general-equilibrium model of this process. Occupations bundle tasks; workers possess task-specific skills and sort by comparative advantage. When a task is automated, remaining tasks gain in importance, so wage effects depend on workers’ full skill profiles. We estimate the distribution of task-specific skills and project individual-level wage effects of generative- AI automation. Moderate exposure benefits workers on average but high exposure harms them, with large dispersion within occupations; the return to social skills rises, that to analytical skills falls; and low-earners gain more than high-earners. Job transformation drives these results.




[Link to September 2025 version](https://researchdatabase.minneapolisfed.org/downloads/fj236244p)