Augment or Replace? Uneven Labour Market Consequences of AI Expansion Across Asia-Pacific Economies

Abstract

The rapid diffusion of artificial intelligence (AI) has intensified debates regarding its implications for employment and the future of work. While some scholars argue that AI complements human labour by enhancing productivity and creating new employment opportunities, others contend that it displaces workers through automation and task substitution. This study examines the labour-market consequences of AI across selected Asia-Pacific economies, focusing on whether AI primarily augments or replaces labour. Drawing on the theoretical foundations of skill-biased technological change, routinebiased technological change, and task-based approaches to technological transformation, the study investigates the relationship between AI intensity and occupational employment structures using panel data from China, Japan, South Korea, Hong Kong, and Taiwan over the period 2010-2025. A composite AI Intensity Index is constructed using principal component analysis, while fixed-effects panel regression models are employed to assess the effects of AI development on high-skill, middle-skill, and low-skill employment shares. The findings indicate that AI development is positively associated with high-skill employment but negatively associated with middle-skill employment, suggesting that AI simultaneously generates labour augmentation and labour displacement effects. These relationships remain robust across alternative specifications, including lagged AI measures and leave-one-country-out estimations. The results further reveal significant cross-country heterogeneity, indicating that the labour-market consequences of AI are shaped by differences in institutional arrangements, innovation capacity, and economic structures, while robustness analyses confirm that the findings are not driven by any single economy. The study contributes to the emerging literature on AI and employment by demonstrating that the effects of AI are neither uniformly beneficial nor uniformly disruptive but are instead context-dependent and manifested through processes of occupational restructuring. The findings underline the importance of adopting nuanced and comparative perspectives when evaluating the implications of AI for labour markets and workforce transformation.