New government report reveals AI's impact on employment, revenue, and productivity
The introduction of artificial intelligence tools has led to employment growth among firms in Singapore, according to a new government report, amid persisting concerns that the technology's adoption will lead to job losses.
The Ministry of Trade and Industry (MTI) published on Tuesday a new study that measured the firm-level effects of AI use on employment and performance in Singaporean companies.
It found that first-time AI use by firms is associated with firm-level increases in total employment and revenue, with the gains rising as AI capabilities deepen.
Initial AI use is associated with an increase in total employment of four per cent in the first year of adoption, before rising to eight per cent one year post-adoption, according to the report.
"Deeper analysis on the employment effects show that they differ across worker types. Initial gains are found to be concentrated among local higher-earners and mid-career workers, as well as skilled foreign professionals," the report read.
"However, as firms deepen their AI capabilities, the local employment gains broaden across wage and age groups."
The findings come in the wake of recent Robert Walters research that showed 48% of Singapore-based employees being concerned that AI adoption will include the risk of job displacement due to automation.
But MTI's findings offer a slight comfort to Singaporean professionals, with the report suggesting that any worker separations that may occur during AI adoption are outweighed by new hiring.
"It may also be the case that AI tends to automate specific tasks rather than entire jobs, thus allowing workers to focus on the remaining and/or new complementary tasks," the report read.
More revenue, flat productivity
Meanwhile, the report also found that first-time AI use is associated with firm-level increases in revenue, but did not lead to a "statistically significant increase" in productivity or profit.
The findings revealed that initial AI use is associated with an increase in revenue of seven per cent in the first year of adoption, before going up to 16% one year post-adoption.
"This result could reflect the potential scale and/or innovation effects of AI use (e.g., AI reduces costs and/or enables the creation of new products, thus allowing firms to expand output)," the report read.
On the other hand, initial AI adoption has not led to an increase in productivity.
"There is no evidence of statistically significant gains in profit and VAPW (value-added per worker) at the firm-level over the immediate four-year post-adoption period," the report read.
It pointed out that measured profit and productivity gains may emerge only after complementary investments and adjustments are completed and embedded in firms' processes.
The lessons for employers
The report, however, underscored that its findings are limited by data that were collected only up to 2024, meaning that it should only reflect the "early impact of AI diffusion."
"[It] would not capture the effects of more recent advances in AI capabilities (e.g., agentic AI) as well as broader enterprise adoption," the report read.
"Future studies could analyse the effects of the different AI use cases that firms are implementing using more recent data that better capture the advances in AI technology and new patterns of adoption."
According to the study, realising economic benefits from AI will need a workforce policy that focuses on job transformation and worker training to help workers move toward AI-complementary tasks as some of their tasks get automated.
The other policy lessons that the report outlined for leaders are:
- The importance of strengthening foundational digital capabilities as they could aid in AI adoption
- Support for AI use should be differentiated by sector and firm size
