AI-driven transformation puts jobs, inequality and skills at a crossroads in the Arab region

BEIRUT (ILO News) - Artificial intelligence (AI) could dramatically reshape economies and labour markets across the Arab region over the coming decade, generating major productivity gains and new employment opportunities in some future scenarios, while deepening inequality and displacing millions of workers in others, according to a new report by the United Nations Economic and Social Commission for Western Asia (ESCWA) and the International Labour Organization (ILO).

The ESCWA-ILO report ''Artificial Intelligence and Employment Futures for the Arab Region'' was launched at a special session held in preparation for ESCWA's Arab Forum for Sustainable Development (AFSD), with opening remarks from ILO Regional Director for Arab States Ruba Jaradat.

The report highlights that AI is already transforming job structures, skills demand and sectoral dynamics across the Arab region, with impacts expected to deepen significantly by 2035. While automation is likely to reduce employment in clerical and routine jobs, new opportunities are expected to emerge in sectors such as education, health and technology-intensive activities.

The report outlines three possible scenarios for AI adoption by 2035, showing how different levels of policy preparedness, workforce transition and investment in skills could determine whether AI becomes a driver of inclusive growth or a source of greater labour market disruption.

• In one scenario, rapid AI adoption is accompanied by strong investment in workforce transition and skills development, enabling economies to absorb disruption while AI contributes nearly 25 per cent of regional GDP by 2035, despite the displacement of millions of jobs and major restructuring across labour markets.
• A second scenario warns of sharper inequality and labour market fragmentation if technological change outpaces workforce preparedness, with AI contributing an estimated $375 billion to regional GDP by 2035 while large numbers of lower- and middle-skilled workers face prolonged displacement and downward mobility.
• A third, more measured scenario envisages gradual AI integration combined with coordinated policy action, allowing countries to generate productivity gains and expand opportunities in a generally positive and more inclusive way, particularly in sectors such as tourism, logistics and digital services, while annual growth in the contribution of AI to Arab economies ranges between 20 and 34 per cent per year.

In parallel, the report exposes a widening skills gap, with mismatches between education systems and labour market needs reaching as high as 40 to 70 per cent in some countries, highlighting the urgency of reforming education and training systems.

In this context, the need for proactive and inclusive policy responses has become increasingly urgent. Governments and social partners face critical questions around how to build future-ready skills systems, strengthen social protection, adapt labour regulations and ensure ethical governance of AI in the workplace.

These issues were at the centre of discussions during the AFSD special preparatory session titled "Shaping the Future of Work in the Arab Region: Artificial Intelligence and Employment Pathways."

The session brought together regional and international experts to examine the findings of the ESCWA-ILO report and to explore how AI could reshape employment pathways across different demographic groups, including youth, women and low-skilled workers. It also provided a platform for dialogue on policy priorities, including advancing education and lifelong learning and strengthening labour market institutions and inclusive AI governance.

AI is not a distant prospect. Its impacts are already being felt across sectors, from public administration to services and beyond.

Opening the session, ILO Regional Director Jaradat stressed the importance of shaping the future of work through deliberate policy choices:

"AI is not a distant prospect. Its impacts are already being felt across sectors, from public administration to services and beyond. Our estimates suggest that nearly 25 per cent of occupations in the region could be affected in one way or another by Generative AI - including jobs at risk of displacement and jobs that will be augmented by these technologies. Entirely new roles are also expected to emerge, often requiring new skills."

At the ILO, our mandate is clear: to ensure that developments in the world of work - including technological change - advance rather than undermine decent work, social justice and inclusion.

Jaradat highlighted the importance of ensuring that technological change supports social justice and inclusion. "The overall impact, however, is not predetermined; it will depend greatly on the policy choices we make today. At the ILO, our mandate is clear: to ensure that developments in the world of work - including technological change - advance rather than undermine decent work, social justice and inclusion. This requires sustained investment in skills and lifelong learning, stronger labour market institutions, expanded social protection systems, and ensuring that the benefits of innovation are shared broadly across society," she said.

Discussions during the session stressed the need for stronger investment in skills and lifelong learning, enhanced social protection systems, and greater collaboration between governments, employers and workers' organizations to manage the transition effectively.

The ILO's participation in the session highlighted its commitment to supporting Arab States in navigating the transformation of work, ensuring that AI becomes a driver of inclusive growth, decent jobs and sustainable development, rather than a source of deeper inequality.