Park, Jiyong, Myunghwan Lee, Yoonseock Son, Gene Moo Lee “The New Industrial Revolution: AI, Labor Unions, and the Future of Work”, Work-in-Progress.

• First three authors equally contributed to the work.

As a general-purpose technology, Artificial Intelligence (AI) has profoundly transformed the human labor landscape with its capability to perform complex tasks. Despite ongoing debates about AI’s role in the future of work, there remains a limited understanding of how a firm’s endeavors to strengthen its AI capabilities interweave with its workforce. Reflecting on the ongoing role of labor unions in responding to technological advancements, we investigate the impact of unionization on AI investments and their subsequent effects on firm value. Utilizing datasets on labor elections and AI-skilled labor, we construct measures for unionization and AI investment. Based on a regression discontinuity design framework, our results indicate that while AI investments lead to an improvement in firm value, unionization decreases AI investments in the following 5 years, implying that labor unions have an indirect negative impact on firm value by hampering AI investments. We also provide suggestive evidence of the competition between firms and labor unions in resource allocation between AI investments and employment as a potential mechanism through which labor unions may hinder AI investments. This research advances our understanding of corporate AI strategies by recognizing labor unions as a crucial stakeholder, enriching the discourse on the literature on the business value of AI and IT.