Government funding for AI jobs did not produce more jobs, research finds
Northeastern study finds that AI skills are more in demand in the job market, but don’t always lead to more jobs.
Artificial intelligence is reshaping how companies operate, but it may not translate into more job creation, according to new research.
That’s a major takeaway from a recently published study co-authored by Northeastern University economics and public policy professor Shantanu Khanna.
In the report, researchers examined the long-term results of a government-backed subsidy program in Sweden that provided funding to small- and medium-sized businesses investing in AI for the first time.
One of the study’s biggest findings is that although the government funding resulted in firms posting more job advertisements, it did not translate into the creation of more jobs, Khanna explained.
The program was created by Vinnova, the country’s innovation agency, and awarded funding to Swedish businesses from 2019 to 2020.
The companies were creative, broad and varied in their project summaries to the Swedish government — from creating image recognition software for plant cultivation to developing online shopping recommendation algorithms to reducing the rate of product returns.
To take a long-term assessment of the program’s impact, the researchers cross-referenced data from the program — which included descriptions of projects, awarded amounts of funding, and start and end dates — with Swedish government business registries to better understand how these projects impacted employee retention, hiring and separations.
The researchers then compared the differences in labor demands between the firms that received funding and the ones that applied but did not receive funding over a five-year period.
“What we found was that five years post award, the firms that were ‘treated,’ which means firms that got the AI subsidies, were 24 percentage points more likely to post a job vacancy relative to firms that were not awarded,” Khanna said.
Furthermore, those job postings tended to be for more “white collar” office jobs as opposed to “blue collar” manual-labor-type jobs, he explained.
But, when analyzing changes to employee headcount, the researchers didn’t “find any positive or negative impacts.”
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“There’s this discrepancy that you notice between our labor demand impact, which is firms want to hire workers. They are putting out job ads, but employment isn’t increasing. Something has gone wrong.”
Khanna said this is likely the result of not finding workers to fill these job ads.
“They are just not able to find workers,” he said.
Khanna is quick to recognize the limits of this study; it’s just one program in one country in Europe.
However, the study provides an entryway to understand the various ways small companies are adopting AI and its overall impact on the job market.
Khanna’s study echoes a January 2026 report from the International Monetary Fund, a global financial institution that conducts market research, that found that “although vacancies demanding new AI-related skills post higher wages, they have so far not boosted overall employment in U.S. local labor markets.”
That being said, the same report found that nearly 40% of jobs worldwide will be exposed to “AI-driven” changes.
“This underscores the need for proactive and comprehensive policymaking that prepares the labor force for the future of work and ensures the gains from AI are broadly shared,” the organization wrote in a blog post summarizing the report.
