
New working paper · August 2026 draft
Generative AI and Labor Displacement in the Global South: Evidence from Philippine Business Process Outsourcing
Nico Ravanilla
Exported services have become for labor-abundant countries what manufacturing once was: a development path that absorbs large numbers of workers into internationally traded production. Generative AI performs many of the tasks these economies export, raising the possibility of labor displacement. I examine whether this displacement has begun in the Philippines, the economy most dependent on this path, by combining pre-ChatGPT occupational composition with occupation-level observed AI usage from the Anthropic Economic Index and tracing labor market outcomes as US client firms adopt AI. Employment growth slows in the most exposed provinces, industries, and municipalities, amounting to roughly a quarter million foregone jobs by mid-2025. The adjustment occurs through reduced hiring rather than layoffs: wages and hours do not change. The displaced enter unemployment, and first-time overseas departures fall rather than absorbing the workers the sector no longer hires.
Read the paper

