Europe is lagging behind other regions in terms of competitiveness. To address this problem, the EU needs to enhance its productivity growth – a point made by former European Central Bank President Mario Draghi in his report on the EU’s future competitiveness. More needs to be produced in fewer working hours, and strengthening the digital economy is of crucial importance to that equation. It is vital that the EU take full advantage of AI solutions and new technology.
European Commission President Ursula von der Leyen has tasked Commissioner Roxana Mînzatu with developing an initiative on algorithmic management. There are, however, a few things policy makers should keep in mind as we move forward.
A great deal of new legislation has been introduced over the past five years in the digital area. Bruegel, a think tank, identified 116 digital-related legislative proposals adopted during 2019-2024. In many cases, these had negative consequences for companies’ ability to innovate and grow – and hence for the EU’s competitiveness. Fewer and fewer companies are able to cope with compliance and the costs associated with the difficult-to-navigate regulatory labyrinth. Accordingly, the initiative being developed should not take the form of a legislative proposal.
The EU Charter, existing labour law and work environment regulations, and the new AI Act impose far-reaching provisions on the development and deployment of AI systems, including in areas such as hiring and management. We should therefore be asking, ‘What market failure does further regulation aim to address?’
The Confederation of Swedish Enterprise opposes a regulation of companies’ use of software systems in their management practices. Such systems have been used for decades, with no identifiable market failure. The term ‘algorithmic management’ should not be confused with the much narrower definition of AI specified in the AI Act.
Definition of AI-system according to the AI-act: means a machine-based system that is designed to operate with varying levels of autonomy and that may exhibit adaptiveness after deployment, and that, for explicit or implicit objectives, infers, from the input it receives, how to generate outputs such as predictions, content, recommendations, or decisions that can influence physical or virtual environments
Definition of algorithmic management: the use of automated monitoring or decision-making systems to coordinate work effort in an organization. The computer systems consist of artificial intelligence (AI) or other software, may involve defining and assigning work shifts, developing and delivering work-related instructions, assessing workers’ performance, and assigning rewards or penalties, according to the Joint Research Centre, the European Commission and the Platform Directive, Chapter III.
AI systems that are wisely implemented and utilised will help employers assess and develop the skills of their workforce, provide career guidance, and support job matching. They will also assist employers by increasing productivity, streamlining decision-making processes, producing data-driven insights, optimising work organisation, and reducing costs.
The use of AI also creates opportunities for workers, including by providing support in their work tasks, improving job adaptation, simplifying communication processes, and ensuring a balanced workload. Most operational changes involve work environment challenges, and it is essential to assess and monitor the impact these changes have on the work environment. AI systems can help monitor the work environment and identify potential risks in real time, creating a safer workplace by detecting patterns that indicate risks and notifying managers of necessary measures.
Productivity in Europe is stagnating, and the EU is facing a severe demographic decline in coming years. At the same time, the use of AI has enormous potential for public services, healthcare, innovation, growth, productivity, and job preservation throughout the EU. Any future EU initiatives should therefore aim to create opportunities for European companies to harness the full potential of AI-powered management tools.
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