The employment effects of artificial intelligence are diverging sharply across South Korea's regions. Knowledge-work jobs tied to generative and agentic AI are growing mainly in the Seoul metropolitan area, while physical AI, which is applied to factory floors and logistics sites, is more likely to threaten jobs outside the capital region. That has raised concerns that the spread of AI, combined with regional industrial structures, could widen the gap between the capital area and the rest of the country.
Seoul had the highest exposure to generative AI, followed by Sejong, Gyeonggi and Incheon, according to an issue note titled "AI and Regional Labor Markets" released by the Bank of Korea on the 15th. Exposure to agentic AI was also highest in Seoul, followed by Sejong, Gyeonggi and Daejeon. Exposure to physical AI, by contrast, was high in areas outside the capital region such as North Gyeongsang, South Jeolla, North Chungcheong and Ulsan. Generative and agentic AI are used mainly in knowledge work such as clerical, professional and managerial jobs, while physical AI is combined with on-site work such as machine operation and manual labor.
Actual job growth was also concentrated in the capital region. In the three years since generative AI began spreading in earnest in 2023, employment in occupations highly exposed to generative AI rose by 247,000. Of that, 199,000, or 80.8%, came in the Seoul metropolitan area. Of the 105,000 increase last year in employment in occupations highly exposed to agentic AI, 93,000, or 88.3%, was also concentrated in the capital region. In the Seoul area, the higher an occupation's AI exposure, the faster its employment grew, but that relationship was not clear outside the capital region.
Physical AI, on the other hand, could weigh on employment outside the capital area. Unlike occupations highly exposed to generative and agentic AI, employment in occupations highly exposed to physical AI has declined over a long period both inside and outside the Seoul metropolitan area. The central bank said job losses could materialize in regions outside the capital area, where manufacturing, accommodation and food services, and transportation account for large shares of employment, if physical AI technology advances more quickly.
By age, young people have been relatively left out of the benefits of AI adoption. Employment in occupations highly exposed to AI rose across age groups as a whole, but among people in their 20s it fell for occupations highly exposed to both generative and agentic AI, inside and outside the capital region. That suggests the spread of AI, by increasing demand for workers with expertise and hands-on experience, could instead become a burden for young people entering the labor market.
The report also raised the possibility that AI could widen regional disparities. The capital region accounts for 71.9% of workers in knowledge service industries and 74.4% in semiconductor manufacturing. Because AI investment is highly complementary to skilled labor, investment could tilt further toward the Seoul area, where related industries and talent are already concentrated. In that case, gaps in productivity and wages between regions could widen, the Bank of Korea said.
AI could also serve as a catalyst for narrowing regional gaps, however. Using AI can digitize human experience and knowledge, reducing the need for face-to-face contact and geographic clustering, and combining it with physical AI could push manufacturing outside the capital region toward knowledge-based services, the report said. Raising productivity in regional service industries that lack human capital and creating quality jobs could also help slow the outflow of young people from those regions.
The Bank of Korea recommended that "regional flagship universities be developed as AI hubs to connect local talent with local companies, and that knowledge services and startups linked to manufacturing be fostered."
