by Alba Blue - 06/20/2024
At Alba Blue we’re drooling over simplifying our workflows, automating the heck out of every lost minute to continuously seek direct added value in our work. You know that we’re addicted to our tools! Now the market shifted the tools are not only extensions of our skills, with Artificial Intelligence there’s a whole new perspective to look at. This new paradigm with impacts beyond our time gained is eventually questioning the job relevancy of its own makers. AI is set to impact approximately 40% of jobs worldwide. Is this going to be an improvement for everyone? This article explores AI's future influence on the workforce. Rather than delving into the history of AI, we focus on its potential positive impacts alongside the fears surrounding this specific Technological Revolution.
Understanding the Impact: The impact of AI on labor income inequality revolves on the balance between exposure to AI, complementarity with the technology, and eventual productivity boosts.
Research Findings: According to an IMF study, when AI significantly complements labor, the positive impact on high-income workers outweighs the displacement effect. This results in fewer high-income workers being negatively affected by AI compared to scenarios with lower complementarity. However, this complementarity also decreases labor income for low-income workers with less complementary tasks, increasing overall income inequality. Considering AI's productivity boost, labor income rises for all workers, even those with low AI exposure and low complementarity.
Emerging Markets and Developing Economies: In emerging market and developing economies with higher initial inequality, AI could widen wealth gaps and reduce wage disparity significantly. However, if AI exposure is lower and more widespread, these effects could be mitigated. Higher initial inequality exacerbates wealth disparity as AI gains benefit top earners. Meanwhile, labor income inequality might decrease due to more AI-exposed workers being among high earners. The overall impact depends on AI complementarity. In economies with fewer AI-exposed workers, AI's direct impact on income and wealth distribution is less evident.
Complex Effects on the Economy: AI advances create excitement and concern, with complex effects on the global economy requiring policies to harness its benefits. The nature of work is reshaped with AI as a complement tool for humans.
IMF Analysis: IMF analysis shows that 40% of global jobs are exposed to AI, impacting both routine and high-skilled jobs. In advanced economies, 60% of jobs may be impacted, with half benefiting from AI and the other half facing reduced labor demand. Advanced economies face greater risks from AI but also have more opportunities to leverage its benefits compared to emerging and developing economies.
Emerging Markets: In emerging markets, 40% of jobs are exposed to AI, and in low-income countries, 26% are exposed, with risks of increasing inequality due to infrastructure and skill gaps. Emerging market and developing economies face fewer immediate AI disruptions. However, many lack the infrastructure and skilled workforce to fully leverage AI's benefits, risking increased inequality over time.
Polarisation Between Workers: AI may increase income and wealth inequality within countries. In research on Generative AI at work, a polarization is observed between workers who can use AI significantly in their daily jobs and those who cannot. We already see a gap in productivity between young workers and older workers in their adoption of AI.
Income Disparities: The impact of AI on labor income will largely depend on how well it complements high-income workers. If AI significantly aids these workers, their labor income could rise disproportionately. Additionally, productivity gains from AI-adopting firms will likely boost capital returns, benefiting high earners and potentially increasing inequality.
Policy Recommendations: In most scenarios, AI is expected to exacerbate overall inequality. Policymakers must address this proactively by establishing comprehensive social safety nets and retraining programs for vulnerable workers, ensuring the AI transition is inclusive and helps protect livelihoods while reducing inequality.
Urgency for Policy Action: AI is rapidly being integrated into businesses worldwide, highlighting the urgent need for policymakers to act. To guide policy development, the IMF created the AI Preparedness Index, which evaluates countries based on digital infrastructure, human-capital and labor-market policies, innovation and economic integration, and regulation and ethics.