Around 40 percent of global employment is exposed to AI (artificial intelligence), the International Monetary Fund (IMF) says, adding that the advanced economies are at greater risk but also better poised to exploit the benefits than emerging market and developing economies.
In advanced economies, about 60 percent of jobs are exposed to AI, due to the prevalence of cognitive-task-oriented jobs, says the IMF in the latest report “Gen-AI: Artificial Intelligence and the Future of Work”.
The world’s top financial institution says AI is set to profoundly change the global economy, with some commentators seeing it as akin to a new industrial revolution. “Its consequences for economies and societies remain hard to foresee. This is especially evident in the context of labour markets, where AI promises to increase productivity while threatening to replace humans in some jobs and to complement them in others.”
WEALTH INEQUALITY
According to the IMF, unlike previous waves of automation, which had the strongest effect on middle-skilled workers, AI displacement risks extend to higher-wage earners. However, potential AI complementarity is positively correlated with income. Hence, the effect on labour income inequality depends largely on the extent to which AI displaces or complements high-income workers.
Model simulations suggest that, with high complementarity, higher-wage earners can expect a more-than-proportional increase in their labour income, leading to an increase in labour income inequality. This would amplify the increase in income and wealth inequality that results from enhanced capital returns that accrue to high earners.
Countries’ choices regarding the definition of AI property rights, as well as redistributive and other fiscal policies, will ultimately shape its impact on income and wealth distribution.
HIGHER GROWTH, HIGHER INCOME
The IMF says gains in productivity, if strong, could result in higher growth and higher incomes for most workers. Owing to capital deepening and a productivity surge, AI adoption is expected to boost total income.
If AI strongly complements human labor in certain occupations and the productivity gains are sufficiently large, higher growth and labor demand could more than compensate for the partial replacement of labor tasks by AI, and incomes could increase along most of the income distribution.
COLLEGE EDUCATION AN ASSET
College-educated workers are better prepared to move from jobs at risk of displacement to high-complementarity jobs while the older workers may be more vulnerable to the AI-driven transformation. In the UK and Brazil, for instance, college-educated individuals historically moved more easily from jobs now assessed to have high displacement potential to those with high complementarity.
In contrast, workers without postsecondary education show reduced mobility. Younger workers who are adaptable and familiar with new technologies may also be better able to leverage the new opportunities. But older workers may struggle with reemployment, adapting to technology, mobility, and training for new job skills.
EVERYTHING DEPENDS ON LEVEL OF DEVELOPMENT
To harness AI's potential fully, priorities depend on countries’ development levels. A novel AI preparedness index shows that advanced and more developed emerging market economies should invest in AI innovation and integration, while advancing adequate regulatory frameworks to optimize benefits from increased AI use.
For less prepared emerging market and developing economies, foundational infrastructural development and building a digitally skilled labor force are paramount. For all economies, social safety nets and retraining for AI-susceptible workers are crucial to ensure inclusivity.