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AI is a groundbreaking technology that’s expected to have a significant impact on the world, comparable to the industrial revolution. However, similar to past technological advancements, AI might also lead to income and economic disparity, job loss, and inequality, according to a new detailed report from the International Monetary Fund (IMF).
The IMF highlights that around 60% of jobs in advanced economies like the U.S., UK, and EU are vulnerable to AI, and globally, 40% of employment is at risk. The overall effect of AI is hard to predict since it will affect economies in complex ways. Yet, in most scenarios, AI is likely to increase overall inequality, a concerning trend that policymakers need to address proactively to avoid escalating social tensions.
According to the report, about half of the AI-exposed jobs in advanced economies and globally will face negative impacts, while the other half could see benefits from increased productivity. However, emerging markets and low-income economies aren’t immune to these effects. In these regions, 40% and 26% of jobs, respectively, are exposed to AI. While they might see fewer disruptions in the short term, they are also less prepared to take advantage of AI’s benefits, which could widen the digital divide and increase cross-country income disparity.
The report points out that, unlike previous technological advances that primarily affected lower and mid-skilled workers, AI could displace higher-wage, white-collar jobs. Jobs requiring complex judgment, creative problem-solving, or intricate data interpretation, traditionally held by highly educated professionals, may be augmented or even replaced by advanced AI algorithms, potentially exacerbating inequality across various occupations.
Interestingly, the combination of AI and human workers could lead to significant income increases, further impacting income inequality. AI adoption is expected to boost total income due to increased productivity, and the collaboration between AI and human workers might offset job losses.
College-educated workers will likely find it easier to shift into roles that complement AI, while older workers and those without higher education will be more vulnerable. Younger workers, who are more adaptable and tech-savvy, might also be better positioned to capitalize on new opportunities.
AI could further deepen inequality within countries in various ways. For example, women globally tend to occupy positions that are more exposed to AI than men. Additionally, societal acceptance plays a role, as some countries and professions might resist AI due to cultural, ethical, or operational concerns. The rapid evolution of AI, especially with generative AI, is expanding its potential applications, reshaping job functions and labor divisions.
The IMF acknowledges the uncertainty surrounding AI’s exact impact on economies and societies, comparable to past general-purpose technologies like electricity. As AI develops, countries need to craft effective policies. To support this, the IMF created an ‘AI Preparedness Index’ to measure the readiness of 125 countries. Singapore, the U.S., and Denmark have the highest scores, indicating that wealthier countries are better prepared for AI adoption.
The Index assesses readiness based on digital infrastructure, human capital and labor market policies, AI innovation, and regulation and ethics. Digital infrastructure is essential for AI adoption, but it also requires a skilled workforce. The human capital and labor market component looks at workforce skills, job market mobility, and social safety nets. These factors can lead to AI innovation and economic integration, promoting international trade and attracting investment. The regulation and ethics component evaluates the adaptability of legal frameworks and their ability to enforce new policies, including cybersecurity risk.
Countries with high AI exposure should enhance their digital innovation capacity and legal and ethical frameworks to govern and support AI advancements. Low-income countries should establish social safety nets and offer training and retraining programs for vulnerable populations to make the AI transition more inclusive, protecting livelihoods and reducing inequality.
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