AI likely to worsen overall inequality; to affect 40% of jobs globally: IMF chief

Barely four days after Google fired hundreds of its employees, reportedly as a result of its reliance on generative artificial intelligence (AI) and partly due to a restructuring exercise, International Monetary Fund (IMF) chief has flagged concerns about the impact AI may have on the labour market worldwide, leading to more inequalities.

IMF managing director Kristalina Georgieva said in a media interview that "in most scenarios, AI will likely worsen overall inequality". According to her, policymakers need to address this 'troubling trend' to prevent further aggravation of social tensions.

Further, she claimed that “advanced economies face greater risks from AI” running the risk of losing 60 per cent jobs. With AI expected to have less effect in developing countries, around "40 per cent of jobs globally are likely to be impacted," she added, quoting from a new IMF report.

AI’s impact on jobs

According to the IMF report, about 60 percent of jobs may be impacted by AI in advanced economies. But in half of these instances, workers may benefit from AI integration since it may end up enhancing their productivity.

However, for the other half, AI applications may execute key tasks currently performed by humans, which could lower labour demand, leading to lower wages and reduced hiring. News reports quoted Georgieva as saying that in the most extreme cases, some of these jobs may disappear, which is not good or AI may enhance your job, so you actually will be more productive and your income level may go up.

The IMF findings are the outcome of an analysis of the impact of AI on the labour market globally. One of the striking findings of the analysis is that “almost 40 per cent of global employment is exposed to AI”, with the technology impacting high-skilled jobs the most.

“Historically, automation and information technology have tended to affect routine tasks, but one of the things that sets AI apart is its ability to impact high-skilled jobs. As a result, advanced economies face greater risks from AI – but also more opportunities to leverage its benefits – compared with emerging market and developing economies,” said Georgieva, underlining both the merits and demerits of AI.

Deepening inequality among nations

While advanced economies may offset the demerits by harnessing the benefits of AI integration, many emerging markets and developing economies may not be able to do that because of the lack of infrastructure and skilled workforce. Although they may not face immediate disruption, the AI gap may “worsen inequality among nations”.

“In emerging markets and low-income countries, by contrast, AI exposure is expected to be 40 percent and 26 percent, respectively. These findings suggest emerging market and developing economies face fewer immediate disruptions from AI. At the same time, many of these countries don’t have the infrastructure or skilled workforces to harness the benefits of AI, raising the risk that over time the technology could worsen inequality among nations,” said the IMF chief, explaining about AI’s pitfalls at a time when the technology has taken the world by storm.

Meanwhile, the report said that AI could also affect income and wealth inequality within countries. "We may see polarization within income brackets, with workers who can harness AI seeing an increase in their productivity and wages – and those who cannot falling behind,” the report added. AI’s impact on labour income, particularly if it complements higher-income workers, may “exacerbate inequality”.

AI Preparedness Index

IMF has also come out with an AI Preparedness Index, highlighting the advantages and disadvantages of AI for various economies and the impact it could have on jobs.

The report, on the one hand, underlines the priority the advanced economies should give to AI innovation and integration, while “developing robust regulatory frameworks” to “cultivate a safe and responsible AI environment” and help gain public trust. On the other hand, it calls for emerging markets and developing economies to lay a “strong foundation through investments in digital infrastructure and a digitally competent workforce”.

In a nutshell, the IMF analysis covers both aspects of AI – replacement of jobs and complementing human work – while making a case for making the technology inclusive.