By 
AI will affect 40% of jobs worldwide, replacing some and complementing others. We need a careful balance of policies to tap its potential
We stand at the precipice of a technological revolution poised to drive productivity, fuel global growth, and elevate incomes worldwide. Simultaneously, however, this surge in technology holds the potential to displace jobs and deepen societal inequalities.
The rapid advance of artificial intelligence has captivated the world, causing both excitement and alarm, and raising important questions about its potential impact on the global economy. The net effect is difficult to foresee, as AI will ripple through economies in complex ways. What we can say with some confidence is that we will need to come up with a set of policies to safely leverage the vast potential of AI for the benefit of humanity.
Reshaping the Landscape of Employment
In a recent analysis, the IMF scrutinized the potential ramifications of AI on the global labor market. While numerous studies have forecasted the possibility of AI replacing jobs, it is acknowledged that AI is likely to complement human work in many instances. The IMF’s analysis encompasses both these aspects.
The results are noteworthy: nearly 40% of global employment faces exposure to AI. Unlike historical trends where automation and information technology primarily affected routine tasks, AI stands out for its impact on high-skilled jobs. Consequently, advanced economies face heightened risks from AI, but they also possess more opportunities to leverage its benefits compared to emerging market and developing economies.
In advanced economies, approximately 60% of jobs may feel the impact of AI. Roughly half of these exposed jobs stand to benefit from AI integration, enhancing productivity. Conversely, the other half may witness AI applications executing tasks currently performed by humans, potentially reducing labor demand, leading to lower wages, and diminished hiring. In extreme cases, certain jobs may vanish.
In contrast, AI exposure in emerging markets and low-income countries is expected to be 40% and 26% respectively. While these findings suggest fewer immediate disruptions from AI, these countries often lack the infrastructure and skilled workforces to fully harness AI benefits, heightening the risk of exacerbating inequality among nations over time.
AI’s impact on income and wealth inequality within countries is also a concern. There is the potential for polarization within income brackets, with workers adept at utilizing AI experiencing increased productivity and wages, while those who cannot lag behind. Research indicates that AI can expedite productivity gains for less experienced workers, potentially creating a divide between younger and older workers in adapting to opportunities.
The effect on labor income will hinge on the extent to which AI complements higher-income workers. If AI significantly complements this group, it could disproportionately increase their labor income. Additionally, productivity gains from AI adoption by firms may boost capital returns, further favoring higher earners. These dynamics could contribute to an exacerbation of overall inequality in most scenarios.
In light of these trends, policymakers must proactively address the potential of AI to worsen inequality. Establishing comprehensive social safety nets and offering retraining programs for vulnerable workers are crucial steps. This approach aims to make the AI transition more inclusive, safeguarding livelihoods and mitigating inequality.
An Inclusive AI-Driven World
AI is rapidly integrating into businesses worldwide, emphasizing the urgency for policymakers to take action. To assist countries in formulating appropriate policies, the IMF has developed an AI Preparedness Index, gauging readiness in areas such as digital infrastructure, human capital and labor market policies, innovation, economic integration, and regulation and ethics.
The human-capital and labor-market policies component, for example, evaluates elements such as years of schooling and job-market mobility, as well as the proportion of the population covered by social safety nets. The regulation and ethics component assesses the adaptability to digital business models of a country’s legal framework and the presence of strong governance for effective enforcement.
Using the index, IMF staff assessed the readiness of 125 countries. The findings reveal that wealthier economies, including advanced and some emerging market economies, tend to be better equipped for AI adoption than low-income countries, though there is considerable variation across countries. Singapore, the United States and Denmark posted the highest scores on the index, based on their strong results in all four categories tracked.
AIglobal labour marketLanka biz newsLankabiznews readersLankabiznews Sri LankaSri Lanka business newsSri Lanka business news online
