IMF: AI will impact 60% of jobs and worsen inequality

AI is a technological breakthrough that some say will impact the world in a manner akin to the industrial revolution. 

But just as with past technology advancements, AI will also lead to income and economic disparity, job displacement and inequality, according to a new lengthy report from the International Monetary Fund (IMF). 

Notably, the agency says that roughly 60% of jobs in advanced economies — such as the U.S., UK and EU — are exposed to AI, while 40% of global employment as a whole is prone. 

“The net effect is difficult to foresee, as AI will ripple through economies in complex ways,” writes Kristalina Georgieva, IMF managing director. However, “in most scenarios, AI will likely worsen overall inequality, a troubling trend that policymakers must proactively address to prevent the technology from further stoking social tensions.” 

Impacts both positive and negative

Per the report, roughly half of the 60% of AI-exposed jobs in advanced economies and the 40% globally will experience negative impacts. On a positive note, however, the remaining half could benefit from enhanced productivity. 

But emerging markets and low-income economies are certainly not immune to impacts. In fact, 40% and 26% of their jobs, respectively, are prone to AI. There’s a yin and yang to that, according to IMF researchers: While those markets see less AI-related disruptions in the short term, they are also less equipped to take advantage of the technology’s many benefits. 

“This could exacerbate the digital divide and cross-country income disparity,” researchers write. 

Interestingly, according to the report, while previous waves of technology — and automation in particular — have largely impacted lower and “middle-skilled” workers, displacement by AI is now a very real possibility for higher-wage, white collar workers. 

“Jobs that require nuanced judgment, creative problem-solving or intricate data interpretation — traditionally the domain of highly educated professionals — may now be augmented or even replaced by advanced AI algorithms, potentially exacerbating inequality across and within occupations,” the IMF says.

At the same time, the complementarity (or usefulness when combined) of AI and human workers could result in a “more than proportional increase” in income, further impacting income inequality. 

“Owing to capital deepening and a productivity surge, AI adoption is expected to boost total income,” researchers write. Also, AI and human workers complementing each other and driving growth and labor demand could “more than compensate” for AI’s job displacement. 

Women, older workers and those without higher ed the most impacted

Not unexpectedly, college educated workers will find it easier to move into such complementarity roles, the IMF says, while older workers and those without post-secondary education will be more vulnerable. 

“Younger workers who are adaptable and familiar with new technologies may also be better able to leverage the new opportunities,” researchers write. 

AI could further contribute to inequality within countries along various areas. For instance, women globally tend to hold higher-exposure positions than men. 

There’s also the question of societal acceptability: Some countries and professions may resist AI due to cultural, ethical or operational concerns. 

Ultimately, “the field of AI is experiencing a swift evolution, especially with the advent of gen AI, which has broadened AI’s potential applications,” the IMF asserts. “This suggests that its impact will expand to reshape job functions and the division of labor.”

The IMF AI Preparedness Index

IMF researchers acknowledge that the exact implications of AI on economies and societies are difficult to predict, “embodying a level of uncertainty reminiscent of past introductions of general-purpose technologies, such as electricity.”

But as it evolves, countries must craft effective, comprehensive policies. To support this worldwide, the IMF developed an ‘AI Preparedness Index’ measuring the readiness of 125 countries. Singapore, the U.S. and Denmark posted the highest scores. All told, while there is “considerable variation” across countries, the wealthiest are better equipped for AI adoption. 

The Index bases readiness based on four factors: digital infrastructure, human capital and labor market policies, AI innovation and economic integration and regulation and ethics.

Digital infrastructure, not surprisingly, is crucial for adoption, but it also requires skilled workforces that know how to use it. The human capital and labor market factor addresses this by assessing the prevalence and distribution of skills within the workforce based on years of schooling, job market mobility and the existence of social safety nets. 

Those two factors can lead to AI innovation and economic integration, thus promoting international trade and attracting investment, according to researchers. Lastly, the regulation and ethics component evaluates how well existing legal frameworks can adapt to new business models and effectively enforce new and evolving policies. These frameworks must also address cybersecurity risk. 

“We will need to come up with a set of policies to safely leverage the vast potential of AI for the benefit of humanity,” writes Georgieva. 

Countries with high AI exposure should strengthen their capacity for digital innovation and legal and ethical frameworks to both govern and support AI advancements, researchers advise. Low income countries, meanwhile, should establish comprehensive social safety nets and offer training and retraining programs for those most vulnerable. 

“In doing so, we can make the AI transition more inclusive, protecting livelihoods and curbing inequality,” Georgieva says.