We are on the cusp of a technological revolution that could revive productivity, boost global growth and increase incomes around the world. But it could also replace jobs and worsen inequality.
Rapid advances in artificial intelligence have captivated the world, sparking both excitement and concern, and raising important questions about its potential impact on the global economy. The net effect is difficult to predict, as AI will have complex impacts on economies. What we can say with some confidence is that we will need to develop a set of policies to safely harness the vast potential of AI for the benefit of humanity.
Reshaping the nature of work
In a new analysis, IMF staff examines the potential impact of AI on the global labor market. Many studies predict that jobs will likely be replaced by AI. Yet we know that in many cases AI has the potential to complement human work. The IMF’s analysis captures these two forces.
The results are striking: almost 40% of global jobs are exposed to AI. Historically, automation and information technology have tended to impact 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 exploit its benefits – compared to emerging and developing economies.
In advanced economies, around 60% of jobs could be affected by AI. About half of exposed jobs could benefit from AI integration, improving productivity. For the other half, AI applications could perform key tasks currently done by humans, which could reduce demand for labor, leading to lower wages and reduced hiring. In the most extreme cases, some of these jobs could disappear.
In contrast, in emerging markets and low-income countries, exposure to AI is expected to be 40% and 26%, respectively. These findings suggest that emerging and developing market economies face less immediate disruption from AI. At the same time, many of these countries do not have the infrastructure or skilled workforce to harness the benefits of AI, increasing the risk that the technology will ultimately worsen inequalities between the Nations.
AI could also impact income and wealth inequality within countries. We could see polarization within income brackets, with workers who can harness AI seeing their productivity and wages increase – and those who can’t fall behind. Research shows that AI can help less experienced workers improve their productivity more quickly. Younger workers might find it easier to exploit opportunities, while older workers might struggle to adapt.
The effect on labor incomes will largely depend on the extent to which AI complements high-income workers. If AI significantly complements higher-income workers, it could lead to a disproportionate increase in their labor income. Additionally, productivity gains from companies adopting AI will likely increase returns on capital, which could also favor high earners. These two phenomena could exacerbate inequalities.
In most scenarios, AI risks worsening overall inequality, a worrying trend that policymakers must proactively address to prevent the technology from further inflaming social tensions. It is crucial that countries put in place comprehensive social safety nets and provide reskilling programs for vulnerable workers. In doing so, we can make the transition to AI more inclusive, protecting livelihoods and reducing inequalities.
An inclusive world driven by AI
AI is being integrated into businesses around the world at remarkable speed, highlighting the need for policymakers to act.
To help countries develop the right policies, the IMF has developed an AI Readiness Index that measures readiness in areas such as digital infrastructure, human capital and labor market policies. work, innovation and economic integration, as well as regulation and ethics.
The human capital and labor market policies component, for example, assesses things such as years of schooling and labor market mobility, as well as the proportion of the population covered by social safety nets. The regulatory 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 this index, IMF staff assessed the preparedness of 125 countries. The results reveal that wealthier economies, including advanced economies and some emerging market economies, tend to be better equipped for AI adoption than lower-income countries, although there is variation. considerable between countries. Singapore, the United States and Denmark achieved the highest scores on the index, thanks to their excellent results in all four categories tracked.
Guided by learnings from the AI Preparedness Index, advanced economies should prioritize AI innovation and integration while developing strong regulatory frameworks. This approach will foster a safe and responsible AI environment, helping to maintain public trust. For emerging and developing market economies, the priority should be to lay a strong foundation through investments in digital infrastructure and a digitally competent workforce.
The age of AI is upon us, and it is still within our power to ensure that it brings prosperity to all.
—To learn more about artificial intelligence and the economy, see the
December issue of Finance & Development, the quarterly magazine of the IMF.
