AI Will Transform the Global Economy. Let’s Make Sure It Benefits Humanity.
IMF Blog, January 14, 2024
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- Authors: Kristalina Georgieva
- Published: January 14, 2024
Reshaping the Nature of Work
- IMF staff analysis finds "almost 40 percent of global employment is exposed to AI."
- In advanced economies:
- "about 60 percent of jobs may be impacted by AI."
- "Roughly half the exposed jobs may benefit from AI integration, enhancing productivity."
- "For the other half, AI applications may execute key tasks currently performed by humans, which could lower labor demand, leading to lower wages and reduced hiring."
- "In the most extreme cases, some of these jobs may disappear."
- In emerging markets and low-income countries:
- "AI exposure is expected to be 40 percent and 26 percent, respectively."
- 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."
- Distributional and demographic effects:
- AI "could also affect income and wealth inequality within countries."
- Potential polarization: workers who can harness AI may see "an increase in their productivity and wages—and those who cannot falling behind."
- Research indicates "AI can help less experienced workers enhance their productivity more quickly."
- "Younger workers may find it easier to exploit opportunities, while older workers could struggle to adapt."
- Channels exacerbating inequality:
- If "AI significantly complements higher-income workers, it may lead to a disproportionate increase in their labor income."
- "Gains in productivity from firms that adopt AI will likely boost capital returns, which may also favor high earners."
- Conclusion: "In most scenarios, AI will likely worsen overall inequality."
An Inclusive AI-Driven World
- Rapid integration of AI into businesses "underscor[es] the need for policymakers to act."
- IMF developed an "AI Preparedness Index" measuring readiness across four areas:
- "digital infrastructure,"
- "human-capital and labor-market policies,"
- "innovation and economic integration," and
- "regulation and ethics."
- Examples of index components:
- Human-capital and labor-market policies evaluate "years of schooling and job-market mobility, as well as the proportion of the population covered by social safety nets."
- Regulation and ethics assess "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."
- Findings: "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."
Policy Recommendations and Priorities
- To make the AI transition inclusive and prevent social tensions:
- "establish comprehensive social safety nets and offer retraining programs for vulnerable workers."
- These measures aim to "protect livelihoods and curb inequality."
- Country-specific priorities based on readiness:
- Advanced economies: "prioritize AI innovation and integration while developing robust regulatory frameworks" to "cultivate a safe and responsible AI environment" and "helping maintain public trust."
- Emerging market and developing economies: "the priority should be laying a strong foundation through investments in digital infrastructure and a digitally competent workforce."
Overall Assessment
- AI presents both substantial opportunities ("jumpstart productivity, boost global growth and raise incomes") and risks ("replace jobs and deepen inequality").
- The net effect is "difficult to foresee" because "AI will ripple through economies in complex ways."
- Nonetheless, policymakers can influence outcomes: "The AI era is upon us, and it is still within our power to ensure it brings prosperity for all."
Source: AI Will Transform the Global Economy. Let’s Make Sure It Benefits Humanity., Kristalina Georgieva, January 14, 2024.