“Artificial intelligence (AI) promises to boost productivity and growth, but its impact on economies and societies is uncertain, varying by job roles and sectors, with the potential to amplify disparities,” said “GenAI: Artificial Intelligence and the Future of Work,” a recently published report by the International Monetary Fund (IMF). “As a positive productivity shock, AI will expand economies’ production frontiers and will lead to reallocations between labor and capital while triggering potentially profound changes in many jobs and sectors. AI offers unprecedented opportunities for solving complex problems and improving the accuracy of predictions, enhancing decision-making, boosting economic growth, and improving lives. However, precisely because of its vast and flexible applicability in numerous domains, the implications for economies and societies are uncertain.”
“The impact of AI is also likely to differ significantly across countries at different levels of development or with different economic structures,” adds the IMF report. “Advanced economies, with their mature industries and service-driven economies, typically have a higher concentration of jobs in sectors that require complex cognitive tasks. These economies are therefore both more susceptible to, yet better positioned to benefit from, AI innovations.”
“Conversely, emerging market and developing economies, often still reliant on manual labor and traditional industries, may initially face fewer AI-induced disruptions. However, these economies may also miss out on early AI-driven productivity gains, given their lack of infrastructure and a skilled workforce. Over time, the AI divide could exacerbate existing economic disparities, with advanced economies harnessing AI for competitive advantage while emerging market and developing economies grapple with integrating AI into their growth models.”
The article notes that to study the impact of technological innovations on jobs, it’s become standard to frame individual occupations as involving multiple tasks or processes. Some of these tasks are more exposed to automation, while other tasks require judgement, social skills and other human capabilities. While automation does indeed substitute for labor, automation also complements labor. Automating the more routine parts of a job will often increase the productivity, earnings and quality of workers, by complementing their human skills with new technologies that automate some of the tasks, enabling them to focus on those aspect of the job that most need their attention.
Let me summarize some of the report’s key findings.
Which occupations are most exposed to AI innovations?
Occupations whose tasks are highly exposed to AI automation may see reduced human labor demand, whereas those that require human supervision to complement AI will experience an increase in productivity and the creation of new occupations. Based on the degree of exposure and complementarity to AI, the report categorizes occupations into three distinct groups:
- High exposure, high complementarity. These are primarily cognitive jobs where AI can complement workers in their in their tasks, decision-making, and social interactions, — e.g., surgeons, lawyers, judges.
- High exposure, low complementarity. These are high exposure jobs where there’s a greater likelihood that AI can automate most of the human tasks, which generally leads to a decline in labor demand and wages, e.g., clerical workers, telemarketers.
- Low exposure. These are jobs with minimal or no potential for AI automation, mostly because their tasks are primarily physical in nature, e.g., dishwashers, cleaning services, dancers.
Which Countries are More Exposed to AI Adoption?
Overall, almost 40% of workers around the world are in high-exposure occupations, but the degree of exposure and complementarity depends on the composition of the labor force, which varies across advanced, emerging, and developing economies.
Advanced economies, — including countries in North America, Western Europe, and Asia Pacific, — have a high concentration of jobs in sectors that require complex cognitive and communication capabilities. These countries have the highest exposure to AI innovations, 60%, of which 27% are high-exposure, high-complementarity occupations; 33% are high-exposure, low-complementary; and 40% are low exposure occupations. While being more susceptible to AI innovations, advanced economies are also better positioned to benefit from the emerging AI productivity and growth opportunities.
Emerging economies, — including China, India, Brazil, Mexico, and South Africa, — are mostly reliant on traditional industries and mid-skill occupations. These countries have a 40% exposure to AI innovations of which 16% are in high-exposure, high-complementarity occupations; 24% are in high-exposure, low complementarity occupations; and 60% are in low exposure occupations.
Developing economies, — mostly in sub-Saharan Africa and parts of Asia — are mostly reliant on low-skilled manual labor and thus have the lowest exposure to AI innovations, 26%, of which 8% are high-exposure, high-complementarity occupations; 26% are high-exposure, low-complementary occupations; and 74% are low exposure occupations.
While being more susceptible to AI innovations, advanced economies are also better positioned to benefit from emerging AI productivity and growth opportunities. Conversely, emerging and development economies may initially face fewer disruptions, but they may also miss out on AI-driven productivity gains given their smaller skilled workforce.
How will AI affect workers within countries?
“The advent of AI could exacerbate inequality within countries along various dimensions, such as the income level of individuals, their education level, or their gender. Understanding which groups are most vulnerable is essential to design policies that can mitigate those effects.”
Income distribution: Unlike previous waves of automation which mostly affected mid-skill, mid-wage blue- and white-collar workers, AI automation is potentially affecting the jobs of workers throughout the income distribution. However, the potential gains from AI are positively correlated with income, that is, AI’s gains will disproportionately accrue to higher income earners in just about all countries.
Educational level: Higher education levels are particularly associated with high-exposure, high-complementarity occupations that require complex cognitive and communication capabilities. Consequently, AI could more strongly affect such highly educated, high-skilled workers, but it will mostly do so by complementing their jobs and thus improving their overall productivity.
Gender: Women tend to be more employed in high-exposure, service-oriented occupations than men, but because their share is approximately the same in low- and high-complementary jobs, they both face greater risks and greater opportunities.
In what ways could AI reshape income and wealth inequality?
The impact of AI on labor income inequality depends largely on the extent to which AI automates or complements high-income workers. “Model simulations suggest that, with high complementarity, higher-wage earners can expect a more-than-proportional increase in their labor income, leading to an increase in labor income inequality.” Countries’ policy choices will ultimately shape the overall impact of AI on income and wealth distribution.
What is the potential impact of AI on growth and productivity?
AI may lead to broad-based productivity gains, which if strong, could result in higher growth and higher incomes for most workers. “If AI strongly complements human labor in certain occupations and the productivity gains are sufficiently large, higher growth and labor demand could more than compensate for the partial replacement of labor tasks by AI, and incomes could increase along most of the income distribution.”
“Harnessing the advantages of AI will depend on countries’ preparedness and the ability of workers to adapt to this new technology,” said the IMF report in conclusion. “Advanced and more developed emerging market economies should launch adequate regulatory frameworks to optimize the benefits of increased AI use and invest in complementary innovations. Low-income countries and other emerging market economies should prioritize digital infrastructure and human capital. With such investments, AI could help alleviate skill shortages, expand the provision of health care and education, and improve productivity and competitiveness in new sectors.”
“We are on the brink of a technological revolution that could jumpstart productivity, boost global growth and raise incomes around the world,” wrote IMF’s Managing Director Kristalina Giorgieva in her IMF blog. “Yet it could also replace jobs and deepen inequality. 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.”
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