AI will hit 40% of global jobs, worsen inequality, IMF says

Advanced economies are better poised to exploit the benefits of artificial intelligence (AI) but are also at greater risk of jobs being replaced by the advancement of AI, a new analysis by the International Monetary Fund (IMF) said.

Titled Gen-AI: Artificial Intelligence and the Future of Work, research carried out by IMF staff found that almost 40% of global employment is exposed to artificial intelligence.

In advanced economies, 60% of jobs are exposed to AI. While roughly half the exposed jobs may benefit from AI integration, enhancing productivity, AI applications that may execute key tasks currently performed by humans could lower labor demand, leading to lower wages and reduced hiring for the other half, the researchers said. 

The report noted that in emerging markets and low-income countries, 40% of jobs may benefit from AI integration while 26% of them may be negatively impacted. 

The findings are based on the assessment of 125 countries using IMF’s AI Preparedness Index which measures readiness in areas such as digital infrastructure, human capital and labor-market policies, innovation and economic integration, and regulation and ethics.

Emerging economies less exposed to AI disruption

The report said wealthier economies, including advanced and some emerging market economies, tend to be better equipped for AI adoption than low-income countries. Singapore, the US, and Denmark posted the highest scores on the index.

Although emerging markets and developing economies face fewer immediate disruptions from AI, many of these countries don’t have the infrastructure or skilled workforce to harness the benefits of AI.

The contrast is visible in the findings: high-exposure occupations constitute 70% and 60% of employment in the US and the UK, respectively, whereas, in emerging market economies, the range of high-exposure employment varies from 41% in Brazil to a mere 26% in India.

This is because most workers in India are craftspeople, skilled agricultural workers, and low-skilled, or “elementary” workers and fall under the low-exposure category. Brazil represents a broadly intermediate case.

The report noted 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, increasing overall income across most of the income distribution. 

Risks of increased inequality

The analysis, however, raises the risk that AI exposure could worsen inequality among nations because of its ability to benefit high earners and rich nations. 

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’ choices regarding the definition of AI property rights, as well as redistributive and other fiscal policies, will ultimately shape its impact on income and wealth distribution, the study said. 

Explaining the impact of AI on income inequality, IMF managing director Kristalina Georgieva said that the effect on labor income will largely depend on the extent to which AI will complement high-income workers. 

“If AI significantly complements higher-income workers, it may lead to a disproportionate increase in their labor income. Moreover, gains in productivity from firms that adopt AI will likely boost capital returns, which may also favor high earners. Both of these phenomena could exacerbate inequality,” Georgieva wrote in a blog. 

Workers who can harness AI see an increase in their productivity and wages—and those who cannot fall behind. 

Citing research by the American think tank National Bureau of Economic Research (NBER), the IMF chief said that AI can help less experienced workers enhance their productivity more quickly as younger workers may find it easier to exploit opportunities, while older workers could struggle to adapt.

The IMF staff report highlighted that advanced and more developed emerging market economies should invest in AI innovation and integration, while advancing adequate regulatory frameworks to optimize benefits from increased AI use. 

For less prepared emerging markets and developing economies, foundational infrastructural development and building a digitally skilled labor force are paramount, it said. 

Georgieva advised policymakers to proactively address to prevent the technology from further stoking social tensions arising from worsening overall inequality. 

“It is crucial for countries to establish comprehensive social safety nets and offer retraining programs for vulnerable workers. In doing so, we can make the AI transition more inclusive, protecting livelihoods and curbing inequality,” she said.