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IMF raises concerns about rising inequality caused by AI

Ft
Thursday, Jun 20, 2024

The IMF said it had “profound concerns” about massive labour disruptions and rising inequality as societies move towards generative AI, and it urged governments to do more to protect their economies.

In a report published on Monday, the fund said countries should take action such as improving unemployment insurance, warning that, unlike past disruptive technologies, AI could lead to job losses in higher-skilled occupations.

While the IMF said that generative AI held immense potential to boost productivity growth and advance the delivery of public services, it cautioned that it also “raises profound concerns about massive labour disruptions and rising inequality”.

Generative AI, the ability of computers to automatically generate text or images using generative models, came to widespread attention with the launch of OpenAI’s ChatGPT late in 2022. While many companies have been slow to adopt it so far, it has prompted a rebound in global tech stocks.

Regulating AI has become a concern. The EU has agreed a first-of-its-kind AI Act that targets the risks posed by the fast-moving technology, with a possible outright ban on AI applications that carry unacceptable risks for the safety, livelihoods and rights of EU citizens.

In its report, the IMF said that policies on education and training needed to adapt to new realities to help prepare workers for a rapidly changing job market in the future, with a greater focus on offering life-long learning. Sector-based training, apprenticeships and reskilling programmes could play a greater role in helping workers with the transition to new tasks and sectors, it said.

“We want people to be able to benefit more broadly from the potential that this technology holds and we want to ensure that there are opportunities created for people,” said Era Dabla-Norris, deputy director at the IMF’s fiscal affairs department and co-author of the report.

She added that the “transition could be painful for workers” facing the prospect of higher and longer unemployment because “older workers may not have the skills that are needed in the age of AI and it may require more time than in the past to acquire these new skills”.

“You want to be able to cushion this costly transition and maintain social cohesion in societies,” she said.The IMF advised against special taxes on AI, which have been suggested as a revenue-raising solution to cover the negative effects of AI, arguing they could hamper productivity growth.

Instead, the IMF proposed hiking taxes on capital gains and profits, levies that have declined in recent decades, as well as corporate income taxes, to help offset rising wealth inequality.

Earlier automation waves, such as the adoption of robotics, displaced mostly blue-collar and lower-skilled workers, while higher-skilled and white-collar workers are seen as most exposed to AI.

However, AI is also capable of powering more intelligent robots and could lead to further automation of blue-collar jobs, too, the IMF warned. This could exacerbate income and wealth inequality.

Generative AI could also result in a further rise in the market power and economic rents enjoyed by dominant firms “in increasingly concentrated and winner-take-all markets” as a result of capital getting more concentrated in the hands of fewer companies.

In January, the IMF estimated that AI would affect almost 40 per cent of jobs around the world, replacing some and complementing others. That echoed a report from Goldman Sachs in 2023, which estimated AI could replace the equivalent of 300mn full-time jobs while creating others and boosting productivity.

The IMF said that given uncertainty over the future of AI, governments should take an “agile” approach that prepares them for “highly disruptive scenarios”.

Because of the global reach of AI, said Dabla-Norris, “it’ll be really important more than ever for countries to work together”.