The IMF Raises Serious Inequality Concerns over AI's Impact

Hey Everyone,

The IMF's managing director Kristalina Georgieva has recently said "in most scenarios, AI will likely worsen overall inequality". This after releasing a pretty in-depth study.

AI meets composability

As the leading intelligent composable content platform, Contentful enables developers and marketers alike to easily deliver compliant on-brand experiences at speed and scale—all within one unified content system.

Get Started

The IMF is making rather large claims about the disruptive power of Generative A.I. They said in a recent blog that “(we're) the brink of a technological revolution that could jumpstart productivity, boost global growth and raise incomes around the world. Yet it could also replace jobs and deepen inequality.”

Their insights were widely reported across global media outlets.

The International Monetary Fund (IMF) works to achieve sustainable growth and prosperity for all of its 190 member countries. It does so by supporting economic policies that promote financial stability and monetary cooperation, which are essential to increase productivity, job creation, and economic well-being.

Mandate of the IMF

The IMF has three critical missions:

1. Furthering international monetary cooperation
2. Encouraging the expansion of trade and economic growth
3. Discouraging policies that would harm prosperity.

To fulfill these missions, IMF member countries work collaboratively with each other and with other international bodies.

Around the time of the Davos meetings we always get reminded of this. The world’s richest five men have more than doubled their fortunes since 2020, the charity Oxfam has said, sounding the alarm about unchecked corporate power as business elites hold their high-profile annual gathering in Davos, Switzerland.

The five men are worth a combined $869bn after growing their fortunes at a rate of $14m per hour during the past four years, Oxfam said in its report “Inequality Inc.”, released on Monday.

AI likely to Hurt Inequality

• IMF's managing director Kristalina Georgieva says "in most scenarios, AI will likely worsen overall inequality".
• The IMF said AI is likely to affect a greater proportion of jobs - put at around 60% - in advanced economies. In half of these instances, workers can expect to benefit from the integration of AI, which will enhance their productivity.
• ?"And then it goes down to 40 percent, for emerging markets, 26 percent for low-income countries," she added, referencing the IMF report, which notes that overall, almost 40 percent of global employment is exposed to AI.

Demographics and AI

Lower-income and older workers could fall behind, the IMF believes. More generally, higher-income and younger workers may see a disproportionate increase in their wages after adopting AI.

"If we don't have thoughtful distribution of benefits [of AI] and inequality grows dramatically, that can break the social fabric in a way that is going to be very unhealthy for the world," IMF managing director Kristalina Georgiev

In a new analysis, IMF staff examine the potential impact of AI on the global labor market.

Download 41-page Report

"We must focus on helping low-income countries in particular to move faster to be able to catch the opportunities that artificial intelligence will present," she said.

Read the Blog

• The IMF report notes that half of the jobs impacted by AI will be negatively affected, while the rest may actually benefit from enhanced productivity gains due to AI.

In Summary

About 40% of global employment is exposed to AI, according to the IMF. In advanced economies, roughly 60% of jobs are exposed to AI due to the prevalence of "cognitive task" oriented jobs. Overall exposure is 40% in emerging markets and 26% in low-income countries, says the IMF.

Above: The UK has a significant portion of employment in professional and managerial occupations, which exhibit high exposure and high complementarity, and in clerical support workers and technician occupations, generally high exposure and low complementarity. In India most workers are craftspeople, skilled agricultural workers, and low-skilled, or “elementary” workers; most of these are in the low-exposure category. Brazil represents a broadly intermediate case.

• As AI continues to be adapted by more workers and businesses, it’s expected to both help and hurt the human workforce, Georgieva noted.
• Lower-income and older workers could fall behind, the IMF believes.
• Meanwhile Advanced economies and young people who are early adopter could see the biggest wage gains and career earnings bump.

Echoing previous warnings from other experts, Georgieva said the effects were expected to be felt more deeply in advanced economies than emerging markets, partly because white-collar workers are seen to be more at risk than manual laborers.

Women and AI

Exposure is higher for women and for more educated workers but is mitigated by a higher potential for complementarity with AI. In most countries, women tend to be employed in high-exposure occupations more than men.

According to reporting by Insider, LinkedIn vice president Annesh Raman said in a podcast interview in November that AI would reduce the value of technical skills, making soft skills more important.

In the long term, workers will adjust to changing skill demands and sector shifts, with some potentially transitioning to high-AI-complementarity roles and some struggling to adapt.

It is thought this favors young people who are often early adopters and who have more of their career to adjust or pivot to new roles and new kinds of jobs.

The shelf life of a degree is also beginning to shrink as AI accelerates in terms of its new developments and capabilities. This has dawned on some young people already who seem determined to take less than traditional paths.

For Low Income Countries

“Many of 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,” noted Georgieva.

Women and highly educated workers are consistently more exposed to, but also more likely to benefit from, AI; older workers may be more likely to struggle during this technological transition. It is not clear what the IMF defines as an “older worker”. Is it age or more of an outdated profession or both? However neither am I sure that AI adoption means necessarily things like “get good at prompting”, like we heard in 2023. This tech is unstable, in flux and still in its nascence.

This study also seems skewed to the UK. Their conclusions that this benefits young people I think is also mistaken and contradicts reports by other economists I read in 2023.

White collar young people globally could be in for a tough time as even jobs they pivot to could be disrupted multiple times over with inflation and the cost of living getting unrealistic.