AI’s Impact on Income Inequality

In today’s technologically dependent world, the emergence and implementation of technology has created a dystopia of new challenges and opportunities. Despite many believing that the greatest concern of AI implementation is lack of supervision, the most impactful challenge is AI’s impact on income inequality. To bridge the growing income gap created as a result of technological advancement, it is crucial to implement policies, invest strategically in education, and foster international collaboration to ensure universal access to the benefits of technological progress.

The integration of artificial intelligence and automation has allowed for a greater increase in efficiency and productivity in the global economy. However, it has also disrupted the job market, through the automation of labor intensive tasks, which has led to numerous blue collar jobs being displaced (“The Future of Jobs Report.”). As AI continues to get more advanced, job displacement is predicted to spill out to other industries such as finance, healthcare and agriculture. A study conducted by Mckinsey Global Institute estimates that up to 375 million workers worldwide may need to change their occupations by 2030 due to automation (Chui, Michael, et al). This is a major concern as blue collar workers are both more likely to be negatively impacted as a result of AI while also being more inclined to have less education, leading these workers to struggle to find a new job, which leads to an increase in income disparity.

Additionally, AI increases the income gap through highlighting the potential disparity of individual skill and access to technology. In order to effectively use technology, one needs to have specialized skills. This need for skill sets further creates a divide between those who have access to technological education and those who do not. According to the World Economic Forum, the demand for analytical thinking and innovative skills is expected to grow by 41% (Insight Report the Future of Jobs Report 2018). As a result, individuals without access to quality education in these areas and the accompanying technological skills may be disadvantaged, further increasing the income inequality.

The concentration of wealth within the technology industry has also become a focal point of capital inequality concern. With the present day world’s dependence on technology, and the continuous increasing capital the industry gains, this raises concern about the societal impact such an accumulation of imbalance would have. With regards to this concern, economists Zucman and Piketty emphasize the need for policies, such as progressive taxation, to address such disparities (Piketty, Thomas), specifically with regard to capital accumulation within the technology industry.

In order to reduce the technology sector’s impact on income inequality, it is important that policymakers take proactive steps. To bridge the gap of technology’s contribution to income inequality, investments in education and training programs geared towards technical skills would provide those without the means to gain such skills.  Additionally, reimagining social safety nets can provide a financial buffer for individuals adversely affected by automation.The impact of emerging technologies is a global phenomenon and income inequality is not confined to national borders. International collaboration is the most effective way to address this concern. 

In order to effectively navigate the uncharted territory of technological growth, addressing technology’s impact on income inequality is vital. The advancement of AI and digitalization presents both opportunities for growth while providing challenges for social cohesion. By adopting forward-thinking policies, investing in education, and fostering international collaboration, societies can strive towards a more inclusive economic future where the benefits of technological progress are shared by all. Only through collective efforts can there be a future towards a more inclusive economic landscape where the benefits of technological progress resonate universally, ensuring that no is left behind in the digital age.

Written by Rutuja Kharate

References

Chui, Michael, et al. “Where Machines Could Replace Humans-and Where They Can’t (Yet).” Where Machines Could Replace Humans—and Where They Can’t (Yet), McKinsey & Company, 8 July 2016, www.mckinsey.com/capabilities/mckinsey-digital/our-insights/where-machines -could-replace-humans-and-where-they-cant-yet. 

“Insight Report the Future of Jobs Report 2018 – World Economic Forum.” The Future of Jobs Report, 2018, www3.weforum.org/docs/WEF_Future_of_Jobs_2018.pdf. 

Piketty, Thomas, and Gabriel Zucman. “Capital Is Back: Wealth-Income Ratios in Rich Countries 1700–2010 *.” The Quarterly Journal of Economics, vol. 129, no. 3, 2014, pp. 1255–1310, doi:10.1093/qje/qju018. 

“The Future of Jobs Report.” World Economic Forum, Oct. 2020, www3.weforum.org/docs/WEF_Future_of_Jobs_2020.pdf. Accessed 03 Dec. 2023.