AI to impact 40% of jobs in emerging markets

Sibahle Malinga
By Sibahle Malinga, ITWeb senior news journalist.
Johannesburg, 15 Jan 2024
Policies must promote ethical integration of artificial intelligence, says the International Monetary Fund.
Policies must promote ethical integration of artificial intelligence, says the International Monetary Fund.

Artificial intelligence (AI) is set to have a ripple effect through the global economy, impacting 40% of jobs in emerging markets, and 26% of jobs in low-income countries.

This is one of the key findings of the “Gen-AI: Artificial Intelligence and the Future of Work” report released by the International Monetary Fund (IMF) this weekend.

The IMF report provides an analysis of how AI will impact global jobs and income inequality. It comes as more than 60 heads of state, government officials and hundreds of business leaders, gather in Davos, Switzerland, for the World Economic Forum from today.

According to the IMF, advanced economies face greater exposure to AI than emerging markets and low-income countries with 60% of their job market forecast to be impacted by AI. It further reveals that half of the jobs impacted by AI will be negatively affected, while the rest may significantly benefit from enhanced productivity gains due to AI.

This, as more companies across the globe pour significant investments into the emerging tech, in efforts to unlock productivity gains and increase profit margins.

Mauro Cazzaniga, report author and editor notes, while there’s potential for AI to fully replace some jobs, the more likely scenario is that it will complement human work in the long run.

“AI has the potential to reshape the global economy, especially in the realm of labour markets. Advanced economies will experience the benefits and pitfalls of AI sooner than emerging market and developing economies, largely due to their employment structure which is focused on cognitive-intensive roles. Although many emerging markets and developing economies may experience less immediate AI-related disruptions, they are also less ready to seize AI’s advantages. This could exacerbate the digital divide and cross-country income disparity,” notes Cazzaniga.

For those countries which are prepared for the AI boom, the emerging technology is expected to transform various sectors with its benefits to be felt mostly across the healthcare, education, financial and agricultural sectors, according to the report.

The report points out tertiary-educated workers are better prepared to move from jobs at risk of displacement to high-complementarity jobs, while older and less educated workers may be more vulnerable to the AI-driven transformation.

However, displacement depends largely on the extent to which AI displaces or complements workers across the different markets, it notes.

In the UK and Brazil, for instance, tertiary-educated individuals historically moved more easily from jobs are now assessed to have high displacement potential to those with high complementarity. In contrast, workers without post-secondary education show reduced mobility.

“Younger workers who are adaptable and familiar with new technologies may also be better able to leverage the new opportunities. In contrast, older workers may struggle with reemployment, adapting to technology, mobility, and training for new job skills,” says the report.

According to PwC’s Global Artificial Intelligence study, AI could contribute up to $15.7 trillion to the global economy by 2030, more than the current output of China and India combined.

Labour productivity improvements will drive initial up to 26% GDP gains, as firms seek to "augment" the productivity of their labour force with AI technologies and to automate some tasks and roles, it says.

Income inequality

While long-term productivity gains from AI are likely, during the transition, job displacement and changes in income distribution could have substantial political and economic implications, warns the IMF.

For all economies, social safety nets and re-training programmes for AI-susceptible workers are crucial to ensure inclusivity, it suggests.

Unlike previous waves of automation, which had the strongest effect on middle-skilled workers, the report points out AI displacement risks extend to higher-wage earners. However, it says the effect on labour income inequality depends largely on the extent to which AI displaces or complements high-income workers.

Kristalina Georgieva, MD of the IMF, explains: “The gains in productivity, if strong, could result in higher growth and higher incomes for most workers. Owing to capital deepening and a productivity surge, AI adoption is expected to boost total income.

“If AI strongly complements human labour in certain occupations and the productivity gains are sufficiently large, higher growth and labour demand could more than compensate for the partial replacement of labour tasks by AI, and incomes could increase along most of the income distribution.”

To harness AI’s full potential, priorities depend on countries’ development levels. The IMF’s AI preparedness index shows that advanced and more developed emerging market economies should invest in AI innovation and integration, while advancing adequate regulatory frameworks to optimise benefits from increased AI use.

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

“Advanced and more developed emerging market economies should launch adequate regulatory frameworks to optimise the benefits of increased AI use and invest in complementary innovations. Low-income countries and other emerging market economies should prioritise 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,” says the report.

Policies must promote the equitable and ethical integration of AI and train the next generation of workers in these new technologies; they must also protect and help retrain workers currently at risk from disruptions, it warns.