How AI Is Making The World More Unequal And What You Can Do About It

You’ve probably heard of artificial intelligence (AI), the technology that enables machines to perform tasks that normally require human intelligence, such as recognizing images, understanding speech, or playing games. AI is everywhere these days, from your smartphone to your car to your home. AI is also transforming various industries, such as finance, health care, education, and entertainment.

But have you ever wondered how AI affects the income of different groups of people in society?

How does AI impact the rich, the middle class, and the poor?

How does AI change the structure of the economy, the demand for skills, and the distribution of wealth?

If you’re curious about these questions, you’re not alone. Many researchers, policymakers, and activists are concerned about the social and economic implications of AI. In fact, a recent study by Giulio Cornelli, Jon Frost and Saurabh Mishra from the Bank for International Settlements (BIS) provides some alarming evidence on how AI is associated with higher income inequality across 86 countries over 2010–19.

In this blog post, I’m going to explain what this study found, why it matters, and what you can do about it.

By the end of this post, you’ll learn something new and valuable about AI and inequality, and you’ll feel proud that you’ve gained some insights into one of the most important issues of our time.

AI Is Linked To Higher Income Inequality

The study by Cornelli et al (2023) uses a variety of data sources to measure AI-related economic activity and changes in income shares of different sub-segments of society in a global sample.

The main finding of the study is that investment in AI is tied to higher income inequality. In particular:

• AI investment is associated with higher real incomes and income shares for households in the top decile (the richest 10% of people), while households in the fifth and bottom decile (the middle class and the poorest 10% of people) see a decline in their income shares.
• AI investment is correlated with higher total factor productivity (TFP) and exports of modern services linked to AI, such as software and information services. This suggests that AI contributes to the structural transformation of the economy towards high-productivity sectors.
• AI investment is related to lower employment relative to population, a shift from mid-skill to high-skill managerial roles, and a reduced labor share of income. This implies that AI affects labor market outcomes by changing skill requirements and bargaining power.

These results are consistent across different types of AI applications, such as real estate, network technology, robots, fintech, and retail. They are also robust to various controls for other factors that could influence income inequality, such as trade openness, government consumption, education level, credit availability and foreign direct investment.

The study also explores some possible mechanisms by which AI adoption could influence income inequality. They suggest four potential channels:

• Structural transformation: AI could drive a shift from low-productivity sectors (such as agriculture or manufacturing) to high-productivity sectors (such as modern services), benefiting those who work or own assets in these sectors.
• Skill-biased technical change: AI could favor skilled workers who can use or complement AI technologies, increasing their productivity and wages relative to unskilled workers who may be replaced or degraded by AI.
• Market concentration: AI could enable successful firms (such as big techs) to gain market share and profits at the expense of others, benefiting the owners (and potentially workers) of these firms.
• AI substituting skilled or qualified labor: AI could replace tasks that traditionally require human intelligence, such as writing, translation, or legal work, reducing the demand and wages for these skills.

The study does not claim causality, but rather provides suggestive evidence of a correlation between AI investment and income inequality. They acknowledge the limitations of their empirical strategy, which is based on country-level data for a relatively short time period¹⁵. They also note that the forms of AI that have been adopted since 2010 may not be representative of the latest AI models that are being developed and deployed at the time of writing. Therefore, further research is needed to better understand the causal mechanisms and the heterogeneity across countries.

Why You Should Care About AI And Inequality

You may be wondering why you should care about AI and inequality. After all, isn’t AI supposed to be a good thing for society? Doesn’t it offer many benefits, such as improving productivity, enhancing convenience, and creating new opportunities?

The answer is yes, but not for everyone. AI also has some serious drawbacks, especially for those who are left behind by the rapid changes it brings. Here are some reasons why you should care about AI and inequality:

• Inequality is bad for economic growth. Studies have shown that high levels of income inequality can hamper economic growth by reducing social mobility, undermining trust and cooperation, increasing political instability and violence, and weakening public institutions and policies (OECD, 2015; Ostry et al, 2014).
• Inequality is bad for social welfare. Studies have also shown that income inequality can reduce social welfare by lowering life satisfaction, happiness, and health outcomes, increasing stress, anxiety, and depression, and eroding social cohesion and solidarity (Wilkinson and Pickett, 2009; Deaton, 2013; Kahneman and Deaton, 2010).
• Inequality is bad for democracy. Studies have further shown that income inequality can undermine democracy by increasing political polarization, corruption, and populism, reducing civic engagement and participation, and weakening the representation and accountability of political institutions and actors (Acemoğlu et al, 2019; Piketty, 2014; Stiglitz, 2012).

In other words, inequality is bad for you, no matter who you are or where you live. It affects your economic prospects, your social well-being, and your political voice. It also affects the future of your children and grandchildren, who may inherit a more unequal and unstable world.

What You Can Do About AI And Inequality

So what can you do about AI and inequality? How can you prevent or mitigate the negative effects of AI on income distribution and social justice? How can you ensure that AI is used for good rather than evil?

There is no easy or definitive answer to these questions. But there are some possible actions that you can take at different levels: individual, organizational, and societal.

At the individual level, you can:

• Educate yourself about AI and its implications. Learn about the basics of AI, how it works, what it can do, and what it cannot do. Learn about the ethical, social, and economic challenges and opportunities that AI poses. Learn about the potential impact of AI on your own job or career path.
• Empower yourself with skills and tools. Acquire new skills or upgrade your existing skills that are relevant for the age of AI. These could include technical skills (such as coding or data analysis), soft skills (such as creativity or communication), or hybrid skills (such as problem-solving or critical thinking). Use online platforms or courses to access quality education and training resources.
• Engage yourself with communities and networks. Connect with other people who share your interests or concerns about AI. Join online forums or groups where you can exchange ideas, information, or experiences. Participate in events or activities where you can meet experts, practitioners, or activists in the field of AI.

At the organizational level, you can:

• Advocate for responsible and inclusive AI practices. Encourage your employer or organization to adopt ethical principles and standards for developing and using AI. These could include fairness, accountability, transparency, privacy, security, and human dignity. Urge your employer or organization to consider the impact of AI on different stakeholders, especially those who are vulnerable or marginalized.
• Adapt to changing work environments and demands. Be flexible and adaptable to the changes that AI may bring to your work environment or tasks. Be open to new roles or responsibilities that may emerge as a result of AI adoption. Be proactive in seeking feedback, guidance, or support from your colleagues, managers, or mentors.
• Assist others in navigating the AI landscape. Share your knowledge and experience with your peers or subordinates. Mentor or coach those who are less familiar or comfortable with AI.

At the societal level, you can:

• Advocate for public policies and regulations that promote equitable access to and benefits from AI. This could include policies on education and training, labor market and social protection, competition and innovation, data protection and privacy, or human rights and ethics.
• Participate in public debates and decision-making processes about AI. This could involve attending public hearings or consultations, submitting comments or proposals, voting in elections or referendums, or joining social movements or campaigns.
• Partner with other stakeholders to address the challenges of AI. This could involve collaborating with government agencies, businesses, non-profit organizations, research institutions, or civil society groups.

In conclusion, AI is a powerful tool that can bring many benefits but also many challenges. It is up to us to shape the future of AI in a way that is fair, inclusive, and sustainable. By understanding the problem, feeling the urgency, and taking action, we can make a difference in the world of AI and inequality.

Here are the main points we covered in this blog post:

1. AI is linked to higher income inequality: Investment in AI is associated with higher real incomes for the richest 10% of people, while the middle class and the poorest 10% of people see a decline in their income shares.
2. Why you should care about AI and inequality: Inequality is bad for economic growth, social welfare, and democracy. It affects your economic prospects, your social well-being, and your political voice.
3. What you can do about AI and inequality: You can educate yourself about AI, empower yourself with skills and tools, engage yourself with communities and networks, advocate for responsible and inclusive AI practices, adapt to changing work environments and demands, assist others in navigating the AI landscape.
4. Public policies and regulations: Advocate for public policies that promote equitable access to and benefits from AI.
5. Participation in public debates: Participate in public debates about AI.

P.S.: I’d love to hear your thoughts on this topic! What do you think about the impact of AI on income inequality? Do you have any personal experiences or insights to share? Please leave a comment below! Your input could help others understand this complex issue better.

Remember: every voice counts!