AI reduces Labour Income: ILO

The International Labour Organisation’s (ILO) World Employment and Social Outlook: September 2024 Update highlights rising global inequality, stagnating labour income shares, and significant youth unemployment or inactivity. The report attributes some of these issues to technological advancements, particularly artificial intelligence (AI).

Key Points Made by the Report

• The global labour income share fell by 0.6 percentage points from 2019 to 2022 and has remained flat since, reflecting a long-term downward trend.
• The labour income share continued to decrease since 2019, declining to 52.3pc in 2022 and remaining at that level in 2023 and 2024.
• While the decrease appears modest in terms of percentage points, in 2024 it represents an annual shortfall in labour income of USD 2.4 trillion compared to what workers would have earned had the labour income share remained stable since 2004.
• Impact of Technological Innovations: Technological advancements, especially automation and AI, have led to increased labour productivity and output but have also contributed to a reduced share of labour income.
• COVID-19 Impact: The pandemic significantly worsened inequalities, with nearly 40% of the reduction in the labour income share occurring during 2020-2022.
• The report warns that without stronger policy interventions, the labour income share could continue to decline, further entrenching economic disparities.
• To mitigate adverse effects, the report advocates for policies that ensure equitable distribution of technological benefits, including freedom of association, collective bargaining, and effective labour administration.

Situation in India

• Labour Income Share: In India, like many other countries, the labour income share has faced challenges due to technological advancements and economic shifts. The impact of automation and AI on Indian industries and labor markets is evident, with significant effects on job security and wage growth.
• Youth Unemployment: India has a high rate of youth unemployment and underemployment, exacerbated by economic disruptions and technological changes. Many young people are either unemployed or not engaged in education or training, impacting their future economic prospects.
• Policy Responses: India has initiated various schemes and policies aimed at boosting employment and skill development, such as the Skill India Mission, Pradhan Mantri Kaushal Vikas Yojana (PMKVY) and the National Career Service (NCS). However, challenges remain in addressing the full impact of AI and ensuring inclusive growth.
• Economic Inequality: Economic disparities in India are widening, influenced by factors such as
  • unequal access to technology
  • regional imbalances
  • concentration of wealth among the top income earners