Economic impacts of artificial intelligence
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The disruptive effects of AI may also influence wages, income distribution and economic inequality.
Rising demand for high-skilled workers capable of using AI could push their wages up, while many
others may face a wage squeeze or unemployment. This could affect even mid-skilled workers
,
whose wages may be pushed down by the fact that high-skill workers are not only more productive
than them thanks to the use of AI, but are also able to complete more tasks. The changes in demand
for labour could therefore worsen overall income distribution by affecting overall wages. Much will
depend on the pace, with faster change likely to create more undesirable effects due to
market
imperfections. Theoretically, the more AI solutions replace routine labour, the more productivity
and overall income growth will rise and the more sharply inequality will increase. This may lead to a
'paradox of plenty': society would be far richer
overall, but for many individuals, communities and
regions, technological change would only reinforce
inequalities. There are indeed fears that the current
trends of shifting the distribution of national income
away from labour, which leads to deeper inequality
and the concentration of wealth in 'superstar'
companies and sectors, will indeed only be
exacerbated by AI.
On the other hand, many economists are positive,
saying that it will be hardest for AI to replace the
'sensor-motor skills' required in non-standard and
non-routine jobs, such as that of security staff,
cleaners, gardeners and chefs. Others add that
automation always has an
ambiguous impact on
inequality: low-skill automation always increases
wage inequality, and high-skill automation always
reduces it. In conclusion, it is therefore uncertain that
at least over the short to medium term, the rise in
inequality due to AI automation will be significant.
Selected policy implications
AI has significant potential to boost economic
growth and productivity, but at the same time it
creates equally serious risks of job market
polarisation, rising inequality, structural
unemployment and emergence of new undesirable
industrial structures.
EU policy needs to create the conditions necessary for nurturing the potential of AI, while
considering carefully how to address the risks it involves. A recent economic paper shows that if
labour income
does not benefit from the economic gains generated by AI, consumption may
stagnate and restrict growth, thereby having an adverse effect on the economy. Questions about
distributing the gains from AI are therefore fundamental in managing its outcomes. Tax policies
could help to rebalance the shift from labour to capital, and shelter vulnerable groups from socio-
economic exclusion.
The European Political Strategy Centre describes the internal and external challenges the EU is
facing. The former include low investment and a slow uptake of AI technologies by companies and
the public sector, and the necessity to establish a regulatory framework that does not stifle
technological progress, while at the same time adhering to key fundamental EU principles. The latter
include fierce global competition, with other jurisdictions benefitting from structural advantages.
The centre suggests that the EU should address these by developing an investment-conducive
framework and becoming a leader in setting global AI quality standards. A precondition to
Taxing robots
Bill Gates is one of many who argue that robots that
take somebody's job should pay taxes, so as to prevent
new technologies from diminishing the public money
that supports society. In 2017, the
European
Parliament rejected the idea of imposing a robot tax on
owners to fund support for retraining of workers put
out of their jobs by robots. However, if automation
leads to significant falls in income tax receipts and
increases the pressure on government finances (e.g.
through increased welfare and retraining
expenditure), such a tax may be unavoidable in the
future. In 2018,
South Korea, the most robotised
country in the world, lowered the tax deduction on
business investments in automation, a move that
seems to acknowledge some
experts' concerns about
excessive incentivising of automation. The debate on
this topic is picking up, but if a robot tax were to be
introduced, some fundamental questions regarding a
clear and agreed
definition and the possible forms of
taxation need to be answered. One possibility is to
come up with an international solution that would
allow such a tax to be effective in the global economy.
This solution might lie along an uneasy path of
imposing taxes on the digital economy – an issue that
is hotly debated both
internationally and at EU level.