The productivity gains of the past few decades have primarily benefited executives and company owners, leaving average workers behind and contributing to widening wage and wealth gaps. Artificial intelligence (AI) has the potential to increase productivity even more, but without policies to ensure that everyone benefits, this could lead to even greater inequality. The CEO-to-worker pay ratio has climbed to 399-to-1 in 2021, and the US has the highest degree of income inequality among developed countries. Wealth gaps are also growing between the richest Americans and everyone else. It is time to consider policies to ensure that everyone shares in AI’s productivity gains.
As highlighted by a recent article in Hindustan Times, the rise of artificial intelligence (AI) has the potential to supercharge productivity growth, but it may also exacerbate existing economic inequalities. For decades, productivity gains have largely benefited executives and owners of companies, leaving ordinary workers behind and contributing to widening wage and wealth gaps. If AI delivers on its promise of greater productivity growth, without policies in place to ensure equitable distribution of the gains, these gaps could widen further, adding to the burdens of economic inequality.
The Economic Policy Institute has documented the growing divergence between productivity growth and pay raises since the 1980s. While productivity has grown nearly four times faster than pay for ordinary workers, the difference has gone to shareholders and the most highly paid workers. This has led to a surge in wage ratios, with the CEO-to-worker pay ratio climbing to an astounding 399-to-1 in 2021 from just 20-to-1 in 1965. The US’s Gini index, which measures the degree of income inequality, has trended sharply higher since the 1980s and is now the highest among developed countries. Wealth gaps, too, show a wide and growing divergence between the richest Americans and everyone else.
The article argues that the rise of AI presents an opportunity to reverse these trends and ensure that everyone benefits from greater productivity growth. However, this will require policies that promote equitable distribution of the gains, such as progressive taxation, a higher minimum wage, and stronger labor protections. It will also require investments in education and training to ensure that workers can adapt to the changing demands of the labor market.
The article notes that the potential benefits of AI are substantial. AI has the potential to automate routine and repetitive tasks, freeing up workers to focus on higher-value tasks that require creativity and problem-solving. It can also improve decision-making by providing more accurate and timely information. These benefits could lead to significant productivity gains, which could in turn drive economic growth and job creation.
However, the article also cautions that the benefits of AI are not guaranteed. Companies may use AI to replace workers rather than enhance their productivity, leading to job losses and further exacerbating economic inequalities. Moreover, the benefits of AI may accrue disproportionately to those with the skills and res to take advantage of them, leaving behind those who are already struggling.
To draw things to a close, the rise of AI presents both opportunities and challenges for addressing economic inequality. While AI has the potential to supercharge productivity growth, it may also exacerbate existing inequalities if policies are not in place to ensure equitable distribution of the gains. To ensure that everyone benefits from AI, policymakers must take action to promote equitable distribution of the gains, invest in education and training, and ensure that workers have the skills and res they need to adapt to the changing demands of the labor market.