Intervene to check growing inequality
A recent ILO (International Labour Organisation) report on the links between technology, especially automation and artificial intelligence (AI), and income inequality has raised questions that need answers from governments and societies. The World Employment and Social Outlook September 2024 report has taken note of the increasing pressure on income equality caused by the decline or stagnation of labour income, and also the lack of access to employment, education and training for a large number of young people. The study shows that the global labour income share, which is the portion of total income earned by workers, fell by 0.6 percentage points from 2019 to 2022 and has since remained flat. There was a drastic 1.6% drop between 2004-24. This amounts to $ 2.6 trillion in lost wages. About 28.2% of young women and 13.1% of young men are unemployed in the world. In India, about 83% of the unemployed are young people.
Covid-19 accelerated the decline and aggravated the existing inequalities. It is known that capital income tends to concentrate in the top echelons of society. Historically, technological advances help increase productivity and output, and the Industrial Revolution demonstrated it more dramatically than in earlier times when changes in the means of production impacted economic relations. But labour is unable to make a bargain now, as they do not have as much of a role in production as they once did. The new types of automation and AI lead to big increases in productivity, relying on a smaller labour force. The report also notes that the Indian labour market is characterised by persisting self-employment. This is obviously because employment opportunities are low, but the average monthly income of self-employed persons was about half of that of regular workers in 2022.
The report warns that the deepening inequality will have adverse consequences, including failure to achieve Sustainable Development Goals by 2030. Policies should be framed for equitable distribution of the economic benefits of technological advancements, ensuring sustainable development for all. But the challenge goes beyond the achievement of the SDGs. The estimated 2.6 trillion in lost wages amounts to a transfer of income and wealth to the richer classes. More income shifts are bound to take place in the coming years when AI and other technological advances gain pace. It is necessary to formulate and implement policies that ensure that the labour force and the poor do not lose out any further. Income erosion and rising inequality can lead to social and political consequences in many societies. It should also be noted that there cannot be a single policy suitable for all societies because conditions differ across the world.