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AI might worsen the hollowing out of the middle class and widening of socioeconomic inequality by affecting manufacturing and demand for labor.

Issue

AI Impact(s)

Economic harm and inequity

The current wave of AI-driven technological change comes at a time when the anticipated benefits from the previous wave of digitization have not been evenly distributed and where costs — in the form of historic rates of inequality and low income growth for the middle class — are manifesting. Society has been through cycles of creative destruction before, where new technology makes certain forms of labor redundant, but concerns are rising that this time, increases in unemployment and drops in earnings might be permanent. In periods of stagnating output, increases in labor productivity induced by new technologies necessarily lead to a fall in labor demand. Even if AI does not lead to fewer jobs, such shifts could cause working conditions to deteriorate and earnings to fall further behind productivity, as they have in the past. Women, ethnic and racial minorities, rural, and lower-paid individuals will be disproportionately affected by such shifts. Women are overrepresented in vulnerable and informal employment sectors in low- and lower-middle income countries, and they systematically lack social protections including sick pay, maternity pay, parental leave, and the opportunity to unionize.

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