Artificial intelligence and income inequality: Do technological changes and worker's position matter?

• Published date: 01 November 2020
• Author: Arjun Goyal,Ranjan Aneja
• Date: 01 November 2020
• DOI: http://doi.org/10.1002/pa.2326

PRACTITIONER PAPER

Artificial intelligence and income inequality: Do technological

changes and worker's position matter?

Arjun Goyal|Ranjan Aneja

Department of Economics, Central University

of Haryana, Mahendergarh, India

Correspondence

Ranjan Aneja, Department of Economics,

Central University of Haryana, Mahendergarh,

India.

Email: ranjananeja@cuh.ac.in

The technological progress in artificial intelligence (AI) has led to mass unemployment

and various types of inequalities in the recent years. This study is an attempt to see

how income inequality has increased with the changes in technology. The study also

investigated how technology such as AI has affected (directly or indirectly) to work-

ing position and working process of workers. Analysis of the study is based on the

data of automation and Gini-coefficients. The study finds that the relationship

between AI and income distribution has always been considered negative and this is

what has been observed in this study and it directly affects the distribution of income

and jobs. Due to the automation, low and medium skill jobs are declining, and unem-

ployment is increasing, further the income gap between middle and high skill labor is

increasing. Gini-coefficients of developing nations are higher than in developed

nations, indicating that income inequality in developing nations is higher than the

developed nations.

1|INTRODUCTION

The advancement of technology in the late 19

th

and 20

th

centuries

has impacted all the world economies. “Introduction to artificial intelli-

gence is a continuation of the long process of automation”(Korinek

and Stiglitz, 2018) and it has automated manual labor into intelligent

machines that are performing like humans. The relationship between

technology and inequality is multifaceted. Technology has increased

productivity and boosted economic growth. The third industrial revo-

lution has evolved through information and communication technolo-

gies (ICT), which is operated through meta infrastructure, that

accelerates economic growth by reconfiguring other infrastructure

into the smart system. However, the economy is much dependent on

the Internet of Things (IoT) with artificial intelligence (AI) for the long-

run growth. Artificial intelligence (AI) is a machine that performs cog-

nitive like human intelligence. Since the first industrial revolution,

technology has played a vital role in economic growth, and that boosts

the economic development among the European countries.

1

From the

second industrial revolution to third industrial revolution, the eco-

nomic development starts gearing up and observed high rate of

growth (see Figure 1). The fourth industrial revolution has increased

growth rates of all the counties like employment rate, productivity,

and innovation (see Figure 2).

Nowadays, capitalists and manufacturers have shown interest in

investing in AI technology differently, as the impact of AI has been

miraculous in the last few years. Many economies like the United

States, European Union, China, and India have made a policy to adopt

AI in the coming years. AI technology has increased the productivity,

efficiency, flexibility, growth, and capitalist profit (Heikkil et al, 2012;

Othman et al, 2016; Prettner, 2017), but it has some negative effects

in the form of growing unemployment (Arntz et al, 2016; Lu and Zhou,

2019). Given the increasing share of labor in the world and rising

unemployment due to automation, AI is attracting the attention of the

reseachers (Gries and Naude, 2018) showed a growing fear of AI tech-

nology will create a mass unemployment. According to WEF report

2

(2019) automation will replace around 20% of labor forces (both males

and females) in the world.

However, technological constraints are creating problems among

the developing countries and it directly affects the countries, due to

which some countries are becoming rich and some are becoming poor

in technologies. This phenomenon can be defined as technological

gap principal, which affects the growth, employment, productivity,

labor share and income of the country. China, Japan, United States,

Vietnam, and EU countries are leading in technological change in the

world and they supply the majority of technologies to the other coun-

tries. The investment share of these countries in R&D and innovation

Received: 22 May 2020Revised: 19 June 2020Accepted: 21 July 2020

DOI: 10.1002/pa.2326

J Public Affairs. 2020;20:e2326.wileyonlinelibrary.com/journal/pa© 2020 John Wiley & Sons Ltd1of10

https://doi.org/10.1002/pa.2326