Productivity gains from artificial intelligence are disproportionately boosting high earners, but an argument exists that the dynamic can lift low-wage workers at the same time. It all has to do with a longstanding economic theory.<\/p>\n
AI is often viewed as a catalyst for widening wealth inequality, but rising wages at the top end of the economic spectrum could spill over to benefit all income levels, argued Kristalina Georgieva, managing director of the International Monetary Fund.\u00a0<\/p>\n
In a panel<\/a> conversation on the closing day of the World Economic Forum in Davos, Switzerland, Georgieva described AI as a \u201ctsunami<\/a>\u201d hitting the labor market, with the potential to transform or eliminate 60% of jobs in advanced economies and 40% globally. However, she noted that for a specific segment of the workforce, AI-driven productivity gains at the top could translate into increased demand for services at the bottom.<\/p>\n The \u201cSpillover\u201d Argument<\/strong><\/p>\n The core of Georgieva\u2019s optimistic outlook for low-wage earners lies in the increased spending power of AI-enhanced professionals. As high-skilled workers become more productive and see their wages rise, their consumption patterns shift, benefiting the local service economy.<\/p>\n Georgieva detailed this phenomenon during the panel:<\/p>\n \u201cOne in 10 jobs is already enhanced [by AI],\u201d she said. \u201cAnd the people in these jobs are paid better. When they\u2019re paid better, they spend more money in the local economy. They spend more money in restaurants here, there. Demand for low-skilled jobs goes up. And actually total employment seems to slightly increase because of it.\u201d<\/p>\n There is evidence that AI exposure could amount to higher wages in certain jobs. A PwC survey<\/a> last year, based on an analysis of nearly one billion job ads worldwide, found that AI-skilled workers would earn an average premium of 56% over similar jobs that did not require AI skills. And the economic spillover effect, where rising wages and productivity translate to a rise in service sector jobs as high earners spend more money locally, is well-documented. Studies<\/a> in San Francisco, for instance, have found that for each new local tech job, 4.4 new jobs are created for positions such as retail clerks, cooks, teachers and dentists.<\/p>\n Despite this potential silver lining, Georgieva warned of an \u201caccordion of opportunities that is open to some and not others\u201d\u2014a risk where the gap between the winners and losers of the AI revolution expands rapidly. While the top tier of workers sees wage growth and the bottom tier sees increased demand for manual or local services, the middle class is getting squeezed.<\/p>\n The IMF\u2019s research<\/a> indicates two primary areas of concern: One is stagnating middle-class wages, as jobs that are not enhanced by AI are beginning to pay less in relative terms. Another is barriers to youth employment, as AI rapidly eliminates the tasks typically found in entry-level positions, making it harder for young people to enter the workforce in meaningful roles..<\/p>\n A Fragile Global Context<\/strong><\/p>\n These labor shifts are occurring against a backdrop of moderate economic growth and high debt. While the IMF recently upgraded<\/a> its global growth projections from 3.1% to 3.3%, Georgieva cautioned against complacency. With global sovereign debt nearing 100% of GDP<\/a>, she argued that growth is \u201cnot strong enough\u201d to carry the heavy burden of debt while simultaneously funding the massive technological transition required by AI.<\/p>\n Other leaders on the panel echoed these concerns regarding wealth distribution. European Central Bank President Christine Lagarde emphasized the need to be \u201ccareful about the distribution of wealth\u201d and the widening disparities both within and across countries. Lagarde noted that AI is capital, energy, and data-intensive, meaning its benefits may naturally accrue to those who already control those resources unless cooperative rules are established.<\/p>\n For AI to be a net positive, the panel suggested that global cooperation is non-negotiable. Ngozi Okonjo-Iweala<\/a>, director-general of the World Trade Organization, noted that while AI could reduce trade costs and boost productivity by 40% by 2040, these gains depend on equal adoption. If the technology remains concentrated in wealthy nations, it will only deepen global inequalities, she said.<\/p>\n