Global Labour Income Stagnation: COVID-19 and AI Impact Revealed in ILO Study
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Labour income stagnated since 2019, primarily due to Covid and technological upgradation: ILO
The International Labour Organisation Wednesday said that the labour income share has stagnated since 2019, due to Covid and technological upgradation, putting upward pressure on inequality and a large share of youth remains out of employment, education or training. The global labour income share represents the portion of total income earned by workers. In its World Employment and Social Outlook: September 2024 Update, ILO said the global labour income share fell by 0.6 percentage points from 2019 to 2022 and has since remained flat, compounding a long-running downward trend. If the share had remained at the same level as in 2004, labour income would be larger by $2.4 trillion in 2024 alone, ILO said. "The COVID-19 pandemic is a key driver of this decline, with nearly 40% of the reduction in the labour income share occurring during the pandemic years of 2020-2022," it said. "The crisis exacerbated existing inequalities, particularly as capital income continues to concentrate among the wealthiest, undermining progress towards the Sustainable Development Goal 10, which aims to reduce inequality within and among countries," ILO added. ILO further said that technological advances, including automation, have played a role in this trend. "While these innovations have boosted productivity and output the evidence suggests that workers are not sharing equitably from the resulting gains," it added. The report warns that without comprehensive policies to ensure that the benefits of technological progress are broadly shared, recent developments in the field of artificial intelligence could deepen inequality, putting the achievement of the SDGs at risk. "Countries must take action to counter the risk of declining labour income share," Celeste Drake, deputy director-general, ILO said. "We need policies that promote an equitable distribution of economic benefits, including freedom of association, collective bargaining and effective labour administration, to achieve inclusive growth, and build a path to sustainable development for all," Drake added.
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Latest ILO study links AI to dip in labour income
Inequality is on the rise as the share of labour income has stagnated worldwide and a large share of youth remain out of employment, education, or training, according to the International Labour Organisation's (ILO) World Employment and Social Outlook: September 2024 Update, released in Geneva on Wednesday (September 4, 2024). A major reason for this fall in labour income, according to the report, is artificial intelligence or AI. The ILO analysed the impact of technological innovations over the last two decades across 36 countries and said that, while these innovations have produced persistent increases in labour productivity and output, they can also reduce the labour income share. "This is consistent with automation-based technological innovations driving the aggregate effects," the ILO said, warning that the absence of a stronger policy response across a wide range of relevant domains could push the labour income share still further down. To mitigate the potential adverse impacts on inequality, the benefits of technological progress should be widely distributed, it said. COVID worsened inequalities The report also indicated slow progress on key Sustainable Development Goals (SDGs) as their 2030 deadline approaches. The study revealed that the global labour income share, which represents the portion of total income earned by workers, fell by 0.6 percentage points from 2019 to 2022 and has since remained flat, compounding a long-running downward trend. "If the share had remained at the same level as in 2004, labour income would be larger by $2.4 trillion in 2024 alone," the report said. It added that the COVID-19 pandemic was a key driver of this decline, with nearly 40% of the reduction in the labour income share occurring during the pandemic years of 2020 to 2022. "The crisis exacerbated existing inequalities, particularly as capital income continues to concentrate among the wealthiest, undermining progress towards SDG 10, which aims to reduce inequality within and among countries," it said. "Countries must take action to counter the risk of declining labour income share. We need policies that promote an equitable distribution of economic benefits, including freedom of association, collective bargaining and effective labour administration, to achieve inclusive growth, and build a path to sustainable development for all," said Celeste Drake, ILO Deputy Director-General, releasing the report. Published - September 04, 2024 11:23 pm IST Read Comments
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A recent International Labour Organization (ILO) study highlights the stagnation of global labour income since 2019, attributing it to the COVID-19 pandemic and technological advancements, particularly artificial intelligence.
Global Labour Income Trends
The International Labour Organization (ILO) has released a study revealing that global labour income has remained stagnant since 2019. This lack of growth is primarily attributed to two major factors: the COVID-19 pandemic and the rapid advancement of technology, particularly artificial intelligence (AI) 1.
Impact of COVID-19
The COVID-19 pandemic has had a significant impact on the global labour market. The ILO report indicates that the pandemic led to widespread job losses and reduced working hours, which directly affected labour income. Many businesses were forced to shut down or scale back operations, resulting in decreased wages and employment opportunities for workers across various sectors 1.
Technological Advancements and AI
The study also highlights the role of technological upgradation, especially AI, in the stagnation of labour income. As businesses increasingly adopt AI and automation technologies, there has been a shift in the demand for certain job skills. This transition has led to job displacements in some sectors and has put downward pressure on wages for certain types of work 2.
Regional Disparities
The ILO report reveals significant regional differences in labour income trends. While some regions have experienced growth, others have seen declines:
- Asia and the Pacific: Showed the highest growth rate at 1.2% per year.
- Europe and Central Asia: Experienced growth of 0.5% annually.
- Africa: Faced a decline of 0.4% per year.
- Americas: Saw the steepest decline at 0.8% annually 1.
Income Inequality Concerns
The stagnation in labour income has raised concerns about increasing income inequality. The ILO study suggests that the benefits of economic growth and technological advancements are not being equally distributed among workers. This trend could potentially widen the gap between high-skilled, high-wage workers and those in lower-paying jobs 2.
Future Implications
As AI and other technologies continue to advance, the labour market is likely to face further challenges. The ILO emphasizes the need for policies that address the impact of technological change on workers and ensure a fair distribution of the benefits of economic growth. This may include initiatives for reskilling and upskilling workers, as well as measures to protect vulnerable workers in the changing job market 1 2.
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