3:35pm 15/02/2023
Do technological advancement and artificial intelligence reduce income inequality?
By:Goh Lim Thye

Policymakers have long argued that technological advancement and artificial intelligence (AI) boost economic growth.

Such claims follow classical economic growth theory which holds that technological advancement increases productivity and thus, a country’s GDP and overall wealth.

PricewaterhouseCoopers (PwC) in 2017 stated that AI adoption would result in a US$15.7 trillion increase in global GDP by 2030, and it was expected to add $500 billion to India’s GDP by 2025 (EPtech, 2022).

Other reports have stated that advances in biomedical and genomic technologies and new information technologies fueled the global response to Covid-19.

In contrast, the advancement of digitalization and artificial intelligence has greatly aided the survival of businesses and supply chains.

However, this situation begs the question, “Does technological advancement and artificial intelligence benefit the society?”

According to the World Bank, the Covid-19 pandemic’s first two years doubled the fortunes of the world’s ten richest people (from $700 billion to $1.5 trillion) — at a rate of $15,000 per second or $1.3 billion per day.

In contrast, over 500 million people were either pushed into or pushed deeper into extreme poverty.

In Malaysia, the Covid-19 pandemic widened Malaysia’s income gap from 0.407 (2019) to 0.411 (2020) – where 0 indicates perfect equality (everyone receives an equal share) and 1 indicates perfect inequality.

So, as a result of the pandemic, the rich have become richer while the poor have become poorer.

The presented statistics do not identify artificial intelligence and technological advancement as the root causes of rising income inequality, as no direct cause has been identified.

However, given that only two of the world’s top ten richest people (Bernard Arnault & family and Warren Buffett) are not directly linked to technology or AI, while Bill Gates’ (Microsoft) net worth grew from $96.5 billion in 2019 to $129 billion in 2022, and Elon Musk’s (Tesla) wealth grew from $22.30 billion in 2019 to $219 billion in 2022, which is food for thought.

In contrast, the pandemic has increased the wealth of Bill Gates and Elon Musk by $27.5 billion (approx. 28.5%) and $196.7 billion (approx. 882%) respectively.

The United States Gini coefficient (a measure of a country’s income inequality) increased to 0.494 in 2021 from 0.488 in 2020. So, perhaps it is true that technological advancement and artificial intelligence have unduly benefited the wealthy more.

Without a doubt, technological advancements in e-commerce aided the global economy during the pandemic. However, while Amazon founder Jeff Bezos’ wealth increased from $131 billion in 2019 to $177 billion in 2021, 600,000 US establishments were permanently closed yearly and millions lost their jobs.

Similarly, while companies such as Lazada and Shopee saw significant increases in sales, 15% of Malaysian SMEs closed down during the pandemic due to a lack of funds and inability to digitalize their operations. This result implies that technological advancement could promote and hinder economic growth and income inequality.

Furthermore, the recent launch of artificial intelligence (AI)-powered ChatGPT may be another example of how AI may lead to inequality.

Wealthier students may be able to subscribe to the professor version of the software. They may be able to produce better assignments and obtain better grades, giving them a better chance of a scholarship.

In contrast, the poorer students may lose out due to their inability to subscribe. As a result, the opportunity to reduce inequality is diminished.

As a result, while recognizing the importance of innovation, technological advancement, artificial intelligence and digitalization in driving a strong economy, policymakers must do much more to ensure that income is distributed fairly.

Economic growth will be meaningless if it only benefits a small group of people while the majority of the population struggles to meet their basic needs.

Perhaps policymakers should look into ways to engage companies in corporate social responsibility (CSR) projects that improve the living conditions of vulnerable groups.

Furthermore, policymakers should emulate the policies implemented by countries such as Norway and Switzerland to promote inclusiveness in employment, close the gender gap, and promote sustainable living.

(Goh Lim Thye, Department of Economics, Universiti Malaya.)


Goh Lim Thye


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