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July 24, 2024
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New social safety nets may be needed

The AI revolution may exert pressure on governments to enact new social safety nets to protect people who lose their jobs but are unable to upskill themselves, warns the head of the International Monetary Fund (IMF).

“If we don’t have thoughtful distribution of benefits [of AI] and inequality grows dramatically, that can break the social fabric in a way that is going to be very unhealthy for the world,” IMF managing director Kristalina Georgieva tells Yahoo Finance Live. “Social safety nets in a world of artificial intelligence are paramount.”

Georgieva’s comments come amid the release of an extensive IMF study on the global economic impact of AI’s proliferation on Sunday. The findings coincide with the 2024 World Economic Forum in Davos, Switzerland, where AI will be a hot topic amongst high-profile tech attendees such as Microsoft (MSFT) co-founder Bill Gates, OpenAI’s Sam Altman, and Salesforce (CRM) CEO Marc Benioff.

Those social safety nets may need a hefty amount of funds, if the IMF’s findings are any indication.

About 40% of global employment is exposed to AI, according to the IMF. In advanced economies, roughly 60% of jobs are exposed to AI due to the prevalence of “cognitive task” oriented jobs. Overall exposure is 40% in emerging markets and 26% in low-income countries, says the IMF.

Although many emerging markets and developing economies may experience less immediate AI-related disruption, the IMF reasons they are also ready to capitalize on AI’s advantages. This could “exacerbate” the “digital divide” and “cross-country income disparity,” the study concludes.

Georgieva thinks the elderly could see an outsized impact from AI’s widespread adoption and be in need of a social safety net.

“You have to be able to support those that fall off a cliff because their jobs are wiped out. We also look at who are most adaptable. Obviously the younger generation, in some areas, women more adaptable, but in others less. And the older generation may need more support to catch up in this new world,” Georgieva adds.

The IMF isn’t a singular voice on possible economic aftershocks from AI.

In research of its own in 2023, Goldman Sachs economists found that advances in AI could expose the equivalent of 300 million full-time jobs globally to automation. In other words, job loss.

Goldman’s economists projected that roughly two-thirds of US occupations are exposed to some degree of automation by AI.

Look no further than the news industry as a prime example of what the IMF and Goldman are discussing.

Large language models (LLMs) are well down the path of ingesting news and information and spewing it out to the global masses, lessening the need to visit a website. Media organizations, meantime, have moved to automate some functions of newsrooms to increase content quantity and slash costs.

News Corporation CEO Robert Thomson (NWSA) told Yahoo Finance Live in late 2023 that AI will be “epochal” for news.

Thomson went onto warn that the industry could face a “tsunami potentially of job losses” due to the new tech.

“These are not just jobs lost, it’s insights lost. So it’s important that all media companies understand the impact, but also, it’s incumbent on the big AI players to understand their impact,” Thomson added.

Davos 2024Davos 2024

Davos 2024

Brian Sozzi is Yahoo Finance’s Executive Editor. Follow Sozzi on Twitter/X @BrianSozzi and on LinkedIn. Tips on deals, mergers, activist situations, or anything else? Email brian.sozzi@yahoofinance.com.

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