A recent study by the International Labour Organisation (ILO) has linked the rise of artificial intelligence (AI) to a significant decline in the global share of labor income, raising concerns about growing income inequality. The findings were detailed in the ILO's "World Employment and Social Outlook: September 2024 Update," released on Wednesday in Geneva.
The report analyzed the impact of technological innovations over the past two decades across 36 countries. While these innovations have consistently boosted labor productivity and overall economic output, they have also contributed to a reduction in the portion of income earned by workers. The ILO attributes this decline to the increasing role of automation and AI in the workplace.
Read the full ILO report here.
"This is consistent with automation-based technological innovations driving the aggregate effects," the report states, cautioning that without stronger policy responses, the labor income share could fall even further.
COVID-19 Exacerbates Inequalities
The ILO report also highlights the slow progress toward key Sustainable Development Goals (SDGs) as the 2030 deadline approaches. According to the study, the global labor income share fell by 0.6 percentage points from 2019 to 2022 and has since remained stagnant, reflecting a long-running downward trend. The report estimates that if the labor income share had stayed at its 2004 level, workers would have earned an additional $2.4 trillion in 2024 alone.
The COVID-19 pandemic played a significant role in this decline, with nearly 40% of the reduction in labor income share occurring during the pandemic years of 2020 to 2022. The report emphasizes that the pandemic exacerbated existing inequalities, particularly as capital income continues to concentrate among the wealthiest individuals, undermining global efforts to reduce inequality as outlined in SDG 10.
Learn more about SDG 10 and global inequality efforts here.
Call for Policy Action
The ILO is calling for urgent policy measures to counter the declining share of labor income and mitigate the potential adverse impacts on inequality. "Countries must take action to counter the risk of declining labor income share," said Celeste Drake, ILO Deputy Director-General, during the release of the report. "We need policies that promote an equitable distribution of economic benefits, including freedom of association, collective bargaining, and effective labor administration, to achieve inclusive growth and build a path to sustainable development for all."
Explore the ILO's recommended policy actions here.
The report underscores the importance of ensuring that the benefits of technological progress are widely distributed to prevent further exacerbation of income inequality and to support sustainable economic development.