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Workers’ share of the spoils of economic output has not recovered from a sharp drop seen after the Covid-19 pandemic, according to data that points to worsening economic inequalities as the rollout of generative AI gathers pace.
Estimates by the International Labour Organization, published on Wednesday, show that the share of global gross domestic product earned by employees and the self-employed fell from 52.9 per cent in 2019 to 52.3 per cent in 2022 and had remained flat in the following two years.
The trend marks a sharp acceleration of a long-running decline. The ILO said labour’s share of global GDP had fallen 1.6 percentage points since it first began publishing data in 2004 — representing a loss of $2.4tn after adjusting for inflation — and that 40 per cent of the drop had taken place since 2019.
Steven Kapsos, head of data production and analysis at the ILO, said the decline was “a strong sign of rising inequality” between workers and the asset-rich and should alert policymakers to the risk of technological change hurting workers.
A fall in labour’s share of GDP is seen as worrying because income from employment tends to be relatively evenly distributed, while capital income, earned by the owners of assets, tends to be concentrated among wealthier people.
Economists give various explanations on why workers’ share of the pie has shrunk over time, including globalisation, unions’ waning power, and the rise of “superstar” companies that share less of their profits with their employees.
Technological change is also a prime suspect. A recent study by the Centre for Economic Policy Research said that recent advances in AI “might be more capital-biased than past forms of technological progress”.
“It certainly seems to us that technology is playing a role,” said Kapsos, describing the drop in labour’s share of GDP since 2019 as “consistent” with evidence of previous waves of innovation hitting hours and earnings.
The ILO said that while recent advances in AI would not necessarily cause the same effects as past innovations, “the link between technological progress and material wellbeing is far from a guarantee,” making it crucial to steer AI-driven innovation “to ensure its benefits are widely distributed”.
The clearest declines in labour’s share of GDP since 2019 had been in Africa, the Americas and the Arab states, the agency said.
In Asia and the Pacific there was only a modest change, while Europe and Central Asia had a fall of 1.8 percentage point between 2019 and 2022, followed by a partial rebound.
The UN agency is the main source of cross-country data on the split of GDP between labour and capital, because it takes account of earnings from self-employment, which plays a big role in developing countries.
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