If We Get AI ‘Right’ It Will Help Reduce Economic Inequality

If We Get AI ‘Right’ It Will Help Reduce Economic Inequality

At its heart, artificial intelligence is about efficiency and productivity. In a world of omnipresent AI that is present across every segment of economic activity, people will be able to do more with less. This leads to greater economic wealth, health, and also increased leisure and family time.

For evidence of the economic and social benefits that AI will bring, look no further than the fact that workers in richer countries tend to work fewer hours than workers in poorer countries. This is because in technologically advanced richer countries workers are able to produce more with each hour of work, which translates into higher incomes and the ability to work less.

If we get artificial intelligence ‘right’ by ensuring its adoption across poorer countries then we can usher in decades of productivity gains that will elevate economic and social wellness within those countries. But of course, if we get the rollout of AI ‘wrong’ and restrict it only to rich nations, then we risk exacerbating economic inequality as rich countries surge further ahead.

Economic prosperity in different places across the world is vastly unequal. People in Switzerland, one of the richest countries in the world, have an average income that is more than 20-times higher than that of people in Cambodia. When considering these differences in prosperity, a natural question to ask is: who works more?

Looking at the available data, the answer is clear: workers in poorer countries actually tend to work more, and sometimes much more.

Countries like Cambodia have some of the lowest GDP per capita but the highest working hours in the world. In Cambodia, the average worker puts in 2,456 hours each year, nearly 900 more hours than in Switzerland (1,590 hours).

Working hours tend to decrease as countries become richer

Since the Industrial Revolution started to introduce the concept of ‘technology’ into our lives, people in many countries have become richer, and working hours have decreased dramatically over these last 150 years.

The four highlighted countries in the above chart exemplify how working hours have decreased at the same time that average incomes have increased. Germany, for example, moved far to the right as its GDP per capita increased more than 10-fold (from $4,644 to $47,556), and far to the bottom as working hours decreased by nearly half.

This makes sense: as people’s incomes rise they can afford more of the things they enjoy, including more leisure and less time spent working.

People are able to work less when they work in more productive economies

The key driver of rising national incomes and decreasing working hours is productivity growth. The key metric is labor productivity: the economic return for one hour of work.

At the most basic level, labor productivity captures things like the number of bread that a baker bakes in an hour or the number of cars factory workers assemble in an hour. And we know from the world around us that automation and artificial intelligence can drastically increase this productivity, sometimes by exponential growth factors in segments such as automotive production.

Higher labor productivity is associated with fewer working hours, as shown in the chart above. We see that richer countries with lower working hours — like Germany and Switzerland — have very high labor productivity, both at nearly 70$/h. Put simply, if workers can produce more with each hour of work, it becomes possible for them to work less.

In contrast, the countries toward the top-left of this chart have far lower labor productivity — Cambodia, for example, is at only 2$/h — and thus workers there need to work many more hours to compensate.

(It is worth noting as an aside that higher productivity doesn’t necessarily mean that workers actually do work less — workers in the US and Singapore work more hours than those in countries with similar productivity.)

The link between productivity, incomes, and working hours is technological innovation

Technological innovation makes it possible for each worker to become much more productive. And increases in productivity, in turn, help to drive both increases in incomes and decreases in working hours.

A prime example of how tech innovation drives productivity growth in agriculture. Innovations like better machinery, crop varieties, fertilizers, and land management have enabled farmers to be much more productive.

In the US farm production per labor, hour increased nearly 16-fold from 1948–2011. This increased productivity enabled the US to feed a rapidly growing population even whilst the fraction of people working in agriculture declined.

Besides tech innovation, there is evidence that working fewer hours can itself keep productivity higher, making the link between working hours and productivity self-reinforcing. For example, economist John Pencavel (2015) studied munitions workers in war-time Britain and found that their productivity stayed high up to a certain threshold of hours, but declined markedly above that threshold. We’ve probably all experienced the drop in productivity that comes at the end of a very long day of work!

What do we do now?

That people in poorer countries work so much more than in richer countries shows that differences in prosperity are not due to differences in work ethic — they are due to differences in access to productivity-enhancing technology.

There is a lot of debate about creating regulatory protocols to govern the rollout of artificial intelligence. That debate tends to focus on how to regulate against the possibility of a malignant AI.

We need to make sure that we are also thinking about how we can ensure that AI becomes just as omnipresent in poorer countries as in rich ones. One of the ways that we can do this is through technology transfer, which I discuss at length in this blog post from 2020:

Technology Transfer Can Close The Gap Between Rich And Poor
The Global Development Index

Ensuring that AI becomes omnipresent in poorer countries is not just altruistic. It is self-evident that the world misses out when exceptionally talented people, including all the brilliant but underprivileged people in today’s poorer countries, do not realize their potential.

Finding ways to raise productivity is therefore not just key to increasing production, but also to the reduction in working hours that is necessary for a society, and our world, to flourish. Artificial intelligence offers an unprecedented opportunity to make this happen. If we get it ‘right’.

For more information on Tej Kohli as a philanthropist visit tejkohliruit.com and to read more of his views go to his Medium.

To read about Tej Kohli as an investor visit Kohli Ventures.

Find out more about Tej Kohli: Tej Kohli the technologist investing in human triumph, Tej Kohli the philanthropist trying to cure the developing world of cataracts and Tej Kohli the London tycoon with a generous streak.

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