authors: Amrudha Harini D, Prab Jot Kaur, Aanya Narula

Introduction

The transformative power of Artificial Intelligence (AI), robotics, and automation is redefining the global workforce, reshaping employment landscapes and widening socio-economic gaps. While these technologies offer unprecedented efficiency and innovation, they simultaneously raise profound concerns regarding labor displacement, wage stagnation, and income polarization. This article argues that the rapid deployment of AI and automation has accelerated job polarization and contributed to rising income inequality, disproportionately affecting routine and middle-skilled workers while amplifying advantages for high-skilled labor and capital owners. Acemoglu and Restrepo (2020) demonstrated that the rise of industrial robots in the U.S. led to significant declines in both employment and wages, particularly in routine occupations. Their more recent 2021 study further elaborated that AI technologies tend to augment high-skilled jobs while replacing tasks traditionally performed by middle- and low-skilled workers, contributing to labor market polarization (Acemoglu et al., 2021). Similarly, Frank et al. (2019, updated 2021) highlighted that AI’s diffusion is likely to benefit workers with digital and analytical skills, while others may experience job displacement or downward mobility. Choudhury et al. (2020) examined the platform economy and found that while automation can enable remote, flexible work, it also intensifies precarity and income volatility for gig workers. Moreover, the World Economic Forum (2020) predicted that while automation will create 97 million new jobs by 2025, it will also displace 85 million, particularly in sectors relying on repetitive or manual labor. This churn implies that without proactive policy intervention, inequality is likely to deepen.

This article critically evaluates how the current wave of technological advancement is influencing employment trends and income distribution, and discusses the imperative for inclusive innovation strategies and workforce reskilling policies.

Impact of AI on Job Creation and Displacement

The nature of work is being transformed by AI and automation. Machines are getting smarter and faster however most people are concerned/ worried about their jobs (or job security). The question is whether AI will replace everything or new opportunities will emerge? The answer is both!

1) Jobs are being replaced: Automation of repetitive and mundane jobs is one of the largest transformations that AI introduces.  These jobs include data entry, factory labour… driving. These jobs can be done quicker and cheaper using machines than without taking breaks. As a result, many middle- skill occupations are declining and employers in sectors like manufacturing, logistics and retail are under threat. Workers in professional jobs too find their work altered. With AI, the need for human intervention is minimised. AI can now interpret data, identify patterns, and make choices. As stated by the Head of Research at Gartner: By 2025, one out of every three occupations will be replaced by robots, software, and smart equipment.  — Peter Sondergaard

2) New jobs are being created: AI is creating new, just replacing old ones. Jobs which require  reactivity, emotional intelligence and complex decision making are rising. AI for example can’t substitute for teachers, designers and psychologists . In addition, there is a huge demand for people who can develop, administer and enhance AI systems-like data scientist, digital marketers. Flexible income opportunities are being provided by gig economy and freelancing websites. Emerging industries are expanding rapidly. Report Prediction from McKinsey: “AI could produce an extra $13 trillion in economic output, which would raise the global GDP by 1.2%.”

3) Skills Matter More than ever: In today’s fast changing world, the most significant determinants of success are education and skills. Individuals with digital, technical, or strong problem-solving skills have a higher likelihood of gaining new opportunities. But people with lower levels of education or outdated skills might find themselves struggling.  That is why lifelong learning is a necessity now. Whether it is learning to operate new tools, enhancing your technical skills, or brushing up on soft skills such as communication and teamwork, continuous learning is the solution to keep you employable.

AI is fueling the employment landscape with its ever evolving algorithms and learning. It is true- some jobs will disappear under the vast possibilities that come with AI, while some may require some upskilling. A more certain truth is that it will also come up with a horizon of new job opportunities. If we prepare well and arm ourselves with the updated skills while assisting those at risk, future work dynamics will have a different and better trajectory. The verdict is that AI should be viewed as a tool of assistance and not a threat to our displacement

Unequal Impact: Who Gains? Who Loses?

While artificial intelligence (AI) drives both productivity and job displacement, its impact is unevenly distributed across sectors, regions, and social groups. On one end of the spectrum, certain individuals and institutions reap significant benefits, while others face substantial losses. A 2021 study by the McKinsey Global Institute estimates that up to 800 million workers globally could be displaced by automation by 2030, with the most affected being those lacking tertiary education or digital skills.

Globally competitive firms and those with labor market power, such as monopsonistic employers, are more likely to benefit significantly from automation, as they are better positioned to invest in advanced technologies (Keller, 2024). At the same time, AI and machine learning (ML) can automate not only manual tasks but also complex functions traditionally performed by skilled professionals. As a result, job losses are particularly pronounced in sectors such as administrative support, transportation, manufacturing, retail, customer service, finance, and data analysis.

Older workers also face a unique challenge, as they often struggle to adapt to new technologies and may be left behind in the absence of targeted reskilling programs. On the other hand, AI also creates new employment opportunities in roles such as robotics technicians, AI specialists, cybersecurity professionals, and data analysts. These roles predominantly benefit highly skilled, tech-savvy individuals who can adapt quickly to technological shifts (Setati, 2024). This divergence contributes to rising income inequality: wages tend to increase for those with advanced technological skills, while they stagnate or decline for individuals in roles susceptible to automation. Consequently, the gap between high-skilled and low-skilled workers widens. Tasks that rely on non-cognitive abilities—such as creativity, emotional intelligence, and complex problem-solving—remain relatively resistant to automation, offering continued opportunities for individuals with these skills (Adams et al., 2022). Geographical and economic disparities also shape the winners and losers of automation. Developed countries are expected to see greater displacement, whereas developing countries may find new opportunities in AI-related growth—though these benefits are often unevenly shared (Brown, 2018). 

Several factors determine whether an individual stands to gain or lose in the age of automation, including education level, skill set, income status, location, and gender (Agrawal et al., 2024). High-skilled, well-educated individuals are more likely to benefit from AI integration. Conversely, low-income workers often lack access to the resources needed to acquire new skills or transition into emerging sectors. Urban areas—particularly those with established tech ecosystems—are better positioned to adopt and capitalize on AI technologies. As a result, the uneven distribution of AI’s advantages exacerbates income inequality, deepens the divide between skilled and unskilled labor, and reinforces the urban-rural gap. Without substantial investments in reskilling programs and digital infrastructure, many individuals risk being left behind in the rapidly evolving technological landscape.

Income Inequality in the Age of Automation(Impact of Artificial Intelligence on Employment and Wages)

Artificial Intelligence has taken the world by its rapid evolution and automation process from small- medium companies to large organisations in all sectors of work. Artificial Intelligence (AI) is rapidly transforming industries worldwide. According to the International Monetary Fund (IMF), in advanced economies, about 60% of jobs may be impacted by AI (Cazzaniga et al., n.d.), with roughly half potentially benefiting from AI integration and the other half facing reduced labor demand, leading to lower wages and reduced hiring(The Impact of AI on Job Automation and Employment, n.d.).

By examining how AI and automation are reshaping the global job market (Research: How Gen AI Is Already Impacting the Labor Market, n.d.)deepening income inequality, and offering new opportunities, exploring the landscapes of Africa, Asia, America, and Europe to understand the multifaceted impacts of AI on employment and wages.

1. Understanding Automation and AI

Artificial Intelligence (AI) refers to the simulation of human intelligence processes by machines, especially computer systems. These processes include learning, reasoning, and self-correction. Automation involves using technology to perform tasks with reduced human intervention(AI Impacts in BLS Employment Projections : The Economics Daily: U.S. Bureau of Labor Statistics, n.d.-a).

Historically, automation has evolved from the mechanization during the Industrial Revolution to the current Fourth Industrial Revolution (4ir), characterized by the fusion of technologies blurring the lines between the physical, digital, and biological spheres. Current trends include machine learning, robotics, generative AI, and robotic process automation (RPA), all contributing to significant shifts in labor markets (AI Could Widen the Equality Gap between Rich and Poor Nations | World Economic Forum, n.d.).

1. Global Overview of AI’s Impact on Employment and Wages

II.1 Job Displacement and Job Creation

AI and automation are displacing routine and manual jobs. The U.S. Bureau of Labor Statistics projects that AI will primarily affect occupations whose core tasks can be replicated by generative AI, including roles in computer, legal, business, financial, and engineering sectors (AI Impacts in BLS Employment Projections : The Economics Daily: U.S. Bureau of Labor Statistics, n.d.-b). 

Conversely, AI is creating new job categories, such as data scientists, AI ethics consultants, and AI system trainers. These roles require advanced skills and are often concentrated in developed economies.

II.11 Wage Polarization Developed vs. Developing Countries

Technological advancements have contributed to increases in wage inequality across OECD countries. Evidence suggests that AI exposure may be associated with lower inequality between high- and low-wage workers within occupations, but overall, AI has not significantly altered the wage gap between high- and low-wage occupations (What Impact Has AI Had on Wage Inequality? | OECD, n.d.).

In advanced economies, AI poses greater risks and opportunities, with about 60% of jobs potentially impacted (International Monetary Fund (IMF), in Advanced Economies, about 60% of Jobs May Be Impacted by AI – Google Search, n.d.). In developing countries, the impact is less pronounced, with some evidence of job polarization in countries like Mexico and Brazil (Molina & Maloney, 2019).

AI adoption in Africa is growing, with experts predicting that AI could contribute up to $1.2 trillion to Africa’s economy by 2030 (Teknikalitech.Com/Blog/Impact-of-Ai-on-Africa/, n.d.). AI is transforming key industries in Africa, including healthcare, agriculture, and education. For example, AI-powered chatbots are being used in public health to improve access to medical services. Africa faces challenges such as a skills gap, low R&D funding, and a digital divide, which hinder the full potential of AI adoption.

Currently, Asia is leading in AI adoption, with developing economies in the Asia-Pacific region having gen AI adoption rates 30% higher than developed economies (Generation AI in Asia Pacific | Deloitte Insights, n.d.). AI is impacting over 11 billion working hours per week across Asia Pacific, with students and employees leading the gen AI revolution (“Research,” n.d.). Despite high adoption rates, there are concerns about privacy risks, fraud, and employment impacts, which hinder widespread trust in AI technology (AI Adoption Accelerates In APAC, But Consumers Struggle With Trust, Security, And Job Displacement Concerns | Scoop News, n.d.).

AI is significantly impacting the U.S. job market, with occupations in computer, legal, business, financial, and engineering sectors being susceptible to AI-related impacts(AI Impacts in BLS Employment Projections : The Economics Daily: U.S. Bureau of Labor Statistics, n.d.-a). In Latin America, there is evidence of incipient job polarization in countries like Mexico and Brazil due to automation. Both regions face challenges in reskilling the workforce and addressing digital inequities to adapt to the changing job landscape.

Europe has a strong policy framework for AI ethics and data privacy. AI adoption in the EU from 2012 to 2022 has been studied to understand its employment implications(Guarascio & Reljic, 2025). The EU is focusing on transitioning to green and tech jobs, with social safety nets and reskilling programs in place to support workers. Europe faces challenges such as an ageing population and regional disparities in AI readings.

II.111 The Global Inequality Lens, Gender and Youth Dimensions

AI is contributing to income inequality by disproportionately affecting low-skilled workers and certain demographics, leading to wage polarization. Developing countries may become dependent on foreign AI technologies, leading to concerns about digital colonialism and loss of autonomy. While AI boosts productivity, its benefits are not evenly distributed. High-income countries with better infrastructure, education systems, and digital readiness reap more rewards, deepening the divide with lower-income regions. Within countries, individuals with advanced digital skills and capital access benefit more, while low-skilled workers face greater displacement risks.

Women and youth are disproportionately impacted by automation. A 2023 IMF report indicated that women are overrepresented in administrative jobs that are more likely to be automated. Young people entering the labor market face uncertainty about which skills will remain relevant. Countries that invest in AI education, upskilling, and accessible digital infrastructure are better positioned to minimize inequality.

Artificial Intelligence is neither inherently good nor bad. it is a powerful tool shaped by how we choose to use it. Its impacts on employment and wages reflect broader systemic issues, inequitable education, infrastructure gaps, and uneven access to technology.

If global and regional actors work together, governments, industry, academia, and civil society, we can ensure that AI uplifts rather than divides. In low-resource settings like Africa, targeted investments in inclusive innovation, local talent, and ethical AI use will be key to ensuring no one is left behind in this technological transformation.

Policy Responses and Recommendations
As AI takes a toll on the job market and continues to exacerbate income inequalities and job displacement, by taking up jobs of humans and performing tasks conveniently, targeted policy responses are essential to mitigate their disruptive effects and promote inclusive growth. Without any intervention, it shall only exaggerate the problem and technological advancements shall take place, with proper strategies in place. Following are a few policy responses and recommendations- 

1. Investment in skill development and education- A rise in investment expenditure with respect to human capital formation needs to be done in all economies to ensure and emphasize on critical thinking, digital literacy, and adaptability. Partnering with Ed-tech companies can prove to be useful for the government and providing training to youth can help upscale the workforce and make efficient use of the human capital. Vocational training and community colleges can play a pivotal role in equipping workers with skills for emerging fields such as data analysis and AI management. 
2. Ensuring social safety- Enhanced social protection is crucial as automation and rise of AI replaces a plethora of jobs. Policymakers should expand unemployment insurance, healthcare access, and pension schemes to cover gig workers and informal laborers. Minimum wage system, ensuring basic healthcare and lifestyle amenities could also aid in minimizing the problems caused. 
3. Coordinated Global Governance-
   Since technological disruption is spread everywhere beyond national boundaries, international cooperation is crucial. Shared frameworks on data rights, AI ethics, and cross-border labor standards can prevent a race to the bottom in wages and protections. In sum, strategic and inclusive policymaking can ensure that the gains from automation are broadly shared, transforming technological disruption into an opportunity for widespread economic empowerment.

Conclusion: 

The global job market is clearly going through a big shift because of the rapid growth of automation, robotics, and artificial intelligence. These technologies can boost productivity, spark innovation, and open up new economic opportunities but they also bring serious challenges. Many routine and mid-level jobs are at risk, and this can lead to job losses, a more divided job market, and rising income inequality. Data shows that people doing routine tasks or with moderate skills are more likely to be affected, while those who own businesses or have advanced tech skills tend to benefit the most. If governments don’t take thoughtful and inclusive action, the gap between rich and poor could grow even wider, especially across different regions, backgrounds, and education levels. Still, this tech revolution doesn’t have to come at the cost of fairness. With smart investments in things like digital infrastructure, social safety nets, education, and helping people learn new skills, societies can adapt. Encouraging lifelong learning will be a key part of making sure no one is left behind.

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