A major reason for the fall in labour income is artificial intelligence, says an ILO report.
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Inequality is on the rise as the share of labour income has stagnated worldwide and a large share of youth remain out of employment, education, or training, according to the International Labour Organisation’s (ILO) World Employment and Social Outlook: September 2024 Update, released in Geneva on Wednesday (September 4, 2024). A major reason for this fall in labour income, according to the report, is artificial intelligence or AI.

The ILO analysed the impact of technological innovations over the last two decades across 36 countries and said that, while these innovations have produced persistent increases in labour productivity and output, they can also reduce the labour income share. “This is consistent with automation-based technological innovations driving the aggregate effects,” the ILO said, warning that the absence of a stronger policy response across a wide range of relevant domains could push the labour income share still further down.

To mitigate the potential adverse impacts on inequality, the benefits of technological progress should be widely distributed, it said.

COVID worsened inequalities

The report also indicated slow progress on key Sustainable Development Goals (SDGs) as their 2030 deadline approaches. The study revealed that the global labour income share, which represents the portion of total income earned by workers, fell by 0.6 percentage points from 2019 to 2022 and has since remained flat, compounding a long-running downward trend. “If the share had remained at the same level as in 2004, labour income would be larger by $2.4 trillion in 2024 alone,” the report said. 

It added that the COVID-19 pandemic was a key driver of this decline, with nearly 40% of the reduction in the labour income share occurring during the pandemic years of 2020 to 2022. “The crisis exacerbated existing inequalities, particularly as capital income continues to concentrate among the wealthiest, undermining progress towards SDG 10, which aims to reduce inequality within and among countries,” it said. 

“Countries must take action to counter the risk of declining labour income share. We need policies that promote an equitable distribution of economic benefits, including freedom of association, collective bargaining and effective labour administration, to achieve inclusive growth, and build a path to sustainable development for all,” said Celeste Drake, ILO Deputy Director-General, releasing the report.