Embracing AI

As we close 2024 and move forward to 2025, I have become more anxious about embracing artificial intelligence (AI), fearful as with all other technological advancements, that I will become so dependent on it that even in writing my column I may fall into the habit of using AI, especially when my muse eludes me or when I become too lazy to do my own research.

When I was studying – from grade school up to college – a good part of writing term papers or reports involved doing research work in libraries, and particularly helpful were massive tomes of encyclopedias. It was even a dream to have our parents invest in a full collection, which at the time was quite expensive – pretty much like buying a gadget in this day and age.

Even then, we were wont to merely copy what the encyclopedia contained, mistakes and all especially if the encyclopedia one used was an old copy and the data had already been updated in more recent editions.

But alas, what we once thought would last for decades and could be used by different generations was rendered obsolete by the advent of technological advancements, specifically digital technology. The printed edition, of course, are voluminous and still involved searching for the proper topic and data.

With digital technology and computers, it became easier and convenient to rely on search engines to find and collect information, background and data. It became much easier to write reports, term papers and thesis.

And now, change is once again upon us. AI is now being incorporated in almost all gadgets, and programs like ChatGPT are now commonly being used. However, programs like ChatGPT have the major flaw of lacking personality – every writer has a style and it is reflected in their writing. At present the current programs still offer stilted or stylized output that can easily be discerned by good editors, but of course are allowed to be used anyway.

AI of course is proving useful and soon necessary in such tasks as transcription of interviews, although the quality of the transcripts still need a lot of cross-checking for accuracy. But I have to admit that it has helped me tremendously in transcribing long interviews that in the past I had to painstakingly transcribe for hours.

But with the technology comes the threat of reshaping the labor force.

According to an International Monetary Fund staff discussion note published on Jan. 14 this year entitled Gen-AI: Artificial Intelligence and the Future of Work, jointly written by Mauro Cazzaniga, Florence Jaumotte, Longji Li, Giovanni Melina, Augustus J. Panton, Carlo Pizzinelli, Emma J. Rockall and Marina Mendes Tavares, AI has the potential to reshape the global economy, especially in the realm of labor markets.

An executive summary of the IMF staff discussion note, stated that “AI is set to profoundly change the global economy, with some commentators seeing it as akin to a new industrial revolution. Its consequences for economies and societies remain hard to foresee. This is especially evident in the context of labor markets, where AI promises to increase productivity while threatening to replace humans in some jobs and to complement them in others.

“Almost 40 percent of global employment is exposed to AI, with advanced economies at greater risk but also better poised to exploit AI benefits than emerging market and developing economies. In advanced economies, about 60 percent of jobs are exposed to AI, due to prevalence of cognitive-task-oriented jobs. A new measure of potential AI complementarity suggests that, of these, about half may be negatively affected by AI, while the rest could benefit from enhanced productivity through AI integration. Overall exposure is 40 percent in emerging market economies and 26 percent in low-income countries. Although many emerging market and developing economies may experience less immediate AI-related disruptions, they are also less ready to seize AI’s advantages. This could exacerbate the digital divide and cross-country income disparity.”

The IMF staff discussion noted went on that “AI will affect income and wealth inequality. Unlike previous waves of automation, which had the strongest effect on middle-skilled workers, AI displacement risks extend to higher-wage earners. However, potential AI complementarity is positively correlated with income. Hence, the effect on labor income inequality depends largely on the extent to which AI displaces or complements high-income workers.

Model simulations suggest that, with high complementarity, higher-wage earners can expect a more-than-proportional increase in their labor income, leading to an increase in labor income inequality. This would amplify the increase in income and wealth inequality that results from enhanced capital returns that accrue to high earners.

Countries’ choices regarding the definition of AI property rights, as well as redistributive and other fiscal policies, will ultimately shape its impact on income and wealth distribution. The gains in productivity, if strong, could result in higher growth and higher incomes for most workers. Owing to capital deepening and a productivity surge, AI adoption is expected to boost total income.”

Furthermore, the IMF staff discussion notes pointed out that “if AI strongly complements human labor in certain occupations and the productivity gains are sufficiently large, higher growth and labor demand could more than compensate for the partial replacement of labor tasks by AI, and incomes could increase along most of the income distribution. College-educated workers are better prepared to move from jobs at risk of displacement to high-complementarity jobs; older workers may be more vulnerable to the AI-driven transformation.”

Among the ASEAN (Association of South East Asian Countries) ready for AI adoption is clearly Singapore with an AI Preparedness Index (as of 2023) of 0.8 which ranks even higher than that of the US’ 0.77, Germany’s 0.75, the UK, Japan and Korea’s 0.73.

China’s AIPI is at 0.64, slightly lower than that of Hong Kong which is rated at 0.7. For the rest of the ASEAN members, the Philippines’ AIPI is at 0.5 and at par with Brunei which also has 0.5, a smidgen better than India’s 0.49 but slightly lower than Indonesia’s 0.52.

The IMF staff discussion notes pointed out that “to harness AI’s potential fully, priorities depend on countries’ development levels. A novel AI preparedness index shows that advanced and more developed emerging market economies should invest in AI innovation and integration, while advancing adequate regulatory frameworks to optimize benefits from increased AI use. For less prepared emerging market and developing economies, foundational infrastructural development and building a digitally skilled labor force are paramount. For all economies, social safety nets and retraining for AI-susceptible workers are crucial to ensure inclusivity.”