The rapid advancement of generative-AI technologies holds the promise of significantly boosting productivity and enhancing public service delivery. However, this transformation also brings challenges, including potential job losses and increased inequality. A new IMF paper highlights the crucial role of fiscal policy in ensuring equitable distribution of AI’s benefits, suggesting that social-protection and tax systems need substantial upgrades to manage these changes effectively.
To mitigate the disruptive impact of AI on the labor market, more generous unemployment insurance, sector-based training, and upskilling programs are recommended. These measures could help displaced workers transition to new jobs that match their skills, reducing the negative effects of automation. Emerging-market and developing economies face unique challenges, as their larger informal sectors limit the reach of formal social-protection programs. Leveraging digital technologies could expand social-assistance coverage in these regions.
Tax policies also need to be rebalanced to address AI-induced inequalities. While taxing AI directly is not advisable, reconsidering corporate tax incentives that favor automation and strengthening taxes on capital income could help mitigate rising income and wealth inequality. The global minimum tax agreement and other measures like supplemental taxes on excess profits are steps toward a fairer tax system.
Ultimately, policymakers’ decisions will shape the future of AI, and international cooperation will be crucial to ensure that AI’s benefits are broadly shared across society.
