Canady 1

Patrick Canady

Professor Kate Kimball

ENC 2135-76

10/17/21

Artificial Intelligence and its Implications on Job Loss and Wealth Inequality

Margaret Davies was an ordinary working-class woman from South Wales who worked

at a tax inquiry center. She made minimum wage and was content with her job responsibility of

finding mistakes in tax returns, fixing them, talking with clients, and explaining the problem.

One day, however, she received news that she, along with 33 of her coworkers, no longer had a

job because of the increase of clients submitting their tax returns online through automated

processes.

Margaret Davies was not the only one who lost her job to artificial intelligence (AI). With

the modern rise in AI, concerns have been raised about its implications on job loss and wealth

inequality. Although it is often viewed to have no effect on job loss and wealth inequality, AI

has proven to do the opposite.

To understand this dilemma, one must first understand the definition of artificial

intelligence. Although the definition of AI has been debated in the field, Abbass Hussein gives

one definition as “social and cognitive phenomena that enable a machine to socially integrate

with a society to perform competitive tasks requiring cognitive processes and communicate with

other entities in society by exchanging messages with high information content and shorter

representations” (2). This definition, provided with the fact that the word “cognition” originated

from the Latin word cogito, which means “to know” (Hussein, 2), provides a general definition
 Canady 2

of artificial intelligence which, although ambiguous, is sufficient to get a good understanding of

the overall umbrella as to which every topic of artificial intelligence falls under.

Another definition of AI can be explained as the “simulation of human intelligence

processes by machines, especially computer systems. These processes include learning (the

acquisition of information and the rules for using the information), reasoning (using the rules to

reach approximate of definite conclusions) and self-correction” (qtd. in Naudé 1). This definition

of artificial intelligence falls under Hussein’s broad definition of AI and provides a meaning that

is more specific to the focus of this essay. Some examples of artificial intelligence that fall under

this definition include thermostats, smartphones, handwriting recognition used by banks to

inscribe handwritten checks, and Deep Blue – an extremely fast supercomputer that can analyze

up to 60 billion chess moves in three minutes (Makridakis, 49).

With the increase of artificial intelligence in the world of business, many jobs are being

replaced. Similarly, because AI has not reached the potential of artificial general intelligence

(super-intelligence), the jobs being replaced are typically labor-intensive and do not require

significant cognitive ability. In an interview with Hank Tran, he states that “there is a lot of fear

that AI is going to take over people’s jobs (Tran). When in fact, that is the reality, and most of

those jobs are nonscientific and more labor-intensive work.” Makridakis confirms this with

statistics about the pattern of the percentage of the labor force in agriculture, manufacturing, and

services in the US and UK from 1995 to 2014 (see Table 4 and Table 5). He concludes from the

tables that since 1995 “employment [dropped] from 2.5% to 0.7% in agriculture and from 17%

to 14% in manufacturing in the USA and correspondingly from 2.1% to 1.3% and from 21% to

15% in the UK while witnessing increases in the percentage of employment in services” (56-57).
 Canady 3

Due to the steady decrease of agriculture and manufacturing jobs caused by an increase in

AI technologies, it is safe to assume that the trend will continue and the number of jobs in the

service sector will eventually have to compensate for the loss of jobs in the other sectors.

However, with AI getting more intelligent and heading towards a state of super-intelligence, the

service sector will also be affected, causing many jobs to be eliminated and new ones to open

(Makridakis, 57). For example, Amazon Go retail store is an online retail store that allows people

to shop for food and return items that they purchased from Amazon. This store uses artificial

intelligence to replace employees that otherwise would have had jobs.

 Canady 4

A more generalized view of the jobs that will be taken over by artificial intelligence can

be found in a study conducted by the McKinsey Global Institute. In this study they distinguished

three groups of occupational activities that are highly susceptible, less susceptible and

least susceptible to machines and robots taking over jobs currently performed by humans

(with the number in parentheses denoting the estimated percentage substitution). The first

group includes ‘data collection’ (64%), ‘data processing’ (69%) and ‘predictable physical

work’ (78%), the second covers ‘interactions among stakeholders’ (20%) and

‘unpredictable physical work’ (25%) while the third contains ‘managing others’ (9%) and

‘applying expertise’ (18%). (qtd. in Makridakis 57-58)

This study proves that lower class and lower-skilled jobs are going to be replaced by artificial

intelligence in the future, while upper class and higher-skilled jobs will be maintained. For

example, jobs that fall under “data collection,” “data processing,” and “predictable physical

work” also fall under lower class and lower-skilled jobs. This is also true for the second and third

groups from the study but with the middle class, middle-skilled jobs and high class, high skilled

jobs respectively.

Because lower-class jobs are being taken over by artificial intelligence, the demand for

higher-class jobs is increasing. Therefore, the wage gap between the two is increasing. This is

explicated in a simulation conducted by Andrew Berg, Edward F. Buffie, and Luis-Felipe Zanna

which presents that “when robots substitute only for low skilled labor, the magnitude of the

worsening in inequality is horrific. In our base case calibration, the skilled wage increases 56-

157 percent in the long run while the wage paid to low-skill labor drops 26-56 percent and the

group’s share in national income decreases from 31 percent to 8-18 percent” (qtd. in Naudé 7-8).

This simulation only deals with within-country inequality and with inequality and automation in
 Canady 5

advanced economies, however. Along with the increase in wealth inequality between the lower-

class and higher-class in advanced countries, there will also be an increase in inequality between

more developed and less developed countries. Hank Tran points out that countries that cannot

afford artificial intelligence will start to fall behind and will increasingly depend on the more

powerful countries such as the United States (Tran). Furthermore, according to a survey

conducted on a random sample of Florida State University students, 76% of respondents thought

that artificial intelligence will significantly increase the wealth gap between first world and third

world countries (Canady). Because of this decline in the economies of less developed countries

and their increasing dependence on advanced countries, the less developed countries can be

expected to lose more wealth than they are already losing. This will lead to a larger wealth gap in

the global economy

One significant differing point of view stems from the fear of controlling artificial

intelligence in the future. In Josh Clark’s podcast, he explores the possibility that upon the

creation of artificial general intelligence, we may not be able to control it and it may not act in

our general interest. He gives a theoretical example of a company who hires a programmer to

create an AI to run their factory that produces paper clips. Because the programmer wants the AI

to be able to find new ways to make paper clips more efficiently and cheaply, he/she gives the AI

the ability to make its own decisions on how to run the factory and he/she only gives the AI its

goal of producing as many paper clips as possible. If this paper clip maximizing AI becomes

super-intelligent, nothing has changed to the AI and its primary goal is still to produce as many

paper clips as possible, but it has become vastly more capable of carrying out this goal. It then

eventually realizes that if it were to take over the world, it would be able to produce a lot more

paper clips than what it is producing in the single factory alone. It would then have an
 Canady 6

instrumental reason to place itself in a better position to take over the world. Furthermore, an

attempt to stop this AI from doing so would be impossible for a human as Clark adds that

comparing the intelligence of a super-intelligent AI to a human is the same as comparing the

intelligence of Albert Einstein to an earthworm (“Artificial Intelligence”). This outcome would

make job loss and wealth inequality extraneous altogether because artificial intelligence would

take over the planet and replace humans. Because this scenario is purely theoretical, there is no

way to prove nor disprove it; however, it does apply to the scope of this paper because it

provides an alternate view to the effect that artificial intelligence is going to have on job loss and

wealth inequality.

Another counterargument brought up by scholars is that the number of jobs created from

artificial intelligence outweighs the jobs lost because of artificial intelligence. In an interview

with Joe Calhoun, he states, “I always remind people that machines just don't show up and

replace labor. Machines have to be designed, manufactured, and maintained. Those activities

create jobs.” Although this is a valid point, one could argue that the manufacturing and

maintaining of the AI can also be done by other AI, which would eliminate the need for humans.

Furthermore, the process of designing an AI is a high-skilled job which would make it difficult

for someone with a background in lower-skilled jobs. Erik Brynjolfsson and Andrew McAfee

conclude that whether or not the jobs created by artificial intelligence outweigh the jobs lost, we

should start to consider “what kind of society we should construct around a labor-light economy”

and ask the question: “how can the tendency of modern capitalism to produce high levels of

inequality be muted while preserving its ability to allocate resources efficiently and reward

initiative and effort?” (qtd. in Makridakis, 58).

 Canady 7

In conclusion, AI will eventually cause job loss and wealth inequality and our society

will continue to become more unequal. While states in the counter arguments, there will be a

need for additional jobs to program the artificial intelligence, these new jobs are for highly

skilled workers and the lower-level jobs are being displaced. Hence, the entry level jobs will

become obsolete, as proven in the example of Margaret Davies and the automated tax returns and

Amazon Go with online shopping.

In addition, while the lower-class jobs are being taken over by AI and the demand for

higher-class jobs is increasing, this ultimately leads to a wage gap between the upper and lower

class. This does not only effect imbalances in the United States, but it also leads to inequalities

between first and third world countries.

While there are a lot of benefits to artificial intelligence to improve efficiencies and

automation, it is important to understand the consequences this technology will have on both

jobs and inequalities throughout the world.

 Canady 8

Works Cited

Abbass, Hussein. “Editorial: What Is Artificial Intelligence?” IEEE Transactions on Artificial

Intelligence, vol. 2, no. 2, IEEE, 2021, pp. 94–95.

“Artificial Intelligence.” The End of The World with Josh Clark from iHeart Radio, 16

November 2018.

Calhoun, Joe. Personal interview. 28 September 2021.

Canady, Patrick. “Effects of AI on Jobs and Wealth Inequality” Survey. 22 September 2021.

“Could A Robot Do My Job?”. BBC Worldwide Ltd, 2016.

Makridakis, Spyros. “The Forthcoming Artificial Intelligence (AI) Revolution: Its Impact on

Society and Firms.” Futures: The Journal of Policy, Planning and Futures Studies, vol.

90, Elsevier Ltd, 2017, pp. 46–60.

Naudé, Wim. “Artificial Intelligence: Neither Utopian nor Apocalyptic Impacts Soon.”

Economics of Innovation and New Technology, vol. 30, no. 1, Routledge, 2021, pp. 1–23.

Tran, Hank. Personal interview. 21 September 2021.