Technological progress affected labour income

Source: The post technological progress affected labour income has been created, based on the article “Income inequality: More jobs and higher taxes can counter the effects of automation” published in “The Hindu” on 6th August 2024

UPSC Syllabus Topic: GS paper3- Economy-growth, development and employment.

Context: The article explains that technological advances, like automation and AI, have reduced the share of income going to workers. This has worsened income inequality, especially during the pandemic, and suggests solutions like universal basic income or inheritance tax to address these issues.

For detailed information on Income and Wealth Inequality in India read this article here

How has technological progress affected labour income?

1. Technological advancements such as automation and artificial intelligence have significantly impacted labor income globally.
2. Data from the ILO’s World Employment and Social Outlook study indicates a 1.6% decline in the global labor income share from 2004 to 2024.
3. This decrease translates to $2.4 trillion in lost wages, calculated at constant purchasing power parity.
4. The most notable drop occurred during the pandemic years (2019-2022), accounting for almost 40% of the total decline.
5. In 2024, 28.2% of young women globally are not in employment, education, or training, compared to 13.1% of young men. This gender disparity is significant in developing countries, where job creation struggles to keep pace with growing working-age populations.

What is the situation in India?

1. In India, 83% of the unemployed are youth, according to an ILO report.
2. The government has encouraged private sector investment in labour-intensive employment to address rising unemployment and inequality, even as labour productivity increases.

What Should be Done?

1. Universal basic income (UBI) has been suggested as a solution to rising inequality.
2. Though rejected in Switzerland in 2016 and proposed by Andrew Yang in the US and Rahul Gandhi in India, it remains a potential tool to address income disparities.
3. An inheritance tax in developing countries like India could also help reduce wealth inequality.

Question for practice:

Discuss how technological advancements like automation and AI have contributed to income inequality in India and explore potential solutions such as universal basic income or inheritance tax.