Impact of AI on Working Hours, Wage Rate and Global Economy

Abstract

Artificial Intelligence has a substantially increasing impact on the markets and economy. Implications on wage rates, working patterns, and lifestyles have also been marked as important factors. AI has the potential to extend the gap between inequality and unemployment. The framework discussed in this paper connects the dots between AI and the affecting factors. In a report published in 2018 by the World Economic Forum, it was projected that the advancement and implementation of AI would result in a net increase of 58 million new jobs by the year 2022. This estimation suggests that, despite concerns about the impact of AI on employment, the technology has the potential to generate a significant number of job opportunities globally. The objective of this paper is to give an analytical explanation of artificial intelligence with respect to employment, working hours, and leisure in the short run and long run. The paper aims to bridge the gap between theoretical, mathematical and visual interpretations towards the trends of growing AI and its impact on the supply of labour in the market. It is an analytical research method using data from secondary sources. Time period of the study is from 2018 to 2022. Model one shows how the labour supply will behave when a firm is catering to the full demand by existing labour. It considers the situation of a firm with the extensive use of AI and limited work distribution amongst the labour which will lead to constant wage rates and decrease in number of working hours. Model two shows the impact of AI on the supply of labour of a firm which expects excess demand for goods than they can cater. Here, productivity will increase and therefore production will increase which will lead to more work done by labourers and an increase in their wage rate as there is more demand in the market. Given the speed of advancements, they will first have to work on investments and establishments of these technologies faster in order to complement their labor force and not substitute them. The impact of SDG 8 [Decent work and Economic growth] is also evaluated in the research. This paper analyzes the pace of development and impacts on labour markets in both the types of nations (developed and developing) and to study how the work and leisure patterns will change in low, medium, and high-skilled labour forces. JEL: D24, D23, J01, J21, J24, J64.