No single way to fight inequality

A recently released ILO report says that globally, the share of labour incomes in total income declined by another 0.6 percentage point between 2019 and 2022 and has remained flat since. While the latest numbers are in keeping with the long-term trend of falling labour income share, the report notes that the three-year period following the pandemic saw a decline which accounts for 40% of the overall decline between 2004 to 2024. In a number which has lent itself to some bit of sensationalism, the ILO estimates that had the labour income share remained stable between 2004 and 2024, workers would have earned an additional $2.4 trillion in purchasing power parity terms.

The report also flags the role of technology in shaping inequality, especially with the growing use of AI. While such technologies are known to lead to a rise in productivity, they can also lead to a reduction in labour income share, it says.

What does all this mean as far as policy wisdom is concerned? That labour income shares have been falling and technology might have played a role is not something we are being told for the first time. The fact that this trend has not reversed and is perhaps feeding into growth of reactionary politics across the world, especially in the advanced economies, is what needs a closer and urgent examination. So, what is to be done?

The biggest lesson which needs to be learnt is that there cannot be a one-size-fits-all approach to fighting inequality or the role of technology in driving it. Many countries in the world are at a stage of demographic evolution where they would need technology to ease the pressure on the already falling share of working population. The more important question for them is not to control roll out of technology per se but who gets to control the surplus generated from its growing use. India might have a lesson or two to teach the world from its Digital Public Infrastructure push on this front.

To be sure, it is important to ensure that technology does not become the excuse for other policy failures to boost mass incomes. For example, India, the world’s most populous country, has done very well in high-technology exports but performs much below its potential in labour-intensive exports. These counter-intuitive facts remind us that the battle against inequality is best fought outside convenient echo-chambers.

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