The tools for artificial intelligence (AI) are becoming increasingly powerful and, according to the International Monetary Fund (IMF), are finding their way into companies much faster than in previous waves of technology and automation, all the way from steam power to automation and robots. In addition, the force of structural change is much greater than previously assumed.

The IMF believes that the impact of AI on the labour market and social stability, particularly in industrialised countries, will be drastic. Social conflicts could come to a head during the transition phase, it warns. According to the IMF Staff Discussion Note from the Fiscal Affairs Department, large waves of redundancies are to be expected before the economy adjusts to the new framework.

The paper argues that the focus must now be broadened compared to previous assumptions about the impact of AI on the labour market. While economists initially considered office jobs as well as intellectual and artistic activities to be particularly at risk from AI, the focus is now shifting back to the mass of basic industrial activities. With the increased use of AI in robots, machines and factories, a new wave of automation is now sweeping across workplaces. Work that was previously done manually, and the operation of machines, can be taken over by AI assistance systems, thereby eliminating human labour in various industrial sectors.

In the IMF study, the economists, therefore, argue in favour of an expansion of active labour market policy. More than ever, the focus should be on further training and support for changing careers. At the same time, unemployment insurance should be expanded. The redundancy shock for the people affected must be cushioned, and time must be bought for a reorientation. At a the press conference, IMF economist Ruud de Mooij warned against a „loss of prosperity for broad sections of the population“ and a „disruptive social escalation“.

In view of this challenge, the economists also consider it necessary to restructure the tax system. The burden on labour must be reduced, so that market forces not only exploit the potential for automation, but also increasingly focus on new products. It must also be worthwhile for companies to create jobs in new fields of work.

In return, taxes on capital income would probably have to be raised, and the tax base expanded, says IMF economist Era Dabla-Norris. According to Dabla-Norris, care must be taken to ensure that „automation-friendly provisions“ are removed. A lot of fine-tuning of the tax system is necessary in order to make it more „job-friendly“.

In the past, the tax burden on capital has continued to fall while the taxation of wages has increased. According to the IMF, this favours investments in machinery and other capital goods over human labour. According to Dabla-Norris, other tax incentives also need to be reorganised in this respect.

According to the IMF, greater taxation of capital is necessary because AI would increase corporate income to a much greater extent than in the past, as capital plays an increasingly important role in value creation. This would also lead to greater inequality in societies. At the same time, AI would ensure that the oligopolisation of markets would increase. This is because fewer and fewer companies can afford the high AI investments – or have already gained a strong position in the market, which they are now expanding.

In this context, the IMF believes that the international efforts already underway to introduce a global minimum tax rate of 15% are a first step towards making global corporations more responsible for social development. The international community should continue along this path.

However, the IMF considers the idea of a pure machine or robot tax to be absurd. On the one hand, it cannot be clearly separated from other tax objectives in purely practical terms. On the other, it would slow down innovation overall, which in turn would have a negative impact on competition. Nonetheless, according to the IMF, another tax should be focussed on more when restructuring the tax system – consumption taxes. IMF economist de Mooij believes that these could be raised in order to cushion any potential tax revenue shortfalls in the course of the tax reorganisation.