Large shift to automation increases economic inequality, says IMF

American factories are shifting to more automation, which may lead to a larger gap in economic inequality, says Gita Gopinath, Chief Economist at the International Monetary Fund.

Gopinath made the remarks during a live broadcast with the American University of Cairo early this week.

Gita Gopinath, chief economist and director of the Research Department at the International Monetary Fund. Photo: Olivier Douliery/AFP via Getty Images 
Gita Gopinath, chief economist and director of the Research Department at the International Monetary Fund. Photo: Olivier Douliery/AFP via Getty Images

It is expected that businesses will put a greater emphasis on adaptation and put less reliance on human workers in the aftermath of the COVID-19 pandemic.

If public policy initiatives do not prioritize retraining workers to adapt to unexpected changes in industries, the US could be facing a new wave of lay-offs.

Gopinath warns that retraining people in mechanical or factory jobs will pose a big challenge. Large mega businesses like Boeing and General Electric are expected to grow exponentially by increasing their automation abilities and hiring highly educated experts. This leaves the people usually working on assembly lines, with lower levels of higher education and a limited set of transferable skills, displaced and unemployable.

Gopinath says it is also a myth that workers move to where better jobs are. This is not usually true for low-income populations because they do not have enough disposable income to relocate.

It is important to rethink how public policy can address potential displaced workers in rural America and not just in urban cities. Better infrastructure and education throughout the US that promote constant re-skilling, re-training, and re-education can help not only these vulnerable populations, but the US economy as a whole.

There is still enough time to be proactive before American factories begin making significant changes.

To prevent an increase in income inequality, the government needs to prepare for a big shift and workers should prepare to attain new skills. There are industries that will thrive post-COVID like hospitality, travel, restaurants, and green energy.

If the government steps up with public policy measures to ensure employability in new industries, then workers will be empowered to adapt to any new challenge facing our economy.

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