IMF warns of massive labour disruption from AI

Today’s top stories

• Israeli Prime Minister Benjamin Netanyahu dissolved the war cabinet he created after Hamas’s October 7 attack following the resignation of two of its members.

• Ukraine urged international bondholders to accept deep cuts on the value of more than $20bn in debt to help finance the nation’s war effort. Its government is facing a tight deadline to secure the debt restructuring, which it needs to continue receiving a bailout from the IMF.

• EU leaders are set to approve Ursula von der Leyen for a second five-year term as European Commission president this evening, ahead of a formal rubber-stamping later this month.

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Good evening.

The IMF today joined a growing list of organisations to warn about the implications of generative AI, arguing that it raised “profound concerns about massive labour disruptions and rising inequality”.

Governments needed to do more to prepare workforces such as improving unemployment insurance, the IMF said, pointing out that, unlike the disruptive technologies of the past, higher-skilled occupations were also at risk.

Generative AI — the ability of computers to generate text or images from human prompts — first came to mass attention with the launch of OpenAI’s ChatGPT in 2022, fuelling a boom in global tech stocks.

The question of how the technology is regulated has also been rising up the agenda, kick-started by the EU’s AI Act and initial responses in the US, which are provoking a fierce response from Big Tech. Silicon Valley is particularly upset over California’s AI safety bill, which calls for a “kill switch” to turn off powerful AI models.  

Big Tech’s AI dealmaking is also under fire from US antitrust authorities, which are concerned that the transformative technology is being concentrated among a few deep-pocketed companies. The likes of OpenAI meanwhile are upping their lobbying efforts.

Governments at the same time are vying for a piece of the action. We report today on how India is offering incentives to Big Tech to spend billions on infrastructure to transform the country into a major consumer and exporter of AI. Argentina meanwhile is trying a different tack, offering itself as a low-regulation AI hub for companies hampered by restrictions in the US and EU.

The impact on the labour market has been at the forefront of concerns. The IMF estimated in January that AI would affect almost 40 per cent of jobs around the world, while Goldman Sachs said AI could replace 300mn full-time jobs, while creating others and boosting productivity.

If organisations are successful in retraining workers for the AI world in skills such as “prompt engineering” — the process of writing the most effective text prompts to generate the desired response from an AI application — the productivity gains could be immense. One AI software company says global productivity improvements from generative AI could be worth $1.75tn a year by 2033.

Moreover, sweeping predictions of a job apocalypse (see Elon Musk’s assertion that AI would make all jobs obsolete) are rather overdone, writes FT innovation editor John Thornhill.

Such dystopian forecasts ignore our past experience with new technologies, often confusing technological feasibility with economic viability, Thornhill writes. And while it is easy to see the jobs that will be disrupted by AI, it is hard to imagine those that will be created: many of today’s jobs did not exist just a few decades ago — in medicine, software, or solar power, for example.

It will still be incumbent on governments however to take an “agile” approach that prepares them for “highly disruptive scenarios”, the author of today’s IMF report argues. And because of the global reach of AI, “it’ll be really important more than ever for countries to work together,” the author concludes.

Need to know: UK and Europe economy

Rachel Reeves, the UK’s new chancellor should Labour win the general election, told the FT she would seek to improve UK-EU trade terms. In an interview outlining her preparations for government, Reeves said she wanted to secure billions of pounds of investment via an early international summit.

Oil and gas chiefs said Labour’s pledge to axe North Sea tax allowances threatened their investments in the basin, with several projects already put on hold. While Labour’s plan to stop issuing new licences was expected by the industry, several companies told the FT they were now unsure about the profitability of projects they already have licences for.

The big question for many people of course is: will the election leave me better off? FT writers examine the party manifestos to see which will have the biggest impact on your personal finances.

Join us on July 5 at 13:00 UK (GMT+1) when Political Fix podcast host Lucy Fisher will dissect the election outcome with Inside Politics author Stephen Bush, political editor George Parker and columnists Robert Shrimsley and Miranda Green. Register and put your question to the panel.

A European Central Bank official dismissed the idea of using emergency powers to intervene in the French bond market after the announcement of a snap parliamentary election caused a debt sell-off. French stocks have just had their worst week since 2022 over fears of a populist poll win.

Need to know: global economy

China opened an anti-dumping investigation into EU pork imports, increasing trade tensions just a few days after Brussels said it would impose tariffs on electric vehicle shipments from China. Fresh data underlined the challenges facing Chinese policymakers as growth in industrial output slowed and property prices fell sharply.

Australia’s trade with China meanwhile has hit record levels, despite wider tensions in the region, as relations between the two countries recovered after a damaging dispute sparked by the pandemic.

Pakistan, the fourth-largest exporter of rice, is selling record amounts to global markets as it profits from trade restrictions introduced last year by India, the world’s biggest. The windfall is sorely needed in a country beset by weak economic growth and double-digit inflation.

Need to know: Business

Global defence companies are hiring at the fastest rate since the end of the cold war as order books overflow, according to an FT survey. Governments around the world have ramped up military spending since Russia’s full-scale invasion of Ukraine and amid widespread geopolitical tensions

US bosses’ pay is rising at the fastest rate in 14 years, according to official data which critics say risk worsening social inequality. A key example is last week’s victory by Tesla chief Elon Musk in securing a $56bn package of stock options — the largest in US history.

Chilean state-owned Codelco, the world’s biggest copper miner, said it could reverse a severe production slump that has hit 25-year lows just as global demand surges. The head of Freeport, the third-biggest copper producer, said oil and gas-style industry consolidation was vital for the clean energy transition.

Japan’s TDK claimed a breakthrough in its small solid-state batteries. The Apple supplier said new material provided an energy density — the amount that can be squeezed into a given space — about 100 times greater than its current battery.

The World of Work

Companies have been busy trumpeting their enlightened approach to mental health in the workplace. A new report however suggests fear of discrimination means many workers are still nervous about revealing the nature of their problems.

One of the drivers of mental ill health is excessive working hours, especially in sectors such as banking, where senior and junior staff alike are feeling the burden of rising workloads and demands amid intense competition.

Could discrimination against working class accents when it comes to Britain’s top jobs finally be on the way out? Big banks and City law firms are among those employers attempting to address the problem,

Business leaders are stepping up efforts to manage Gen Z workers, a cohort, according to a new survey, that is more engaged with social and political causes. 

Ever thought of WFH (working from hairdressers, that is)? Salons are busy installing power sockets and creating quiet areas for remote working in a bid to draw back customers.

Some good news

Today is World Day to Combat Desertification and Drought. Amid dire warnings about the state of the planet, there is however a glimmer of hope: sustainable sources of energy, including solar and wind power, can help reverse the process, the UN says.