The Twin Forces: A Greying Continent and Smarter Machines
Asia, a region that has long been a powerhouse of global growth fueled by abundant labour, is at a turning point. Many of its most advanced economies, such as Japan, South Korea, and China, are facing a demographic cliff. The IMF projects these nations
could see their working-age populations shrink by nearly 25% by 2050. This decline in the workforce threatens to slow down economic growth. At the same time, artificial intelligence is experiencing explosive growth, promising huge leaps in productivity. The IMF's recent book, 'Shaping the Future of Asia,' launched at its annual meetings in Bangkok, identifies these two forces—demographics and AI—as the critical transformations shaping the continent's future.
The IMF's Core Warning: A Widening Divide
The central message from the IMF is that while AI has the potential to offset the economic drag from an ageing workforce, its benefits may not be shared equally. IMF Managing Director Kristalina Georgieva noted that AI could boost annual growth in advanced Asian economies by 0.5 to 1 percentage point, more than making up for demographic pressures. However, there's a significant risk of a widening gap. Advanced economies with strong digital infrastructure and a highly skilled workforce are better positioned to harness AI's benefits. Emerging markets may be left behind, creating greater inequality between nations. Within countries, a similar divide could emerge between workers who can adapt to AI and those who cannot.
Why Older Workers Are Particularly Vulnerable
The headline concern is that older, experienced workers may be the most at risk. The IMF warns that highly skilled workers are more likely to see AI as a tool that complements their abilities, leading to higher productivity and wages. In contrast, workers in roles that can be more easily automated may face displacement. Research shows that younger workers might find it easier to adapt and exploit new AI-related opportunities, while older workers could struggle. This isn't just speculation; some analysis has already shown that in AI-exposed jobs, employment for younger workers is growing while repetitive tasks often performed by a more tenured workforce are decreasing.
The Crucial Question: Augment or Automate?
According to Krishna Srinivasan, director of the IMF's Asia and Pacific Department, the key outcome depends on whether AI is used to 'augment' workers or simply 'automate' their jobs. Augmentation means using AI as a tool to make employees more effective and productive. For example, AI can help a less experienced worker get up to speed faster or handle complex data analysis, freeing up a senior employee for more strategic tasks. The focus, therefore, shouldn't be on replacing humans but on finding ways to integrate AI to boost overall efficiency. Employers seem to be prioritising candidates who can use AI to improve productivity, rather than eliminating roles entirely.
The Solution: A Push for New Skills and Lifelong Learning
To prevent a crisis and instead seize the opportunity, the IMF is calling for massive investment in education, reskilling, and digital infrastructure. The goal is to create adaptable skill sets that can be continually upgraded throughout a worker's career. The types of skills in demand fall into three categories: general AI literacy, specialised skills like prompt engineering, and the ability to integrate AI with a company's internal systems. This requires a coordinated effort from governments, which must expand social safety nets and update education systems, and from companies, which must prioritise training for their existing workforce, especially older employees. The good news, according to the IMF, is that the right reforms can accelerate the positive adoption of AI by a decade or more.
The Indian Context
While India has a much younger demographic profile compared to East Asian nations, with millions of young people entering the workforce, the IMF's warnings are still highly relevant. India's massive services sector, which employs millions in IT and business process outsourcing, is directly exposed to AI's transformative power. IMF research on India has shown that while demand for AI-specific roles comes with a wage premium, it also has a negative effect on the demand for non-AI workers over time. As IMF Managing Director Kristalina Georgieva noted, India is one of the main drivers of growth in AI technology. This makes the need for proactive reskilling and a focus on lifelong learning just as urgent to ensure that the benefits of the AI revolution are shared broadly across all age groups in the workforce.
