We witnessed the boom of artificial intelligence (AI) in 2025, which shows no signs of slowing down yet. From simple web searches to complicated medical diagnoses, AI has significantly influenced the ways we use the internet. Earlier, this new technology was a topic of discourse and discussion among a group of tech geeks, but it has deeply disseminated into society, as now even a school-going student uses AI to learn and understand various subjects.
This level of immense influence by AI has greatly affected workplaces as well. According to a report by the International Monetary Fund (IMF), the global labour market is undergoing a seismic shift, which is enriching those with technical expertise while simultaneously hollowing out the traditional middle class. It mentions that the rapid adoption of AI has created a skill paradox, under which new technologies are driving up wages for a few while failing to generate broader employment growth for others.
The report emphasises that without urgent policy intervention, the AI revolution could create a permanent divide in the global economy.
After analysing millions of job postings, the IMF report claims that new skills in technical competencies like cloud computing and data architecture, which were rare just a decade ago, now appear in 10 per cent of all job vacancies in advanced economies. The financial rewards for workers who have mastered these new skills are staggering. For instance, in the United Kingdom (UK), job postings requiring four or more of these competencies showcased a 15 per cent wage premium, while in the United States (US), the premium sits at approximately 8.5 per cent.
The AI Paradox
The most shocking finding in the report is the “negative employment spillover” for AI-specific roles. Traditionally, when a high-skill industry grows, it creates a multiplier effect, meaning high earners spend money locally, creating 1.3 new jobs for every 1 per cent increase in skilled postings. However, AI-heavy sectors are not following this trend.
The report highlights that in regions where AI demand is highest, employment in “vulnerable” occupations—such as administrative support and routine technical roles—was 3.6 per cent lower after five years. This suggests that AI acts as a wedge, which empowers the most productive workers at the top and increases demand for low-skill manual services at the bottom, but it effectively hollows out the middle of the workforce.
The Broken Career Ladder
The report discusses the looming crisis for young professionals. Generative AI is now capable of performing entry-level tasks—such as basic coding, drafting memos, and data entry. Historically, these served as the first rung of the career ladder for young professionals.
By automating these job roles, companies risk a scarring effect on a generation of graduates who can no longer find the junior positions, which are necessary to gain the experience required for senior-level roles.
The Global Skill Imbalance
To help governments respond, the IMF introduced a Skill Imbalance Index that categorises nations by their readiness:
- The Innovators (like the US and Sweden): These countries have a massive demand for AI skills but a shortage of trained workers. Their priority must be overhauling STEM education.
- The Talent Hubs (like Ireland, Finland, and Australia): These nations have a high supply of skilled graduates but lack the domestic business demand to keep them. They risk a “brain drain” unless they foster more local innovation.
- The Developing Gap: Emerging economies face a “double whammy” of low supply and low demand, risking a permanent digital divide.
The report compares the US and German labour markets to show how different laws change the outcome. In the US, a 1 per cent increase in new-skill job postings led to a 2.3 per cent wage gain and a 1.3 per cent employment boost. In Germany, however, wages only rose by 0.9 per cent, and employment didn’t move much at all.
The IMF attributes this to “structural rigidities”—meaning Germany’s stronger worker protections make it harder for the market to shift as fast as the US, protecting old jobs but slowing down the creation of new ones. For countries like Finland and Ireland (Talent Hubs), which have plenty of educated people but not enough AI jobs, the IMF recommends:
- Access to Credit: Helping small local startups get loans so they can hire the talent that is currently moving to the US.
- Merger & Acquisition (M&A) Monitoring: Ensuring that global tech giants don’t just “acqui-hire” (buy out) local startups, which drains the local economy.
The Return on Education
The report confirms that the supply of these skills is almost entirely tied to tertiary education (college degrees), specifically in STEM and IT. However, the IMF found that IT skills are now required in every field. Even in healthcare and social work, the ability to “handle and analyse large data” is becoming a requirement for the highest-paying job roles.
Kristalina Georgieva, Managing Director of the IMF, emphasised that the outcome of the AI revolution is not destiny, but a policy choice. The report urges world leaders to redesign education by moving away from traditional models toward lifelong learning. It also calls for modernising safety nets with portable benefits that follow workers between jobs and improving labour mobility by eliminating non-compete agreements.
Ultimately, AI should complement human elements rather than entirely replace them. So, finding out that balance remains the defining challenge of this decade.