KISDI Finds AI Expansion Widens Wage Inequality While Linkages Between AI R&D Investment and National Strategy Remain Limited (detail)

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KISDI Basic Research (25-17): The Socioeconomic Impacts of ICT Innovation

KISDI Finds AI Expansion Widens Wage Inequality While Linkages Between AI R&D Investment and National Strategy Remain Limited
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Policy Implications for Responding to the Economic and Social Impacts of AI Expansion

- Tailored policy measures to address wage inequality by industry characteristics
- Stronger medium- and long-term support to enhance the impact of AI adoption in manufacturing
- A need to reassess the linkage between AI R&D investment and national strategic priorities

The Korea Information Society Development Institute (KISDI, President Sangkyu Rhee) recently published its Basic Research Report (25-17), *The Socioeconomic Impacts of ICT Innovation*.

The report examines the effects of artificial intelligence (AI) on wage inequality in the labor market as well as on firm and industry performance. It also assesses the alignment between national AI research and development (R&D) investment and government policy, and presents policy recommendations based on the findings.

As AI innovation has emerged as a key driver of economic growth and a strategic factor shaping technological competitiveness and national security, the importance of effective policy design to strengthen national competitiveness has increased. Against this backdrop, the study provides empirical evidence on whether the economic growth and social benefits generated by AI are being distributed broadly across workers and firms, and whether national strategies and policies effectively support AI-driven technological innovation.

The analysis found that the expansion of AI is associated with widening wage inequality in the labor market, while the alignment between national AI R&D policies and actual investment remains limited.

The labor market analysis showed that wage inequality tended to increase in industries with higher levels of AI adoption. The impact of AI was concentrated primarily at the upper and lower ends of the wage distribution rather than across the entire wage spectrum. In addition, industries with greater AI exposure experienced faster growth in average wages, indicating an expanding AI-related wage premium.

The analysis of firm and industry performance found that the effects of AI adoption varied across industries. In the service sector, AI adoption was associated with statistically significant increases in sales and profits after a certain time lag. In contrast, the effects of AI adoption in the manufacturing sector were statistically insignificant or remained uncertain.

The analysis of the relationship between national R&D strategies and government investment found that the alignment between AI policy objectives and actual R&D investment was not sufficiently strong. Only about 12.73% of the budget allocated to national AI R&D projects was devoted to projects that showed a high degree of alignment with government policy objectives. The report suggests that institutional mechanisms are needed to better reflect national strategic priorities in R&D budget allocation. It identifies several factors contributing to this limited alignment, including fragmented R&D planning across ministries and programs, project selection practices focused on short-term outcomes, and structural limitations that prevent high-level strategic objectives from being translated into measurable implementation criteria.

Based on these findings, the report recommends policy measures including tailored responses to wage inequality reflecting industry characteristics, stronger medium- and long-term support that takes into account the time lag in realizing the benefits of AI adoption in manufacturing, and the establishment of institutional mechanisms to systematically incorporate national AI strategic priorities throughout the planning, selection, and evaluation of AI R&D projects.

Choi Jieun, Research Fellow at KISDI, noted that the study provides a comprehensive analysis of AI's impact across society and the economy. She added that the findings can serve as a useful reference for identifying policy issues requiring further discussion to support sustainable development as AI innovation continues to accelerate.

The report is available for download from the KISDI website (www.kisdi.re.kr).

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KISDI Finds AI Expansion Widens Wage Inequality While Linkages Between AI R&D Investment and National Strategy Remain Limited