AI is often viewed as a catalyst for widening wealth inequality, but rising wages at the top end of the economic spectrum could spill over to benefit all income levels, argued Kristalina Georgieva, managing director of the International Monetary Fund. 

In a panel conversation on the closing day of the World Economic Forum in Davos, Switzerland, Georgieva described AI as a “tsunami” hitting the labor market, with the potential to transform or eliminate 60% of jobs in advanced economies and 40% globally. However, she noted that for a specific segment of the workforce, AI-driven productivity gains at the top could translate into increased demand for services at the bottom.

The “Spillover” Argument

The core of Georgieva’s optimistic outlook for low-wage earners lies in the increased spending power of AI-enhanced professionals. As high-skilled workers become more productive and see their wages rise, their consumption patterns shift, benefiting the local service economy.

Georgieva detailed this phenomenon during the panel:

“One in 10 jobs is already enhanced [by AI],” she said. “And the people in these jobs are paid better. When they’re paid better, they spend more money in the local economy. They spend more money in restaurants here, there. Demand for low-skilled jobs goes up. And actually total employment seems to slightly increase because of it.”

There is evidence that AI exposure could amount to higher wages in certain jobs. A PwC survey last year, based on an analysis of nearly one billion job ads worldwide, found that AI-skilled workers would earn an average premium of 56% over similar jobs that did not require AI skills. And the economic spillover effect, where rising wages and productivity translate to a rise in service sector jobs as high earners spend more money locally, is well-documented. Studies in San Francisco, for instance, have found that for each new local tech job, 4.4 new jobs are created for positions such as retail clerks, cooks, teachers and dentists.

Despite this potential silver lining, Georgieva warned of an “accordion of opportunities that is open to some and not others”—a risk where the gap between the winners and losers of the AI revolution expands rapidly. While the top tier of workers sees wage growth and the bottom tier sees increased demand for manual or local services, the middle class is getting squeezed.

The IMF’s research indicates two primary areas of concern: One is stagnating middle-class wages, as jobs that are not enhanced by AI are beginning to pay less in relative terms. Another is barriers to youth employment, as AI rapidly eliminates the tasks typically found in entry-level positions, making it harder for young people to enter the workforce in meaningful roles..

A Fragile Global Context

These labor shifts are occurring against a backdrop of moderate economic growth and high debt. While the IMF recently upgraded its global growth projections from 3.1% to 3.3%, Georgieva cautioned against complacency. With global sovereign debt nearing 100% of GDP, she argued that growth is “not strong enough” to carry the heavy burden of debt while simultaneously funding the massive technological transition required by AI.

Other leaders on the panel echoed these concerns regarding wealth distribution. European Central Bank President Christine Lagarde emphasized the need to be “careful about the distribution of wealth” and the widening disparities both within and across countries. Lagarde noted that AI is capital, energy, and data-intensive, meaning its benefits may naturally accrue to those who already control those resources unless cooperative rules are established.

For AI to be a net positive, the panel suggested that global cooperation is non-negotiable. Ngozi Okonjo-Iweala, director-general of the World Trade Organization, noted that while AI could reduce trade costs and boost productivity by 40% by 2040, these gains depend on equal adoption. If the technology remains concentrated in wealthy nations, it will only deepen global inequalities, she said.

Ultimately, Georgieva’s message was a call for urgency. “Wake up,” she urged the audience, “AI is for real and it is transforming our world faster than we are getting a handle.” While economic spillover offers hope for low-skilled labor, she stressed that the world must still develop inclusive guardrails to ensure the AI “tsunami” doesn’t leave the middle class and developing nations behind.

For this story, Fortune journalists used generative AI as a research tool. An editor verified the accuracy of the information before publishing.