Key Takeaways:
- Artificial intelligence (AI) substantially reduces wage inequality while raising average wages by 21 percent, according to a new working paper.
- AI’s equalizing effect is driven by simplification, enabling workers across skill levels to compete for the same jobs.
- The use of AI increases the relative productivity of lower-skill workers in tasks and occupations that were previously the territory of higher-skilled workers.
- AI generates sizable welfare gains for almost all workers at labor market entry, with estimated welfare improvements equivalent to permanent wage gains of 26-34% for most workers.
- The impact of AI significantly alters the occupational landscape, with some occupations experiencing large declines in employment and others seeing significant expansions.
Introduction to Artificial Intelligence in the Medical Field
The application of artificial intelligence in the medical field has been a topic of discussion on FOX Business’ Geri Willis and ‘The Big Money Show’ panel. The use of AI in healthcare has been gaining popularity, with people flocking to the technology for health information. According to a new working paper co-authored by an assistant professor at Stanford University, Lukas Althoff, "Artificial intelligence is changing which tasks workers do and how they do them." This paper, titled "Task-Specific Technical Change and Comparative Advantage," explores the impact of AI on the labor market and its effects on wage inequality and average wages.
The Impact of AI on Wage Inequality and Average Wages
The researchers found that AI "substantially reduces wage inequality while raising average wages by 21 percent." As stated in the paper, "We use the quantified model to study generative AI’s impact via augmentation, automation, and a third and new channel — simplification — which captures how technologies change the skills needed to perform tasks. Our key finding is that AI substantially reduces wage inequality while raising average wages by 21 percent." This is a significant finding, as it suggests that the use of AI can have a positive impact on the labor market, reducing inequality and increasing average wages. According to the researchers, "AI’s equalizing effect is fully driven by simplification, enabling workers across skill levels to compete for the same jobs."
Simplification and Its Effects on the Labor Market
The researchers explain that simplification brought on by the use of AI "increases the relative productivity of lower-skill workers in tasks and occupations that were previously the territory of higher-skilled workers." As they note, "This lowering of skill-based barriers is the key force reducing inequality." This means that AI is making it possible for lower-skilled workers to compete with higher-skilled workers for the same jobs, which can help to reduce wage inequality. The researchers also found that AI generates sizable welfare gains for almost all workers at labor market entry, with estimated welfare improvements equivalent to permanent wage gains of 26-34% for most workers.
The Occupational Landscape and AI
The impact of AI on the occupational landscape is significant, with some occupations experiencing large declines in employment and others seeing significant expansions. According to the researchers, "AI generates a large reallocation of employment across occupations." For example, administrative occupations such as financial clerks may see a large decline in employment, while science occupations such as life scientists may expand. As the researchers note, "On average, wages rise, but some occupations — such as architects, engineers, and executives — see absolute wage declines. In many cases, the occupations that experience the largest employment gains are also those for which relative wages decrease the most."
Reaction to the Findings
The findings of the paper have been met with interest and surprise by some experts. White House AI and cryptocurrency czar David Sacks said on X that the findings are a "narrative violation." This suggests that the results of the paper challenge the common narrative that AI will lead to significant job losses and increased inequality. Instead, the paper suggests that AI can have a positive impact on the labor market, reducing inequality and increasing average wages. As the researchers conclude, "Our third key finding is that AI’s impact — together with workers’ responses to it — significantly alters the occupational landscape."
https://www.foxbusiness.com/economy/ai-raises-average-wages-21-substantially-reduces-wage-inequality-researchers-find