"A new Brookings Institution paper suggests that the artificial intelligence revolution may unfold like a classic boom-and-bust cycle - albeit not in markets, but in wages. At first, automation could boost pay as workers become more productive alongside smarter tools. However, as AI systems master more tasks, the demand for human workers in those areas could decline, potentially pushing people into lower-value or slower-growing jobs - and erasing those early gains."
"To illustrate how the AI era might unfold, the researchers developed an interactive model that traces the transition from human-led to machine-led intelligence. It charts a sharp early rise in wages as AI boosts productivity, followed by a plateau and then a decline once automation spreads. Output continues to rise, even as pay slips, revealing how the gains increasingly flow to capital rather than labor. As more cognitive work is automated, humans shift to slower-growing physical jobs - from construction to caregiving - which drives wages down."
AI-driven automation can produce a hump-shaped wage path: an early wage surge as workers become more productive alongside smarter tools, followed by a plateau and decline as automation spreads. Overall economic output can continue rising while wages fall, concentrating returns to capital rather than labor. As cognitive tasks are automated, displaced workers tend to move into slower-growing physical occupations such as construction and caregiving, reducing aggregate wage growth. Model simulations tracing the shift from human-led to machine-led intelligence generate these dynamics, showing initial productivity gains give way to widespread labor displacement and lower labor share.
Read at Business Insider
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