The hidden AI risk for workers isn't just unemployment — it's a pay cut, former Salesforce AI CEO says

As the initial surge in wages driven by AI technology begins to wane, concerns are rising about a potential decline in pay across various sectors. Clara Shih, the ex-CEO of Salesforce AI, emphasizes that while job displacement will occur in some areas, a more pervasive risk for workers is the possibility of reduced salaries. In a recent post on X, Shih elaborated on three mechanisms through which emerging technologies can exert downward pressure on wages. One significant factor is what she describes as an "intra-sector squeeze." This phenomenon occurs when workers displaced in a particular industry compete for a limited number of remaining jobs, leading to decreased wages. Shih referenced the manufacturing sector's struggles post-2000s trade shocks, where the closure of factories and automation resulted in a substantial loss of jobs, with around 5.5 million positions disappearing between 2000 and 2017 according to the US Bureau of Labor Statistics. Shih also highlighted how technology can lower the barriers to entry for jobs that were once highly specialized. For instance, in the past, London taxi drivers underwent a demanding process called "The Knowledge," which required extensive memorization of city streets. However, the advent of GPS and ride-hailing services has diminished the necessity for this expertise, leading to increased competition among drivers and ultimately, lower wages. Moreover, Shih pointed out that high-skill workers transitioning to new fields after job loss often accept lower-paying positions, which can further exacerbate wage decline in those sectors. She stresses the importance of not evaluating AI's impact solely on job losses but also considering its effects on wage trends. In a related discussion, Ioana Marinescu, an associate professor at the University of Pennsylvania, noted that AI might soon reach the peak of its wage-enhancing effect. According to her research, wage growth could start to decline once automation reaches approximately 37% of cognitive tasks. Currently, over 14% of these tasks have already been automated, suggesting that the advantageous period of AI-influenced pay increases might be drawing to a close sooner than anticipated.