AI could shrink paychecks but stretch them further, a Yale economics professor says

According to Yale economics associate professor Pascual Restrepo, the rise of artificial intelligence (AI) could lead to decreased paychecks for workers, but it may also enhance their purchasing power. Restrepo, who specializes in the effects of technology on labor markets and economic growth, argues that the common perception of wage reduction is too simplistic. "People often assume that if AI can perform a job for ten dollars an hour, then that will be the new wage, leading to a decline in quality of life," he explained in a recent interview with Yale University. He emphasized that the key factor is not just the wage itself, but rather what individuals can afford with that wage. Restrepo highlighted that if AI becomes proficient in tasks such as research and education at lower costs, it could lead to a significant reduction in the prices of various goods and services. Consequently, even if nominal wages decline, workers might find that their buying power increases. Experts in the field have been discussing the implications of AI on wages. Ioana Marinescu, from the University of Pennsylvania, pointed out that wages might decline when approximately 37% of intelligence tasks are automated. This tipping point could signal a shift where automation begins to replace human workers instead of simply augmenting their roles. In a recent post on X, former Salesforce AI CEO Clara Shih echoed these concerns, noting that historical trends show wage reductions are often a more prevalent consequence of technological advancements than outright job losses. While Restrepo acknowledges these challenges, he also views AI as a transformative force that could reshape the economy by influencing both earnings and prices. He warned of a more pessimistic outcome where only a limited number of jobs are affected, potentially leading to falling wages without corresponding decreases in living costs, which would leave those workers in a worse financial position. Currently, Restrepo describes the labor market as being in a "wait-and-see" state, where companies are experimenting to determine the best ways to integrate AI into their operations.