Artificial intelligence “Substantially reduces wage inequality while increasing average wages by 21 percent,” according to a new working paper co-authored by an assistant professor at Stanford University.
The article released this week by Lukas Althoff, titled “Task-specific technical change and comparative advantage” and co-written with Hugo Reichardt, an affiliated professor at the Barcelona School of Economics, he said: “Artificial intelligence is changing what tasks workers perform and how they perform them.”
‘Predicting it labor market Their implications require understanding how technical changes affect workers’ productivity in different tasks, how workers adapt by changing occupations and acquiring new skills, and how wages adjust in general equilibrium. We introduce a dynamic task-based model in which workers acquire multi-dimensional skills that shape their comparative advantage and, in turn, their career choices,” the report said.
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A silhouette of a team of engineers and workers at a construction site and an artificial intelligence logo. A new working paper stated that AI “substantially reduces wage inequality while increasing average wages by 21 percent.” (iStock / iStock)
“We use the quantified model to study the impact of generative AI through augmentation, automation, and a third and new channel – simplification – that captures how technologies change the skills needed to perform tasks. Our key finding is that AI substantially reduces wage inequality while increasing average wages by 21 percent,” the researchers write.
“AI’s equalizing effect is driven entirely by simplification, allowing workers of different skill levels to compete for the same jobs. We show that the model’s predictions are in line with recent labor market data,” she added.
White House AI and cryptocurrency czar David Sacks said on X that the findings are a “narrative violation.”
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The researchers say that simplification resulting from the use of AI “increases the relative productivity of lower-skilled workers in tasks and occupations that were previously the domain of higher-skilled workers.”
“This reduction in skills-based barriers is the most important force for reducing inequality,” they said.
“Second, we find that AI generates significant welfare gains for almost all workers when entering the labor market. We estimate that the welfare improvements for most workers are equivalent to permanent wage gains of 26-34%,” the paper continues.
David Sacks, the White House Artificial Intelligence (AI) and Crypto Czar, during the White House Digital Assets Summit in the State Dining Room of the White House in Washington, DC, on March 7, 2025. (Chris Kleponis/CNP/Bloomberg via Getty Images/Getty Images)
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“Our third key finding is that the impact of AI – together with employee responses to it – is significantly changing the situation professional landscape. AI generates a large redistribution of employment between occupations,” they also said. “For example, administrative occupations (e.g. financial administrators) are seeing large declines in employment, while scientific occupations (e.g. life scientists) are expanding. On average, wages are rising, but some professions – such as architects, engineers and managers – are seeing absolute wages fall. In many cases, the occupations that see the greatest employment gains are also the occupations for which relative wages decline the most.”
