current
Capital vs. Labor Dynamics
The power dynamic between capital and labor is shifting, with implications for wage growth, income inequality, and the effectiveness of monetary policy.
Timeframe
long-term
Detailed Analysis
The report discusses the increasing dispersion in wage and productivity growth, rising market concentration, and the potential for AI to exacerbate these trends. It highlights the importance of the elasticity of substitution between labor and capital in determining the impact of technological change on employment. While acknowledging the risk of job displacement due to AI, the report also notes studies suggesting that AI could lead to job creation and boost overall employment. The report emphasizes the need for well-managed innovation to maintain public trust in capitalism.
Context Signals
De Loecker et al. (2022) found increasing dispersion in wage and productivity growth, rising mark-ups, and increasing market concentration.
Eloundou et al. (2023) estimate that around 80% of the US workforce could have at least 10% of their work tasks affected by LLMs.
Gechert et al. (2022) found a lower elasticity of substitution between labor and capital than previously estimated, suggesting a limited ability to replace labor with capital.
Edge
The impact of AI on labor markets will depend on the specific tasks involved and the degree to which AI complements or substitutes human labor.
Policymakers' responses to rising income inequality and potential job displacement will be crucial in shaping the future of work and the social acceptance of AI.
Investors should consider the potential for social and political backlash against AI if it leads to widespread job losses and exacerbates existing inequalities.
