AI benefits capital owners more than workers

Hi,

AI benefits capital owners more than workers

AI is reducing labour’s share of total income, new research from Vienna University of Economics and Business (WU Wien) has found.

In a study of European regions, Klaus Prettner, Professor of Macroeconomics at WU Wien, and his fellow researchers found that with every doubling of regional AI innovation, the share of income going to workers declines by between 0.5% and 1.6%.

Overall, observed levels of AI innovation can explain a reduction in workers’ share of income of up to 0.31 percentage points since 2000.

The effect is mainly driven by worsening wage and employment conditions for high-skill labour, and less so by wage compression for medium- and low-skill labour.

The results of the study show that the benefits of AI are not evenly distributed, with the gains going disproportionately to capital owners, while workers, particularly those in high- and medium-skill occupations, experience declining income shares.

”This study challenges the wide-held assumption that AI benefits skilled workers the most”, says Professor Prettner. ”Instead, it reveals that AI-driven automation often substitutes for cognitive tasks typically performed by medium- and high-skill workers, reducing their wage growth and their job security. By contrast, low-skill workers, though facing lower wages, may see modest gains in employment due to demand for roles that are difficult to substitute by AI systems.”

The authors note that without policy intervention, technological progress could further entrench regional and social divides, deepening inequality across Europe.

The peer reviewed version of the study appeared in the European Economic Review and is available open access here: www.sciencedirect.com/science/article/pii/S0014292125000935

/ENDS

For more information, a copy of the report, or to speak to the researcher, contact Thomas Willis at BlueSky Education on thomas@bluesky-pr.com or call +44 (0)1582 790 706.