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News from EPI The pressing threat to workers isn’t AI, it’s unbalanced employer power in the labor market

Artificial intelligence (AI), like most technological advances that have come before, is unlikely to be a direct threat to the wages and employment of U.S. workers, according to a new Economic Policy Institute report. Instead, the real threat remains an extreme imbalance of power between employers and typical workers that has resulted in rising inequality and sluggish wage growth in recent decades.  

This extreme power imbalance is due to intentional policy decisions—like the decline of unions, the erosion of the federal minimum wage, and a change in macroeconomic policy priorities—not technology. 

Despite claims that accelerating technological change has been a key driver of inequality and sluggish wage growth, most direct measurements of technology’s impact on labor markets (like the pace of productivity growth) show a pronounced slowing of technology’s influence in recent times. Additionally, there is no evidence that technology-induced accelerations of productivity growth have led to worse labor market outcomes—instead, unemployment is lower and wage growth is faster and broader-based when productivity is rising more quickly. Finally, evidence that technological changes have reduced demand for non-college workers and that this is a key player in rising inequality is severely lacking. In short, there is little to fear from the direct effect of technological change on labor markets. 

Like any other technology, AI could be used as a tool for increased employer control of work intensity and wages. It could also be used to boost productivity and make workers’ pay higher and their work lives easier. AI’s uses will hinge entirely on the balance of power in labor markets, not anything intrinsic to the technology.  

“Efforts to blame inequality and unemployment on technology conveniently divert attention from the real cause of rising inequality and weak wage growth: policy failures, including those failing to check excess employer power. The best ‘AI policy’ is boosting workers’ power by improving social insurance systems, removing barriers to organizing unions, and sustaining lower rates of unemployment,” said EPI’s chief economist Josh Bivens, who co-authored the report. 

While it is possible that technology can reduce the demand for specific jobs, these job losses can be more than counterbalanced by increased employment in other sectors, as long as aggregate demand is maintained. 

“Outcomes for workers will not improve unless policymakers get the story right on technology, inequality, and labor market dysfunction,” said Ben Zipperer, EPI senior economist and report co-author. “Policymakers should focus on bolstering workers’ leverage in the labor market to claim any potential gains spurred by AI in the future and to reclaim lost ground from past periods of economic growth.”