How Much Redistribution Will AI Require?
20 days ago
- Labor income equals GDP times labor's share, so a smaller share of a much larger economy can still increase labor income if growth is high.
- Under a 5% annual growth scenario, labor's share can fall to 45% without reducing aggregate labor income after 10 years.
- Under a 10% growth scenario, labor's share could drop to 28% while keeping labor income equal to the no-AI path.
- The required redistribution to keep labor whole is modest when growth is high, e.g., only 5.3% of GDP in the techno-optimist scenario.
- Compensation could come from shifting labor taxes to consumption taxes or other revenue sources, not necessarily raising total taxes.
- Aggregate labor income stability does not protect individual workers; there may still be churn and losses in specific occupations.
- Labor's share alone is a poor indicator of AI's distributional impact; growth rates are equally important.