As GenAI continues to make large strides in adoption and diffusion, one of the most pressing concerns is that its benefits may not be shared equitably. GenAI could exacerbate two types of inequalities: 1) inequality in the distribution of national income between corporate profits and labor, and 2) inequality in the distribution of income across workers and households.
A smaller slice of the GenAI pie
As GenAI technologies spur greater productivity gains, most of the increase in business output will be split between workers in the form of wages (labor share) and businesses in the form of profits (profit share). In advanced economies, this split has become increasingly unequal in recent decades, with the labor share declining markedly since the late 1990s. In the US, it reached a record low of 52% of GDP in 2022 as the profit share reached record-high levels of around 13%. This well-documented secular trend has been attributed to a combination of factors, including technological innovation and automation — with the International Monetary Fund (IMF) estimating that half of the decline in the labor share in advanced economies can be explained by technological change — and, more recently, industry concentration and market power.3
Like prior technological innovation, GenAI will likely exert downward pressure on the labor share. As organizations adopt and absorb the new technologies, they will most likely increasingly substitute capital for labor. This would likely lead to lower labor demand and wage growth amid reduced workers' bargaining power. Elevated market concentration, as the GenAI market becomes increasingly dominated by a small number of large businesses, will also tend to generate higher markups and result in a growing fraction of productivity gains going to corporations.