Economists explain why AI-era falling labor share and rising wages aren't in tension
Afinetheorem · x · 2026-09-22
An economics thread on AI's distributional effects: a falling labor share and rising wages are not in tension — in fact, that's what we should expect when the capital share rises.
- Long run, capital supply is perfectly elastic at a gross return set by depreciation and the discount rate; households accumulate capital until returns revert there
- Labor supply is far more inelastic, so gains from a technology making capital more important flow to the inelastic factor: labor
- Summed up with Ricardo's classic point: "scarce factors get the rent" — and that's labor
A useful frame for reasoning about AI's impact on jobs and income distribution.
Related event: Economists Debate Whether AI-Hit Labor Share Still Benefits Workers(4 posts)→
More from AGI Musings
- Investor: AI diffusion will be slowest in consumer software — Oura, Strava, Labcorp still have no real AI strategy — MartinGTobias · 2026-11-12
- On AI Progress: When Models Lag on Your Load-Bearing Skill, You Can't See Them Improving — dfrsrchtwts · 2026-11-12
- Slack's David Hoang: agents beat people on coordination, proposes 'boundary agents' — davidhoang · 2026-11-12
- CS student mourns coding flow states he'll never experience in the AI era — chrissyykat · 2026-11-12
- Ford's 370% Turnover Led to $5 Days — But ASI Never Quits — krishnan · 2026-11-12
- Against 'verifiable vs. fuzzy': the real axis is how expensive tasks are to grade — dfrsrchtwts · 2026-11-12