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.
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