The last decade has seen impressive advances in Artificial Intelligence (AI). This rapid progress has been accompanied by, amongst others, concerns about the possible effects of AI on the labour market, including on wages and inequality between workers; concerns that have come to a head since the public launch, in late 2022, of generative AI systems.
This paper looks at the links between AI and wage inequality across 19 OECD countries. It uses a measure of occupational exposure to AI derived from that developed by Felten, Raj and Seamans (2019[1]) – a measure of the degree to which occupations rely on abilities in which AI has made the most progress. This measure, which allows for variations in AI exposure across occupations within countries, as well as across countries for a given occupation, is matched to data from the Structure of Earnings Survey (SES) and the US Current Population Survey (CPS) to analyse the relationship with wage inequality.
The results provide no indication that AI has affected wage inequality between occupations so far (over the period 2014-18). At the same time, there is some evidence that AI may be associated with lower wage inequality within occupations – consistent with emerging findings from the literature that AI reduces productivity differentials between workers. However, this does not appear to affect the gender or age wage gaps within occupations.
The analysis covers a period when AI adoption was still relatively low and also excludes recent advances in AI. GPT-3, an AI model that made headlines at the end of 2022 for its performance in natural language processing, is a striking example of how AI development and adoption are accelerating. Extrapolating the findings of this paper to the current context should therefore be made with caution. This also highlights the need to keep monitoring the impact of AI on wages and inequality, as the full effect may not be observable yet.
Further research is also needed to identify the exact mechanisms driving the negative relationship between AI and wage inequality within occupations. One possible explanation is that low performers (i.e. workers with low productivity) have more to gain from using AI because AI systems are trained to embody the more accurate practices of high performers. It is also possible that AI reduces performance differences within an occupation through a selection effect, e.g. if low-performers leave their job because they are unable to adapt to AI tools by shifting their activities to tasks that AI cannot automate.
Chosen excerpts by Job Market Monitor. Read the whole story @ Artificial intelligence and wage inequality | en | OECD
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