AI is ‘increasing average wages by 21 percent,’ finds a new Stanford paper
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Artificial intelligence “significantly reduced wage inequality while raising average wages by 21 percent,” according to a new working paper co-authored by an assistant professor at Stanford University.
A paper released this week by Lukas Althoff, titled “Task-Specific Technical Change and Comparative Advantage” and co-authored by Hugo Reichardt, associate professor at the Barcelona School of Economics, said, “Artificial intelligence is changing what tasks workers do and how they do them.”
“It’s predictable labor market outcomes require an understanding of how technological change affects worker productivity in all occupations, how workers adapt by changing jobs and acquiring new skills, and how wages are adjusted in general equilibrium. We introduce a flexible work-based model where workers accumulate various skills that shape their comparative advantage and, in turn, their career choices,” it said.
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Silhouette of an engineer and a team of workers at a construction site and an artificial intelligence logo. A new working paper announced that AI “significantly reduces wage inequality while increasing average wages by 21 percent.” (iStock / Stock)
“We use a limited model to study the impact of AI on productivity through augmentation, automation, and a third channel – simplification – that captures how technology changes the skills needed to perform jobs. Our key finding is that AI significantly reduces wage inequality while increasing average wages by 21 percent,” the researchers wrote.
“The measurement effect of AI is fully driven to simplify, which allows workers of all skill levels to compete for the same jobs. We show that the predictions of the model are consistent with the latest data of the labor market,” he added.
White House AI and cryptocurrency czar David Sacks told X that the findings are a “narrative breach.”
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Several AI applications can be seen on the smartphone screen, including ChatGPT, Claude, Gemini, Perplexity, Microsoft Copilot, Meta AI, Grok and DeepSeek. (Philip Dulian/dpa/Getty Images/Getty Images)
The researchers said the simplification brought about by the use of AI “increases the relative productivity of low-skilled workers in jobs and occupations that were previously the domain of high-skilled workers.”
“This reduction of skill-based barriers is a key force in reducing inequality,” they said.
“Second, we find that AI produces significant social benefits for almost all workers upon entering the labor market. We estimate social improvements equivalent to permanent wage gains of 26-34% for most workers,” the paper continues.
David Sacks, White House Artificial Intelligence (AI) and Crypto czar, during the White House Digital Assets Summit in the State Dining Room of the White House in Washington, DC, on March 7, 2025. (Chris Kleponis/CNP/Bloomberg via Getty Images/Getty Images)
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“Our third key finding is that the impact of AI – and employees’ responses to it – is profoundly transformative workplace. AI is causing a major redistribution of work across occupations,” they further state. “For example, administrative occupations (eg, financial clerks) are seeing a sharp decline in employment, while scientific occupations (eg, life scientists) are increasing. On average, wages are rising, but some occupations – such as architects, engineers, and managers – are seeing an overall decline in wages. In most cases, the occupations with the greatest employment gains are those with the greatest relative wage declines.”
