“The impact of generative AI, particularly large language models (LLMS), on the U.S. labor market, wages, and economic expectations among college-educated workers. key findings include:
Shift from skill-Biased to Capital-Biased Technical Change: Historically, technological advancements favored college-educated workers, but recent trends indicate a plateau in the college wage premium and increased automation of entry-level professional tasks. Generative Al is automating tasks traditionally performed by college graduates, such as customer support, marketing, software development, consulting, law, and finance.
Functional Income Distribution: The share of national income allocated to labor has been declining since the 1970s, while corporate profits have risen. Generative AI, being capital-intensive, is expected to further shift income from labor to capital, benefiting shareholders and founders of Al-intensive firms.
Productivity Gains Without Wage Growth: Studies show that LLMs improve task-level productivity, especially for mid-skill roles, but these gains have not translated into significant wage increases or employment growth. Firms are capturing the benefits, while workers face stagnant or declining wages.
Impact on Freelance and Entry-Level Jobs: Freelancers In AI-substitutable roles, such as copywriting and coding, have experienced declines in job volume and earnings. Entry-level white-collar positions are under pressure, with young college graduates facing reduced job-finding advantages and slower hiring due to AI-driven automation.
Economic Anxiety Among Young Workers: Surveys reveal widespread concern among young Americans about Al's impact on their job prospects. Many believe AI WIll reduce Job opportunities and view it as a threat to their careers, despite some using AI tools for academic and professional tasks.
College Enrollment and Curricular Adjustments: College attendance has not significantly declined, but there is a shift toward computing-related programs, AI focused curricula, and vocational paths. College education still offers economic advantages, but its role as a safeguard against unemployment is perceived to be weakening.
Macroeconomic Trends: Generative Al is expected to accelerate the long-term trend declining labor income shares and rising capital income. Without institutional changes, productivity gains from Al are likely to benefit capital owners rather that workers.
The labor market is transitioning from a skill-biased to a capital-biased era, with generative AI reshaping the economic landscape. While college-educated workers still enjoy a wage premium, their job security and economic prospects are becoming more precarious. The report also highlights the need for investments in data governance, social protection, and regional cooperation to address the challenges posed by AI, particularly in emerging economies.”