‘I don’t think there’s a floor’: Workers’ share of America’s income is at a record low before the AI boom even begins
EY-Parthenon chief economist Gregory Daco says that the economy’s surprising productivity gains so far predate AI.
Chief economist Gregory Daco of EY-Parthenon warns that the prosperity from the AI productivity boom may not be evenly distributed. While corporate profit margins are reaching record highs and the productivity growth has protected margins, the labor share of income has hit a record low of 52.8%. Daco suggests that as long as gains continue to be concentrated on the capital side, labor's share could continue to decline.
This technological revolution, like previous ones, may initially benefit large, vertically integrated firms while smaller ones face persistent cost pressures. The AI boom is expected to require massive data center investments, which are primarily capital-intensive and imported. While GDP accounting shows positive effects, the net contribution to GDP from these imports is zero.
As a result, GDP growth has been modest despite booming capital spending. The article raises concerns about the distribution of income and the potential fiscal implications, as increasing wealth concentrates in the hands of owners of data centers and shareholders, leaving little for workers.
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