Fed’s Barr: US should prepare for ’serious’ AI job disruption, widening inequality

Federal Reserve Governor Michael Barr cautioned on Thursday that the United States must prepare for substantial short-term disruptions to the job market due to artificial intelligence (AI). Dependent on the speed of AI deployment, the technology could start displacing workers at scale and exacerbate inequality, favoring investors, Barr suggested.

His remarks came following midterm elections that saw a backlash against the rapid AI development, and precede a public Federal Reserve forum in San Francisco on Monday, where a task force led by Fed Chairman Kevin Warsh will examine the technology's potential impact on the economy. Barr emphasized that the consequences remain unclear, depending on factors such as continued competition among AI firms, which could make the technology affordable and widely accessible, similar to the internet's democratizing effects.

Alternatively, AI could concentrate market power among a few winners, increasing inequality and reducing labor's share of national income. Despite limited worker displacement so far, Barr noted that AI's impact might be a labor substitute in some sectors, particularly for younger, less-experienced workers. If labor market changes are swift, workers might struggle to adapt, resulting in significant dislocations.

The concentration of market power could contribute to a widening of inequality, challenging the American Dream.