Abstract

This paper explores how the continuous evolution of AI exacerbates income inequality through three mechanisms: job displacement, skill premium, and monopoly. The Job displacements are occurring in low-skilled jobs and progressively affecting medium-skilled positions. Yet high-skilled jobs are capturing the excess dividends brought by AI innovation. In addition, the AI industry is monopolistic, in part because of the tremendous capital investment required. Both the high capital expenditure and high return are leading to a self-strengthening relationship between AI development and capital accumulation, ultimately resulting in excessive concentration of wealth. To address the growing income inequality, the government should strengthen legislation like special taxes for AI companies and compensation for non-AI labors, the Tech Giants should aim to increase social productivity and welfare as well as limit unequal labor substitution. Furthermore, education should be enhanced so that more people can reap the benefits of these technological developments.

Keywords: Artificial Intelligence, income inequality, Gini Index, job displacement, skill premium, monopoly

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