Will artificial intelligence broadly raise living standards or drive income and wealth inequality?
Speech by Mr Michael S Barr, Member of the Board of Governors of the Federal Reserve System, at "Next-gen financial inclusion", the third annual Financial Inclusion Conference hosted by the Federal Reserve Board, Washington DC, 14 July 2026.
The speech focuses on the effects of AI on labour and inequality; it contains no signal on the monetary policy stance.
This speech carries no signal about the monetary policy stance. Its score of zero means "no signal", not "balanced stance", so it is not included in the bank's average score.
Summary
Barr discusses whether AI will raise living standards broadly or deepen income and wealth inequality. He recalls that every major technological leap has had profound effects on the labour market and has created more jobs than it destroyed in the long run, but that during the transition the number of people displaced and the harm they suffer can be large and lasting. Citing the spread of the internet, he says it may have increased inequality while raising productivity, because it disproportionately benefited knowledge-intensive occupations. (BIS publishes only the introductory section of this speech; the full text is in the PDF.)
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Fed (Federal Reserve) · United States
Introductory section of the speech
Source: Board of Governors of the Federal Reserve System. The text is in the public domain. The text was extracted automatically from the publisher's PDF or web page; only line breaks were adjusted. Footnotes and tables may have turned into plain text — see the source for the official text.
I am grateful for the opportunity to speak to you. Our focus in this conference is financial inclusion, and something that will likely have great consequences for financial inclusion and our economy more broadly in the years ahead is artificial intelligence (AI). As I have explored in a number of speeches over the past several years, AI has the potential to transform lives and the U.S. economy, possibly empowering workers to be more productive, with lower- and middle-income workers benefiting the most. But it is also the case that AI may instead exacerbate inequality, eliminating some lower- and middle-income jobs while boosting the income and wealth of higher-income individuals. Since we don't know which of these futures will come about, it is useful to use potential scenarios, as I've done previously with respect to AI and the economy.
Every major technological advance has had profound effects on labor markets and the economy. Many workers have suffered from these technological changes, while many other workers have seen new opportunities emerge. In the long run, technological advances tend to broadly raise living standards by creating more jobs than they destroy and increasing productivity. But transitions and outcomes can vary, and in the period following the mass adoption of a general-purpose technology-such as electricity, the telephone, and internet-enabled personal computers-the number of people dislocated and the extent of the harm they may suffer can be large and persistent.
Balancing those scales of costs and benefits involves examining whether the benefits are broadly shared or concentrated. Past experience has shown that technological leaps forward can raise living standards. But when the benefits are concentrated among relatively few people, technology can widen inequalities of income and wealth, especially during the transition period. Widespread adoption of the internet raised the productive capacity of our economy and broadly raised living standards, but it also likely exacerbated inequality because it benefited information-intensive jobs (such as accountants) more than other jobs (say, construction workers).