Labor markets and inequality

Abstract

This chapter examines how artificial intelligence (AI) changes labor markets and the distribution of income. It begins by distinguishing skill-biased, routine-biased, and task-biased technological change, then explains why generative AI requires a further shift in emphasis from occupations to tasks, workflows, and organizational control. The chapter argues that AI affects inequality through several channels at once: direct task displacement, productivity gains, the creation of new tasks, changes in market power, and differences in worker bargaining power. A central claim is that exposure to AI is not the same as technological unemployment. The distributional consequences depend on adoption costs, complementary investments, institutions, and the allocation of productivity rents inside firms and across markets. This chapter, therefore, treats AI neither as an automatic engine of mass unemployment nor as a neutral productivity tool, but as a general-purpose technology whose labor market effects are mediated by economic structure and policy.