In a speech at Yale University, Federal Reserve Board Governor Michael S. Barr warned that artificial intelligence (AI) could widen income and wealth inequality by directing more economic gains toward capital owners rather than workers. The distribution of benefits will depend on whether AI replaces or complements labor, market competition and workers’ bargaining power. He urged society to begin considering responses while AI adoption remains at an early stage.
These risks arise against a backdrop of concentrated wealth and a declining labor share of national income. Labor’s share reached a record low of 52.8% in the second quarter of 2026, with a downward trend persisting even after adjustments for measurement issues. The Federal Reserve’s 2025 Survey of Consumer Finances showed that the wealthiest 10% of households held nearly three-quarters of total wealth, while the bottom half held about 2%. Returns on business equity have been a major driver of widening wealth inequality, benefiting households whose income comes primarily from capital rather than wages.
AI’s reliance on data and computing power could reinforce the dominance of leading firms, concentrating investment returns and limiting smaller businesses’ access to improving technology. Competition could instead make AI inexpensive and widely available, spreading productivity gains. Worker displacement remains relatively limited, but signs of substitution are emerging in some sectors, especially among younger, less experienced workers. Rapid adoption could make adjustment more difficult, underscoring the role of investment in job creation, worker training and help connecting workers with new jobs.