Could AI Drag Down Incomes?

“Now that the U.S. government shutdown has faded into the rearview mirror, we're back to our regularly scheduled monthly jobs math.

 

That mostly involves addition and division: How many employees did companies or the government hire and what percentage of the labor force is looking for a job? Payroll growth probably was modest in December, but the unemployment rate is estimated to have dropped slightly to 4.5%, according to economists surveyed by The Wall Street Journal.

 

So, basically okay? Actually, we might be missing some important nuance for the U.S. economy. Growth and profits are determined by how much money people have to spend, not just how many of them are drawing a regular paycheck. Are Americans able to negotiate raises, and what sorts of jobs are they landing?

 

On the wage-negotiation front, Wednesday's report on job openings and turnover brought unwelcome news. The rate of quitting -- a sign of how confident workers are that there are better roles out there -- was the lowest in nearly six years.

 

The other trend that bears watching is the overall amount of money being earned. Bob Elliott, chief investment officer at Simplify Funds, points out that Social Security withholding slowed down late last year. Statistics can mislead, but money collected from paychecks shouldn't.

 

He blames tepid labor-force growth. Another culprit might be what sorts of jobs are being created: One at McDonald's is probably a lot less lucrative than a job at Microsoft or Morgan Stanley.

 

Is AI to blame? Dario Amodei, CEO of Anthropic, predicted last year that the technology could eliminate half of all entry-level white-collar jobs in five years.

 

Recent weakness in hiring seems to be hitting those roles, which traditionally require a college or even a professional degree. Such employees do well initially and sometimes very well later in their careers.

 

The median worker with a bachelor's degree earned two-thirds more than one with only a high school diploma in 2024. Those with a professional degree earned one-and-a-half times as much.

 

Since the month before ChatGPT was introduced, the unemployment rate for Americans aged 20 to 24 with bachelor's degrees has risen to that of young adults who didn't attend college.

 

Those aged 50 to 54 have seen their unemployment rate drop over that time. Many in that cohort own homes and also have become much richer on paper from -- you guessed it -- AI-related stock market gains.

 

Healthy nest eggs support consumer spending, but the wealth effect can turn sour a lot faster than the labor market.

 

They're also connected: Poor job prospects for young, educated workers could feed through to corporate profits and eventually to stock prices.” [1]

 

1. Could AI Drag Down Incomes? Jakab, Spencer.  Wall Street Journal, Eastern edition; New York, N.Y.. 09 Jan 2026: B10.