NEW HAVEN, CONNECTICUT — Pascual Restrepo, an associate professor of economics at Yale University, said workers’ nominal wages could decline while artificial intelligence reduces the cost of goods and services, leaving workers with more buying power. Restrepo also said that focusing on pay alone misses AI’s impact on living costs.

Restrepo studies how technology reshapes labor markets, wages, and economic growth. He addressed how AI could affect paychecks and household budgets, including scenarios in which AI can perform work at low hourly rates.

“People have the wrong intuition when they say that if AI can do my job for ten dollars an hour, then my wage falls to ten dollars and my life is terrible,” Restrepo said. “What matters is not the dollar wage but what you can buy with it,” Restrepo said.

Restrepo connected potential wage changes to how AI could affect production costs across the economy. “A world where AI can do research or teaching at that cost is a world where AI is extremely capable and can produce many other goods and services cheaply,” Restrepo said.

Restrepo also described current labor-market conditions as employers assess the technology. “Right now I would describe the labor market as more of a wait-and-see environment,” Restrepo said. He said firms are experimenting and trying to figure out how to use AI.

Restrepo said a different outcome could occur if AI affects only a narrow slice of jobs. In that scenario, he said, workers in exposed roles could see wages fall while prices elsewhere remain unchanged, leaving them worse off.

Other researchers have offered benchmarks for when automation could affect wages. Ioana Marinescu, an associate professor at the University of Pennsylvania's School of Social Policy & Practice, said wages could dip once about 37% of intelligence tasks are automated, marking a tipping point where automation starts replacing rather than augmenting workers. Marinescu said she expects this tipping point of 37% task automation to arrive sooner than many expect if AI adoption continues to accelerate.

Clara Shih, the former CEO of Salesforce AI, wrote that technological change can affect worker pay through wage adjustments as well as role displacement. “While full AI role displacement will happen in certain roles, history shows that wage resets are a more common, insidious, and often equally disruptive way that new technologies affect workers,” Shih wrote.