AI boom could widen income inequality, Labor MP warns

AI boom could widen income inequality, with only a handful of 'toll collectors' benefiting In short: Labor MP Andrew Leigh says artificial intelligence (AI) could see wage gaps shrink but he is concerned overall income inequality could rise. He warns that a handful of AI companies could end up being the main economic beneficiaries. What's next? This week a Senate committee looking into AI guardrails will table their interim findings to the government. If a handful of artificial intelligence (AI) companies become "toll collectors" for the rest of the economy, overall income inequality could rise even as wage gaps shrink, an MP is warning. The assistant minister for productivity, competition, charities and treasury, Andrew Leigh, will make a case for whether AI increases inequality, during a speech to JPMorgan AI Conference tomorrow. In an advance excerpt of his speech, Mr Leigh will argue that the biggest gains from AI may flow to those who own the technology, rather than those who use it. "If a handful of AI companies become toll collectors for the rest of the economy, overall income inequality could rise even as wage gaps shrink," he will say. Mr Leigh will make the link that while AI makes a junior worker more productive, it could reduce the number of junior workers a firm needs. He will say the employment scoreboard currently reads: some concerning signals for young Americans, much less movement in Denmark, and Australian entry-level outcomes that remain solid. It is possible that the US is atypical, or that effects there are driven primarily by the shift towards working from home. But it is also possible that the US is experiencing the impact of AI a year or two earlier than the rest of the advanced world. He will argue if the junior accountant catches up with the senior accountant, the wage premium attached to education and experience falls and wage inequality could decline. "Yet total income inequality could still rise. The reason is ownership," Mr Leigh will outline. "It is quite possible for the first to become more equal while the second becomes more unequal. That could occur if pay packets equalise but the economy tilts in favour of capital." He will highlight that AI can be a huge driver of productivity and economic benefit for Australia, but first people have to be able to trust that the technology is working for them, and not the other way around. As assistant minister for competition, he says he is now "thinking hard about the effects of market structure". He argues if every bank, law firm, retailer and manufacturer relies on a small number of upstream AI systems, then the model provider begins to resemble a toll road sitting across a growing share of the economy. "The economic question is the size of the toll." Mr Leigh will warn that a business may achieve a productivity improvement, yet retain only part of it if suppliers possess pricing power and competitors quickly copy the innovation. Conversely, an AI provider with market power may collect rents across downstream industries. Therefore the risk of AI on inequality is not primarily through its effect on the wage distribution but on who gets hired, who owns the productive assets, and how much of the surplus is captured by firms with market power. "AI could narrow the gap between the novice and the expert, but at the same time, it could widen the gap between people who earn mainly from their work and people who earn heavily from owning productive capital." Mr Leigh will state that AI will boost productivity but distributing the benefits fairly is the real challenge. "Our government will apply the enduring values of fairness to make AI work for Australians." Bipartisan agreement on AI guardrails within reach The Joint Select Committee on Artificial Intelligence will this week table their interim findings to the government on AI guardrails. Chair and Labor MP Jo Briskey joined Afternoon Briefing with the committee's deputy chair and Liberal senator Jonno Duniam to reveal they had come to an agreement about the direction the country should take on AI. The committee was established to examine the opportunities and risks of AI, and the barriers to adopting the technology. The federal government is trying to break a months-long gridlock over reforms to copyright laws, as AI companies seek to train their technology on creative content. Ms Briskey said she sees a pathway to a bipartisan deal that will ensure creatives remain in control of their work. "That's the key principle for us when negotiating the outcome, but as the study said, we have to get it right for Australia's interest and AI working for us, not the other way around," Ms Briskey said. Senator Duniam said there needs to be a recognition of Australia's sovereignty and right for people who own copyright to be recompensed for the work they produce. "I believe there is an opportunity for us to build our own sovereignty under our laws on our terms, our benefit," he said.