AI could shrink paychecks but stretch them further, a Yale economics professor says

• AI could lower wages but boost spending power by cheapening goods, an economics professor said.
• Yale University's Pascual Restrepo says focusing on pay alone misses AI's impact on living costs.
• Even if paychecks shrink, lower prices could offset the hit.

AI could shrink workers' paychecks — but also make those paychecks go further.

That's the view from Yale economics associate professor Pascual Restrepo, who studies how technology reshapes labor markets, wages, and economic growth.

"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 in a wide-ranging Q&A for Yale University. "What matters is not the dollar wage but what you can buy with it."

"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," he added.

If that happens, workers could end up with more buying power, even if their nominal wages decline, he said.

AI researchers and tech insiders have spoken out in recent weeks about the technology's impact on wages.

Ioana Marinescu, an associate professor at the University of Pennsylvania's School of Social Policy & Practice, told Business Insider that wages could dip once about 37% of intelligence tasks are automated — a tipping point at which automation starts replacing rather than augmenting workers. And, she expects this moment to arrive sooner than many expect if AI adoption continues to accelerate.

In a recent post on X, former Salesforce AI CEO Clara Shih said that past technological developments have shown that wage cuts are a common way new tech hits workers, rather than simply layoffs.

"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.

In the Q&A, however, Restrepo framed the technology as a force that reshapes both sides of the economy: how much people earn and how much things cost.

The more pessimistic scenario, he said, is one where AI affects only a narrow slice of jobs. In that case, workers in exposed roles could see wages fall while prices elsewhere remain unchanged, he said — leaving them worse off.

Restrepo describes the current moment as a "wait-and-see" phase.

"Right now I would describe the labor market as more of a wait-and-see environment," he said. "Firms are experimenting and trying to figure out how to use AI."