Federal Reserve Governor Warns AI May Worsen Inequality

The Federal Reserve’s latest Survey of Consumer Finances confirms a deeply unequal distribution of wealth and income in the United States, and Governor Michael Barr warns that artificial intelligence could worsen the trend if left unchecked. The survey, conducted in 2025, shows the wealthiest 10% of households hold nearly three-fourths of all wealth, while the bottom half possess just 2%. The top 1% alone controls about one-third of the nation’s wealth, a concentration Barr argues has historical roots and policy drivers.

This concentration extends to income, with the top 10% receiving almost half of all income and the top 1% claiming roughly one-fifth. Crucially, the wealth of the top earners is primarily tied to business assets – stocks, private equity, and actively managed businesses – rather than wages, a pattern that dates back decades. This dynamic is particularly concerning in the context of AI, as the technology’s capital-intensive nature could further favor those who already own significant assets.

The Governor’s analysis builds on previous work exploring the potential impact of AI on economic inequality. He highlights a concerning trend: a decline in the labor share of national income, reaching a record low of 52.8% in the second quarter of 2026. This decline, coupled with increasing market concentration in the hands of a few dominant AI firms, suggests that the benefits of AI may not be broadly shared. The potential for AI to substitute for human labor, particularly in tasks performed by younger and less-experienced workers, adds to these concerns.

Barr suggests that policy choices will be crucial in shaping the future distribution of wealth and income in the age of AI. While acknowledging the potential benefits of the technology, he emphasizes the need to proactively address the risks of further concentration of wealth and a widening gap between capital and labor. The key question, he argues, is whether society will invest in the necessary job creation and worker training to mitigate the disruptive effects of AI and ensure its benefits are realized broadly.