Speech by Governor Barr on artificial intelligence and the labor market
Michael S. Barrfederalreserve.gov
Michael S. Barr is a Governor of the Federal Reserve Board of Governors — and former Vice Chair for Supervision (2022–2025) — who is also a professor of law and public policy at the University of Michigan on leave, and previously served as Assistant Secretary of the Treasury for Financial Institutions under President Obama and as a key architect of the Dodd–Frank Act.
Author Perspective
Across 18 tracked claims, Michael S. Barr skews neutral.
39% optimistic22% neutral39% pessimistic
Claims from this article
18 claims
Under a gradual adoption scenario, AI leads to strong productivity growth, comparable to or stronger than the late 1990s and early 2000s, some occupational displacement offset by new jobs, and real wages rise, while large widespread joblessness is avoided.
OptimisticOptimisticMichael S. Barrfederalreserve.govbeyond 5 years
AI has the potential to reverse the historical pattern of favoring higher-wage occupations, automating higher-paying information-based jobs while increasing relative demand for lower-paying jobs and those requiring less education, thus reducing aggregate wage inequality.
OptimisticOptimisticMichael S. Barrfederalreserve.govwithin 1-5 yearsconfidence possible
Widespread AI adoption will very likely lead to dramatic and sometimes difficult changes in the way many of us work and live, but the long-term benefits could be even more dramatic.
OptimisticOptimisticMichael S. Barrfederalreserve.govbeyond 5 yearsconfidence very likely
In the longer run, AI will boost productivity and living standards, and it may even lead to new discoveries.
OptimisticOptimisticMichael S. Barrfederalreserve.govbeyond 5 yearsconfidence confident
The potential of AI to boost the rate of innovation—to be an invention in the method of invention—is where we could see even greater economic benefits, though they may take some time to materialize.
OptimisticOptimisticMichael S. Barrfederalreserve.govbeyond 5 yearsconfidence possible
AI could contribute between 0.3 and 0.9 of a percentage point to annual total factor productivity growth over the next decade.
OptimisticOptimisticMichael S. Barrfederalreserve.govbeyond 5 yearsconfidence uncertain
As with other general-purpose technologies, the long-run effects of AI are likely to be profoundly positive. But in the short term, AI may deeply disrupt labor markets and harm some workers.
OptimisticOptimisticMichael S. Barrfederalreserve.govbeyond 5 yearsconfidence likely, possible
The AI boom is unlikely to be a reason for lowering policy rates.
NeutralNeutralMichael S. Barrfederalreserve.govwithin 1-5 yearsconfidence likely
A long-lasting boost to productivity growth from GenAI would lead to higher demand for capital and upward pressure on interest rates, implying a higher setting for the policy rate when the economy is at equilibrium (r*).
NeutralNeutralMichael S. Barrfederalreserve.govbeyond 5 yearsconfidence uncertain
AI adoption is so far leading to re-allocation within firms rather than layoffs: AI substitutes for labor at the task level, but overall employment effects are small, as workers shift their time to complementary tasks and firms expand employment elsewhere.
NeutralNeutralMichael S. Barrfederalreserve.govimminent
The speed of AI adoption may be much faster than previous general-purpose technologies, boosting productivity growth, but also allowing less time for workers, businesses, and the economy to adapt to these changes.
NeutralNeutralMichael S. Barrfederalreserve.govimminentconfidence possible
Under a stalled AI growth scenario, AI provides only modest and fading productivity gains, and the balance of risks shifts from the labor market to the financial sector, with risk of financial stress when anticipated demand falls short.
PessimisticPessimisticMichael S. Barrfederalreserve.govwithin 1-5 years
Under a rapid AI capability growth scenario, AI agents replace professional and service occupations, autonomous vehicles and robotics automate manufacturing and transportation jobs, layoffs soar leading to widespread unemployment and declining labor force participation, requiring society to rethink the social safety net.
PessimisticPessimisticMichael S. Barrfederalreserve.govbeyond 5 years
In the short term, investment in AI could be inflationary—for example, if electricity supply constraints from inefficiencies in the power grid collide with strong energy demand from the building of data centers.
PessimisticPessimisticMichael S. Barrfederalreserve.govwithin 1-5 yearsconfidence possible
If high earners are better positioned to take advantage of AI, we could see wage inequality rise as the most productive workers pull even further ahead of their peers.
PessimisticPessimisticMichael S. Barrfederalreserve.govwithin 1-5 yearsconfidence possible
AI will have a transformative effect on the economy and affect a large share of workers in ways that will challenge the ability of the private and public sectors to accommodate this adjustment.
PessimisticPessimisticMichael S. Barrfederalreserve.govbeyond 5 yearsconfidence confident
If AI causes a large and long-lasting dislocation of workers, permanently reducing demand for many kinds of jobs, it could imply higher rates of unemployment, even when the economy is healthy and operating close to its potential.
PessimisticPessimisticMichael S. Barrfederalreserve.govbeyond 5 yearsconfidence uncertain
AI may be starting to adversely affect some groups, in particular young people who are just starting their careers in some sectors.
PessimisticPessimisticMichael S. Barrfederalreserve.govimminentconfidence uncertain