How AI might accelerate the K-shape dynamic

When talking about wealth, wages, and equality to name a few, you can't really avoid the idea of the K-shape.

If you're asking what a K-shape is, here's how Societe Generale explain it in a report: "A K-shape describes how a distribution diverges over time: catch-up stalls across the distribution, while income or wealth at the top grows persistently at least as fast as, and often faster than, the rest."

And, they say, existing K-shape trends could be amplified by AI.

"We are already seeing significant concentration in equity markets and corporate profits among AI winners."

In terms of wealth distribution, the report notes that it is too early to draw conclusions about what impact AI might have. But, "the direction of risk is clearer than the scale: if AI raises returns to scarce compute, models, data and distribution, the gains are likely to accrue first to firms and households already owning those assets," Societe Generale said.

So far, consensus seems to be that AI might equalise wages, but also concentrate wealth, the report added.

"Its exposure to high-paid cognitive work could compress some wage gaps, especially if AI tools diffuse widely and help less specialised workers perform more complex tasks," it said.

"The wealth channel points more consistently the other way: AI converts some labour tasks into returns to capital, rewards households with financial and business assets, and may generate concentrated rents around computing power, proprietary models, data and distribution."

(Sophie Kiderlin)