Federal Reserve flags AI risks for U.S. inequality

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Fed flags AI inequality risks

Highlights

Federal Reserve Board's 2025 Survey of Consumer Finances shows the top 10 percent hold nearly three-fourths of U.S. wealth, with the lower half holding just 2 percent.
Survey data reveal 31 percent of Americans in 2025 lack enough cash to cover a $500 emergency, while the upper 0.1 percent own one-sixth of national wealth.
Fed Vice Chair Barr warns that current AI investment trends may accelerate inequality by rewarding capital over labor and causing short-term labor market disruption.

Fed survey data frames inequality concerns

As reported by Federal Reserve, Barr says the central bank's 2025 Survey of Consumer Finances shows both wealth and income are highly concentrated in the United States, with inequality more pronounced for wealth than for income.

According to the survey findings cited in the speech, the top 10 percent of households by income receive almost half of all U.S. income, while the top 1 percent receive about one-fifth. On the wealth side, the top 10 percent hold nearly three-fourths of all wealth and the top 1 percent hold about one-third, while the lower half of households hold only 2 percent of total wealth.

Barr also points to a separate Fed survey showing that 31 percent of respondents in 2025 do not have enough cash to cover an emergency expense of $500 or more. He says concentration is even sharper at the very top, with the upper 0.1 percent, about 135,000 individuals and families, owning one-sixth of national wealth.

A household at the lower edge of the top 1 percent holds $16.3 million in wealth, compared with $215,000 for a household at the median, a gap of 75 times, Barr says. He argues that tracking the extent and evolution of inequality is important for assessing the economic outlook and how the economy is likely to respond to new developments.

AI investment may widen distribution gaps

Barr says the history of U.S. inequality shows the level is not fixed and can change over time, with policy choices, economic growth, technological change, education and globalization all influencing outcomes.

He says the current wave of AI investment, led by hyperscalers and frontier AI labs, raises the possibility that the technology functions as capital-biased innovation, with returns flowing primarily to capital rather than labor. Announced investment plans in the sector suggest capital deepening may accelerate further.

Barr says policymakers and businesses should prepare for potentially serious short-term labor-market disruption if AI becomes capable of replacing human work. He adds that the scale of disruption will depend in part on whether society makes the necessary investments in worker training and new job creation to spread the long-term benefits more broadly.

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