The labor market is a single interconnected system. As AI eliminates white-collar roles, displaced professionals will flood the blue-collar and gig economies, increasing labor supply and creating downward wage pressure across all sectors.

Instead of outright replacing entire roles, AI is more likely to cause significant wage compression. As AI makes certain skills more common, it floods the labor supply for those tasks, driving down pay for both displaced workers and incumbents in affected fields.

AI is beginning to impact labor not by firing employees, but by reducing the need for new hires, particularly in white-collar roles like consulting and business services. This will likely suppress wage growth at the higher end, creating a natural rebalancing of the K-shaped economy from the top down.

An MIT study reveals AI's asymmetrical impact on productivity. While it moderately improves performance for average workers, it provides an exponential boost to the top 5%. This is because effectively harnessing AI is a skill in itself, leading to a widening gap between good and great.

AI will primarily threaten purely cognitive jobs, but roles combining thought with physical dexterity—like master electricians or plumbers—will thrive. The AI-driven infrastructure boom is increasing demand and pushing their salaries above even those of some Silicon Valley engineers.

AI is expected to disproportionately impact white-collar professions by creating a skills divide. The top 25% of workers will leverage AI to become superhumanly productive, while the median worker will struggle to compete, effectively bifurcating the workforce.

AI tools make highly productive individuals even more efficient, allowing them to expand their output significantly. Instead of hiring more people as their "business" grows, they will "hire" more AI agents, concentrating wealth and opportunity among existing successful players.

AI is exacerbating labor inequality. While the top 1% of highly-skilled workers have more opportunity than ever, the other 99% face a grim reality of competing against both elite talent and increasingly capable AI, leading to career instability.

Contrary to fears of automating low-skill work, economist Alan Blinder argues that AI is more likely to replace high-paying white-collar jobs in finance and professional services. Lower-wage manual and service roles are less vulnerable, a dynamic which could potentially compress the upper end of the income distribution.