Fed Governor Barr warns AI market concentration could widen inequality, squeeze smaller businesses
New Haven, November 13
Growing concentration in the artificial intelligence industry could widen economic inequality in the United States by allowing a handful of dominant companies to capture most of the technology's financial gains, while leaving smaller businesses and their workers with fewer opportunities, Federal Reserve Governor Michael S. Barr warned.
Speaking at Yale University on Thursday, Barr said AI's reliance on data, computing power and continuous model improvements could give leading companies an advantage that smaller businesses may struggle to match.
"If a small number of AI firms dominate the market and receive the lion's share of investment returns, then the wealth of the managers and owners of these firms will surge," Barr said.
He added that large businesses could afford continued investment in advanced AI systems, while smaller firms risk losing market share and receiving fewer productivity gains.
Barr, however, said competition could help distribute the benefits more widely. "Vigorous competition among the AI firms so far has meant that access to AI remains fairly broad," he said, adding that smaller businesses could meet many of their requirements through less advanced language models.
He warned that AI could further reduce the share of national income going to workers if technological gains increasingly accrue to companies and investors. He identified technological change, market concentration and declining worker bargaining power as factors contributing to the long-term decline in labour's share of income.
The labour share of US national income fell to a record low of 52.8 per cent in the second quarter of 2026, Barr said.
Citing the Federal Reserve's 2025 Survey of Consumer Finances, he said the wealthiest 10 per cent of US households held nearly three-fourths of the country's wealth, while the bottom half held just 2 per cent.
Barr also flagged the risk of AI replacing workers in certain roles, particularly those involving predictable tasks, with younger and less-experienced employees potentially facing greater pressure.
"As fast as AI has grown, its implementation is still limited so far, and no one knows the degree to which its benefits will be shared," he said.
He called for investment in new job creation, worker training and support to help employees transition into new roles, stressing the need to address these challenges while AI adoption remains at an early stage.
"The concentration of market power may help drive a widening of inequality that would strain the American Dream," Barr said.
Barr added that society must begin addressing these potential challenges while AI adoption is still at an early stage to ensure that its long-term benefits are widely realised.
"In my judgment, now is the time for society to begin to consider how to address these potential challenges - while AI adoption is in its relatively early stages - so we can realize the long-term benefits for society," he said.
— ANI
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