Impacts of Technological Advancements on Income & Wealth Distribution

Abstract

Income and wealth inequalities have long characterized human history, often exacerbated by conflicting interests between labor suppliers and capitalists. In this context, technological advancements have been extensively studied for their effects on income and wealth distribution, with some studies focusing on historical impacts on the labor market and others predicting future implications. Historically, industrial technologies have not significantly disrupted the labor market but have instead bolstered capital returns, influencing income and wealth distribution without substantial labor market deterioration. This study examines trends in income and wealth distribution, linking certain inequalities to technological advancements within the framework of firms' profit maximization objectives. Additionally, we investigate whether new technologies could potentially reverse the historical trend of limited unemployment caused by technological advances. Current data signals suggest that the effects of emerging industrial technologies may differ from those observed in the past; although concerns persist, this time skilled and educated workers may be more affected. Recognizing that every worker is also a consumer, it becomes apparent that surplus supply and increased productivity, leading to lower product costs, do not necessarily enhance the purchasing power of those displaced by automation. In response to these challenges, various political measures are being considered, and this study evaluates the effectiveness of three primary policy approaches—Investment, Steering, and Compensation—to mitigate the potential disruptive effects of industrial technologies.