Federal Reserve Governor Michael Barr warned that rapid artificial intelligence adoption could cause serious short-term labor-market disruptions, displace workers at scale and widen inequality in favor of investors. Speaking at Yale University, Barr said the outcome will depend partly on whether competition allows AI to become a cheap, widely available commodity or whether market power remains concentrated among a small group of companies and investors. He said AI could eventually broaden access to skills and information for small businesses, but warned that younger and less-experienced workers may already be facing substitution risks. Labor’s share of national income fell to 52.8% in the second quarter of 2026, compared with roughly 60% to 65% from World War Two until the early 21st century. Barr also said AI investment has so far raised prices through heavy spending on data centers and computing infrastructure, despite boosting gross domestic product, while potential productivity gains and disinflation remain uncertain. His remarks came before a San Francisco Federal Reserve forum convened by a task force appointed by Federal Reserve Chairman Kevin Warsh and amid broader debate over AI’s economic effects and the outlook for interest rates.