What does the rise of artificial intelligence mean for the labor market? How should society respond to shifting demands for human workers? The Ford School's Betsey Stevenson has been publicly commenting on these critical questions.
Policymakers are asking the wrong questions, Stevenson observes in her keynote address for U-M's Annual Data Science & AI Summit 2025. Stevenson discussed how society will respond to AI as it becomes a substitute for human labor.
"People talk a lot about can AI do this thing that a human can do? That's not the relevant question," Stevenson said. "The relevant question is can technology do something that a human could do cheaper than the human is willing to do it for."
AI is sure to replace human labor in several sectors, she says, and the policy landscape must respond by managing the speed and process of job transformation.
"We could lower taxation on human workers and raise taxation on capital investments like AI," Stevenson proposed. "A shift away from taxing people to taxing capital will recognize the important role that humans play in generating the data on which artificial intelligence relies."
Policymakers should also reconsider linking life satisfaction with jobs, she said. Leading voices often claim that employment gives life purpose and that automation will lead to a sense of disillusionment. However, Stevenson notes that an individual's sense of purpose is actually negatively related to a country's GDP, effectively dispelling the rumor that work is related to one's happiness.
"The idea that our work delivers meaning is not what's happening for most American workers," she said, "What is related to meaning and purpose is our connections to each other in our community."
In a recent essay for the Digitalist Papers, a publication on AI from Stanford University's Digital Economy Lab, Stevenson also warned against the growing income inequality that could accompany AI's rise as a labor source.
In a labor market dominated by automated workers, people who lose their jobs to AI will also lose their wages, reducing the labor share of income and further exacerbating income inequality. The idea of a more prosperous society unburdened from labor needs is not guaranteed, Stevenson argues. Prosperity can only be achieved through comprehensive policy shifts that ensure humans can share in the wealth created by advancing technology.
"AI can only improve well-being if society adapts in ways that preserve a fair and stable distribution of income in the face of potentially declining returns to human labor and human capital," she wrote.
Humans can adapt to a changing job market by learning new skills, specifically for jobs that cannot become fully automated in the near future. But as entry level jobs disappear at a rate that far outpaces society's ability to train new workers, policy interventions become necessary to help society adjust to a new reality.
Stevenson believes that redistributing the wealth generated by AI towards the bottom and middle of the income distribution, a policy known as the "digital dividend," will help manage the transition to automated labor and improve average life satisfaction.
"Rather than treating AI and data-driven profits as a private windfall, governments should tax the use of data and the rents from highly profitable digital and AI firms, and return that money to people as a regular dividend," Stevenson said. "You are contributing your data into the system; you get a dividend from that shared resource."
The idea of a digital dividend is most closely comparable to Alaska's Permanent Fund, where the Alaskan government gives its residents an annual share of the state's oil revenues. "In an AI context, the ‘resource' is not oil in the ground," Stevenson explained, "but data, computation, and intellectual capital built on top of centuries of public and private investment."
Watch: "From Productivity to Purpose: Human Flourishing in the Age of AGI" - U-M Michigan Institute for Data & AI in Society (MIDAS), December 10, 2025.
Read: "What's There to Fear in a World with Transformative AI? With the Right Policy, Nothing." - The Digitalist Papers, Volume 2.
