The Golden Age of Workers: How Demographic Change, Policy, and AI are Transforming Labor Markets

Scarcer labor, government spending, and AI productivity boost are leading to a transformation in how labor markets work.

In the mid-2010s, workers faced a bleak outlook with stagnant wages, income inequality, and purposeless jobs. However, the tides have turned, and the rich world is now experiencing a golden age for workers. Demographic changes, government spending, and advancements in artificial intelligence (AI) are driving a transformation in labor markets. As societies age and labor becomes scarcer, manual work that is difficult to replace with technology is being rewarded. Governments are investing heavily in their economies, supporting demands for higher wages. Additionally, AI is boosting productivity, particularly for less skilled workers, which could lead to further wage increases. This article explores these trends and their impact on labor markets.

Demographic Shifts and Labor Scarcity:

The decline in China’s working-age population and the struggles of other poor countries to build industrial capacity have led to a scarcity of labor in the rich world. The number of individuals aged 20 to 54, capable of physical labor, has already flattened off. A survey by ManpowerGroup found that 77% of companies across 41 countries are struggling to fill roles. Worker shortages are hindering production in industries such as construction and healthcare. The aging population in South Korea has led to an increasing number of older individuals staying in the workforce to avert shortages. Labor has become so precious that businesses are hoarding it, with small American companies seeking to retain employees whenever possible.

Government Intervention and Support:

Governments are also playing a crucial role in supporting workers. Many countries, including the United States and France, have maintained or increased minimum wages in real terms during periods of inflation. Trillions of dollars are being spent on initiatives to accelerate the green transition, reduce dependence on China, and create jobs. Although subsidies primarily benefit firms, they provide workers in protected industries with bargaining power. The macroeconomic policy mix favored by policymakers, including maintaining fiscal deficits and stimulating demand, is also favorable for workers. Policymakers aim to create a “high-pressure economy” that runs close to its potential, ensuring healthy employment and rising wages.

Impact of Government Intervention:

These interventions are already yielding positive results for workers. Tight labor markets in the United States have led to fast wage growth, particularly benefiting poorer employees. Similar trends are likely to be observed across the rich world. Germany, for example, is experiencing severe worker shortages in professions requiring technical education, such as construction and healthcare. Japan’s wages are rising faster than in the past three decades, and the wage premium for university education is shrinking. Unions are also leveraging tight labor markets to demand reduced working hours, leading to increased job satisfaction.

The Role of AI in Boosting Productivity:

Artificial intelligence is another factor transforming labor markets. AI can perform tasks that were previously out of reach for machines, leading to increased productivity. Firms that innovate with AI experience faster employment and revenue growth. AI is particularly beneficial for service workers, such as call center employees, who can resolve more issues per hour when assisted by AI bots. Workers in manufacturing and financial services also report that AI improves their output and working conditions.

The Impact of AI on Different Workers:

AI will have varying effects on different workers. Professional service workers, such as doctors and lawyers, may benefit from AI assistance in making high-stakes decisions. AI can help individuals reach the required level of expertise, potentially leading to more people entering higher-paid expert work. While some studies suggest that AI may decrease earnings for certain jobs, this impact is likely to change as labor markets adjust. As AI adoption increases, productivity gains can lead to increased demand for goods and services, creating new jobs in complementary sectors.


The convergence of demographic changes, government intervention, and advancements in AI is reshaping labor markets. Scarcer labor and government spending are driving upward pressure on wages, while AI is boosting productivity. Workers, particularly those in professions requiring physical labor, are benefiting from these transformations. Governments must continue to support the use of AI in regulated professions to ensure that the benefits are widespread. As labor markets evolve, it is crucial to recognize that a more productive economy can lead to higher demand for labor and the creation of new jobs. The golden age of workers is here, and it is essential to harness these changes to ensure a prosperous future for all.






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