Income Inequality in the Age of AI:From the Market to Internal Distribution Structures

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This paper reframes income inequality in the age of AI not as a direct consequence of AI as a technology, but as the outcome of a process through which value formed by AI is attributed to different parties via distributional decisions within the firm. AI can contribute to value formation, but it is not a party that receives the resulting gains as income. Whether those gains go to wages, executive compensation, dividends, or retained earnings is determined through internal distributional decisions under an institutionally defined distributional decision-rights structure. The same AI can therefore coexist with different income inequality. The paper also shows that, while the labor share is useful as an aggregate indicator, it combines executive compensation and employee wages and thus cannot distinguish differences in internal value attribution. Industry-level data show that plastic and cosmetic surgery and daycare centers have nearly identical labor shares, yet executive compensation distribution ratios of 30.1% and 9.2%, respectively. On this basis, the paper proposes a multi-stage measurement framework that decomposes the labor share into the executive compensation distribution ratio and the wage distribution ratio and then uses the control pay ratio to measure the distributional relationship between the controlling subject and employees. When AI adoption involves workforce reduction, however, changes in employee numbers and in the income of departing workers must also be observed.