Workers in lower-skill occupations could see lifetime earnings rise 15 to 45 percent as artificial intelligence simplifies the tasks their jobs require, according to a working paper released July 8 by Stanford economist Lukas Althoff through the National Bureau of Economic Research.
The projection is a model estimate, not an observed outcome, and depends on how rapidly AI advances. But the finding challenges the dominant narrative that AI will destroy jobs wholesale.
Althoff, an assistant professor of economics and faculty fellow at the Stanford Institute for Economic Policy Research, co-authored the paper with Hugo Reichardt of the Barcelona School of Economics. Their framework identifies three ways AI affects work: automation (replacing workers), augmentation (making workers more productive), and simplification (lowering the skill bar for tasks). Most previous research focused on the first two. Simplification, the paper argues, is the equalizing force.
When AI lowers the skill requirements for specific tasks, workers who previously couldn't access higher-paying roles can compete for them. A housekeeper who uses AI tools to manage scheduling and inventory, for instance, becomes eligible for supervisory work that once required specialized training.
"Our research highlights the more optimistic case for AI's impact on labor market inequality," Althoff said in a Stanford news release.
Local context
The findings carry weight in a city where the gap between tech salaries and service wages defines daily life. Palo Alto's minimum wage is $18.70 per hour as of January 1, 2026. Santa Clara County is home to more than 7,700 hospitality workers, according to NOVAworks Launch Lab, in a region with one of the highest costs of living in the country. The precariousness of local service work was underscored in April when dozens of Graduate Hotel workers in downtown Palo Alto were laid off and replaced by contract staff, a displacement unrelated to AI but affecting the same workforce Althoff's model addresses.
Althoff also found that workers in lower-skill occupations have been slower to adopt AI tools, though not enough to undo the technology's equalizing effect on wages.
What the model predicts for education
The research predicts the overall value of formal skills will decline, with potential consequences for higher education. College majors in mechanics, engineering, culinary arts, and architecture will fare better in an AI economy than those heavy on verbal and social skills, such as political science, sociology, and philosophy, the paper found.
The working paper is the formal NBER publication of research that circulated in draft form earlier in 2026 and received coverage from Fox Business and other outlets.
