AI is powering an economy in which many Americans are falling behind
An aerial view of the downtown San Francisco skyline is seen on July 10
(CNN) — At the Richmond Neighborhood Center in San Francisco, more than 200 people are on the waitlist for the food pantry. The center is just a couple of miles west of “AI Alley,” where a cluster of major AI companies take in billions of dollars in investments and pay out high salaries to employees — in turn making home prices and rent payments soar.
San Francisco serves as a prime example of how the roaring AI industry is helping drive economic growth more broadly, but masking the economic inequality of lower-and-middle-income families.
And San Francisco reflects the same patterns happening on a national scale: In the first three months of the year, the US economy overall grew at a solid 2.1% annualized rate, largely due to businesses ramping up AI-related investments, according to Commerce Department data.
Yet consumer sentiment is languishing near record lows over wartime price spikes, and the bottom quarter of Americans on the income spectrum have seen the weakest wage growth of any other cohort this year, according to the Federal Reserve Bank of Atlanta.
“The inequalities in the neighborhood have just grown and grown and grown,” Yves Xavier, community programs director at the Richmond Neighborhood Center, told CNN. “We can’t draw a direct line to AI’s impact and say ‘That’s exactly it’ because it’s been happening for a while, but it doesn’t exactly take a rocket scientist to see how that’s widening the inequalities in a city already dealing with those issues.”
He added that demand for the nonprofit’s food pantry is up about 10% this year.
‘An economy of winners and losers’
The diverging fortunes of the poorest and wealthiest Americans has emerged as a key theme in the US economy, and experts say AI is playing a significant role.
The billions poured into the AI industry have minted a cadre of handsomely paid workers in tech hubs across the country, including San Francisco, New York, Seattle, Los Angeles, San Jose and Washington, DC, according to a report by Oxford Economics. Those workers are part of the wealthiest 10% of Americans who are increasingly powering US economic growth with their spending, or as much as 62% of growth, according to Moody’s.
“You’re seeing incredible concentrations of wealth as a result of AI for these new companies, their founders and their first employees,” said Manuel Pastor, director of the Equity Research Institute at the University of Southern California. “It’s exacerbating an economy of winners and losers.”
The winners in today’s economy are clearly involved in the development and funding of AI, including early investors, experts told CNN.
SpaceX debuted on Wall Street last month as the largest initial public offering on record. The AI and space exploration company is now worth more than $2.1 trillion, and investors widely expect it to be a windfall for Americans’ retirement accounts. AI stalwarts OpenAI and Anthropic, both headquartered in San Francisco, are also gearing up for their own IPOs, which would add trillions in new market value. And San Francisco companies comprise nearly two-thirds of worldwide AI funding, according to data firm Crunchbase.
Those losing out are vast swaths of Americans, particularly recent college graduates who are struggling to find a job; low-income Americans who continue to rack up debt as they feel the sting of higher inflation; and even workers in creative industries, according to Pastor.
“What people put on the internet or put into books is being privatized by these AI companies, making it more difficult for those same people to make money,” he said. “That’s happening to people who are authors, to people who are musicians, anyone who is a creative.”
The AI hype is also skewing the health of Main Street businesses.
“If you exclude AI, business investment would be actually falling, which is quite unprecedented outside of recessions,” said Maxime Darmet, senior economist at Allianz Trade. “The technology is powerful in propping up the economy, but at the same time, there’s a lot of spending being cut in more traditional areas.”
Meanwhile, the gap between the broader AI-fueled economic growth and the lived reality for millions of Americans continues to widen.
“The inequalities here are very, very stark,” Xavier said of San Francisco. “It’s been an issue for a long time, and I think it’s just continuing to be an issue.”
The-CNN-Wire
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