Acta Electronica Malaysia (AEM)

The accelerating integration of artificial intelligence (AI) into economic systems is reshaping labor markets and redefining wage structures across the globe. From automation in manufacturing to algorithmic decision-making in services, AI technologies are increasingly influencing the demand for specific skill sets, the structure of employment, and income distribution. This study explores the multifaceted impact of AI on labor markets and wage inequality from a computational economic perspective. It critically examines how AI-driven technological change has led to job polarization, characterized by the expansion of high-skill, high-wage jobs and the simultaneous displacement or deskilling of routine, middle-income roles. Furthermore, it highlights the growing divergence in wages due to differential access to technology, education, and adaptable skills among workers. The paper investigates how AI adoption amplifies existing socioeconomic inequalities by disproportionately benefiting capital over labor and exacerbating regional disparities. It also assesses how digital labor platforms and algorithmic management systems are reshaping employment relationships, challenging traditional labor protections. By drawing insights from economic modeling and labor theory, the study contributes to ongoing policy debates on managing the transition to an AI-driven economy. It underscores the urgent need for inclusive policies that balance innovation with social equity, ensuring that the gains of technological progress are broadly shared across society.