If you recently switched careers to join the booming marketplace for AI jobs and profit from the higher salaries or greater upside on offer there, I have bad news for you. You may have inadvertently reduced your lifetime earnings by a large amount.
During the last two days, I have written about the productivity aspects of AI, so I decided I’ll turn this into ‘AI week’ and add a third study on the impact of AI on productivity and lifetime earnings.
Johan Hombert from HEC Paris and Adrien Matray from the Atlanta Fed examined the trajectory of earnings for highly skilled employees in the IT sector before and after the tech bubble of the late 1990s and early 2000s. And just to be clear here, I think that the AI bubble is even larger than the tech bubble of the late 1990s, both in the stock market and in the labour market.
During the run-up to the tech bubble of the late 1990s up to a quarter of all highly skilled workers in the US joined the tech and telecom sector because the internet and new communication technologies like fibre optics promised large upside for entrepreneurs while regular employees were paid higher salaries than in comparable jobs in other sectors.
We know today that this boom was fuelled by large sums of debt and other cheap financing like private equity and venture capital. And when the bubble burst and cheap financing dried up, many businesses went bankrupt while many more people lost their jobs.
But even those who kept their jobs and remained in the industry lost out to highly skilled employees in other industries because in the tech space, your skills become outdated very quickly. I mean, the height of skill in the 1990s and early 2000s was ‘web designer’, a job that hardly exists anymore. So, if you were good in writing http code and designing webpages, you were made obsolete pretty quickly as technology advanced. The result is that your value for employers shrinks because your productivity declines since your skills are no longer useful in a changed workplace.
My chart of the day shows the average wage of workers in the tech sector compared to similarly skilled workers in other sectors. In the late 1990s, tech workers who previously worked in the sector and new entrants during the boom earned 5% to 10% more than their peers in other sectors. But once the bubble burst their wage advantage rapidly declined and by 2005 tech workers were making less money than their peers in other sectors.
Fifteen years after the tech bubble peaked, the tech workers that joined the sector before or during the bubble were on average making 7-8% less than their peers in other sectors.
Turns out the grass isn’t always greener on the other side.
Wages of tech workers relative to similarly skilled workers in other sectors
Source: Hombert and Matray (2026)