The AI Penalty: People Reduce Compensation for Workers Who Use AI

Abstract

We investigate whether and why people might adjust compensation for workers who use AI tools. Across 13 studies (N = 4,956), participants consistently lowered compensation for workers who used AI compared to those who did not. This "AI penalty" is robust across different work scenarios and work tasks, worker statuses, forms and timing of compensation, methods of eliciting compensation, and perceptions of output quality. Moreover, the effect emerges in both hypothetical compensation scenarios as well as real monetary compensation of gig workers. We find that perceived effort and perceived agency -- the degree to which an individual serves as the originating source of the core intellectual or creative contribution in a task -- explain decisions to reduce compensation for AI-users. However, the penalty is not inevitable. Workers who strategically retain creative agency over core tasks recover most of the AI penalty, and employment contracts that make compensation reductions impermissible provide structural means of reducing the AI penalty.