Who Prices Cognitive Labor in the Age of Agents? Compute-Anchored Wages

TL;DR

This paper argues that in the age of AI agents, wages for cognitive labor are determined by compute capital prices rather than traditional labor markets, challenging conventional economic assumptions.

Contribution

It introduces the concept of compute-anchored wages, deriving bounds for human wages based on compute rental rates and agent productivity, shifting the focus from labor to compute markets.

Findings

Wages are bounded by compute rental rates and agent productivity.

The traditional labor market is no longer the primary wage-setting mechanism.

The framework generalizes to various task types and substitution levels.

Abstract

A natural intuition about the economics of AI agents is that, because agents can be replicated at very low marginal cost, agent labor may be supplied highly elastically, placing downward pressure on cognitive-labor wages when it closely substitutes for human labor. We argue this framing is wrong in mechanism but partially correct in conclusion, and that the correction matters for both theory and policy. \textbf{Agents are not labor; they are a production technology that converts compute capital $K_c$ into effective units of cognitive labor $L_A$.} Once this is recognized, the elastic-supply margin that anchors the equilibrium wage migrates from the labor market to the compute capital market. Building on the classic factor-pricing framework \citep{mankiw2020}, we derive a \emph{Compute-Anchored Wage} (CAW) bound stating that, on tasks where human and agent-produced cognitive labor are substitutes, the competitive human wage is bounded above by $\lambda \cdot k \cdot r_c$, where $r_c$ is the rental rate of compute capital, $k$ is the compute intensity of one effective agent-produced cognitive labor unit, and $\lambda$ is the relative human-to-agent productivity. We generalize the result through constant elasticity of substitution (CES) aggregation, separate substitutable from complementary tasks, and discuss factor-share consequences. The conclusion is concise: \emph{the price-setter for cognitive labor is no longer the labor market.}