When Will We Pay a Premium for AI Labor?

AI agents are increasingly outperforming humans in various tasks, yet they typically cost 70% to 80% less.

Will they ever be able to charge a premium?

Waymo has reduced accidents by 82 to 92 percent in San Francisco. Waymos monitor more sensors, don’t fatigue, and react more quickly than humans. But, Waymo is often 13-33% cheaper than alternatives.

Within medicine, recent studies suggest AI can be at least as accurate as human doctors, in the evaluation of rashes from smartphone photos, estimating longevity, and diagnosing medical case histories, scoring 90% accuracy compared to human doctors who averaged in the mid-70s.

But who today is paying a premium for an AI doctor?

This is equally true within the world of enterprise software where many agentic startups are priced at a quarter to a third of a human worker.

One rationale for pricing at a discount in the short term is the technology is still evolving. While AI might be strong in some particular cases, quality needs work. An executive sponsor of an AI technology needs to be paid in some sense for assuming the risk the project may not succeed.

Most recently, Klarna, reverted to human customer support because AI output is lower quality.

For a startup, pricing at a discount offers a trade-off: the ability to capture market share, secure recognizable clients (logos), build credibility, and gather data to improve systems is considered worth the initial revenue sacrifice.

Another reason lies within Jeff Bezos’ maxim, “your margin is my opportunity.” If an AI can complete the same task as a human for a third of the cost and maintain similar margin, there’s a competitive advantage to gathering share. Plus, economies of scale, data network effects, and brand building associated with rapid growth also justify a lower price in the market.

Last, customers may prefer speaking to another person and are willing to pay a premium for it.

The current discount model for AI, driven by market penetration strategies and evolving technology, might not last forever.

We haven’t yet seen an AI product command a premium to the human alternative. But for applications where AI’s unique advantages - constant vigilance, instant processing, and comprehensive knowledge are paramount, we may see it.

In such cases, AI would transform from a cost-saving tool to a premium service.