While AI advances rapidly in digital domains, physical robotics lags due to economic barriers. Automation could replace dangerous labor and boost stagnant sectors, but capital-intensive robots often lack cost justification compared to high-return AI tools for knowledge workers. MIT economist Daron Acemoglu documents how recent automation has favored skilled workers — a trend Anthropic research confirms with Claude Code benefiting expert coders most. Without intervention, investment may continue crowding out automation for low-wage physical labor, risking a "permanent underclass."

Policy can redirect this trajectory. A 2026 study by Stanford University professor Erik Brynjolfsson found a 10% higher minimum wage correlated with 8% higher factory robot adoption in the US. Trade-offs include potential unemployment and inflation, though AI-driven disinflation may offset the latter. Stronger unemployment insurance could mitigate job losses.

State-led industrial policy is also critical. China, Singapore, and South Korea lead in robotics through deliberate government investment and developmental state models. The US should emulate this approach, supporting advanced robotics firms like SpaceX and Anduril to secure strategic leadership in physical automation.