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There’s huge concern worldwide about the difficulties young people are facing in getting their first jobs. Here in the UK, the rise in Neets – that’s young people not in education, employment or training – was the key concern of the review published last week by Alan Milburn, the former health minister under the Tony Blair government. But while the increase in Neets is profoundly worrying, it is not particularly a British issue.
Over the past decade, the job market has clearly shifted against young people. Why? Many reasons have been suggested, including the oversupply of graduates doing degrees that don’t prepare them for jobs, the lack of adequate technical training, even changes in the attitude of young people towards work and so on. While in Britain the problem has almost certainly been made worse by the sharp increases in employers’ national insurance and the living wage, it can’t just be that.
In the past couple of years, two other reasons have pushed to the front. One is the rise in working from home (WFH) following the pandemic. The other is the way in which artificial intelligence seems to be taking over entry-level tasks. But which is more important?
The popular view is that it’s mainly AI that is destroying jobs, and there’s plenty of research that supports this. A Yale University study noted that “the impact of AI can be seen among recent college graduates, who are finding it harder and harder to get that first job”. Just this week, an article in Fortune magazine was headlined: “Gen Z is losing the most in the AI economy – and Goldman warns it’s about to get worse”. Goldman Sachs has been tracking job losses from AI and reckons that a net 11,000 jobs were wiped out in the US in April alone. There were more temporary jobs among older construction and electrical workers building the data centres, but fewer permanent jobs for the younger workers who would run them.
But maybe this is misleading – particularly as far as entry-level jobs are concerned. There’s a new study by two economists at the London School of Economics (LSE) and Warwick University, which suggests that, actually, the real killer of jobs for the young is not so much AI, though that’s important. It is WFH.
WFH may be great for older workers with established careers and proven competence, but for entry-level workers, it is a disaster. It costs more to train them and their performance rises more slowly. So, inevitably, employers try to fill places with staff who already can do the job rather than those they have to train.
The paper is called “The Broken Ladder: AI, Remote Work, and Early-Career Hiring”, and the authors are Peter John Lambert and Yannick Schindler. They looked at 243 million new hires and 407 million online job postings, collected across the US, UK, Canada, and Australia from 2017 to 2025. In all four countries, there was a shift against entry-level candidates – slightly sharper in the UK, less so in the US and Australia, and least in Canada – that really began in earnest towards the end of 2022.
That happens to be the time when ChatGPT was launched, but it was also when companies realised that WFH was here to stay – that they couldn’t go back to pre-pandemic work patterns – and began to adapt their hiring patterns to the new reality. The key point here is that while there is indeed a close correlation between the adoption of AI and the fall in demand for entry-level workers, the jobs most exposed to AI automation are also the occupations most amenable to remote work.
If you think about it, that makes sense. A construction worker has to be on site, and that job cannot be automated with AI. A computer coder can work from home… but may find AI does the job better.
So which is more important? The researchers looked at what companies were doing and found that WFH was a much better predictor of decline in early career hiring than the adoption of AI.
If this is right, and I think it probably is, it’s actually good news for young people. We are not going to stop the advance of AI, for it will inevitably take over a lot of routine white-collar tasks. But if, on the other hand, the real problem is not AI but WFH, then companies can adapt to that in positive ways.
They can work on their training programmes so that people in entry-level jobs interact with more experienced workers. They can require their staff, young and old, to spend more time at the workplace. It’s carrot and stick stuff: you say to all workers, whatever their age: “You will do better in your career if you are the person who shows up.”
And if that means there is more of a burden on older workers, then that’s only fair too, because they benefited from mentoring when they started out. The ladder may be broken, but at least we know how to fix it.
Need to know
From an economist’s point of view, the LSE and Warwick University study is one of the most interesting bits of research I have seen this year. I love the huge data sets. Having 243 million new hires and 407 million online job postings to work with is stunning. I like the fact that they have looked right across the Anglosphere, more than 480 million people, and the counter-cultural conclusion is really stunning. And I like the positive conclusions. Here’s an extract from that:
“Understanding the cause of the fall in relative demand for junior workers is important, as it has both scarring effects on the current cohort and reduces long-run accumulation of human capital, leading to a slowdown in productivity. If GenAI is to blame, more drastic interventions, such as wage subsidies or differential tax treatment, may be needed to offset GenAI displacement effects. If, as our results indicate, WFH is reducing the incentive to hire junior talent, then more micro-level adjustments may be required to help firms adapt their organisational practices, so as to enjoy the benefits of WFH arrangements while simultaneously managing the development of early-career talent.”
Other things need to happen, too. I found myself wondering about the impact of AI on the hiring process, with many applications filtered by AI before reaching a human being. This is deeply dispiriting. However, I suppose there also needs to be an attitudinal shift among entry-level job seekers. I’m struck by the way in which they are frustrated that they get no feedback from potential employers. Indeed, that’s the thing that apparently most concerns them.
But why should an employer give feedback? If you are a university student, of course, you expect feedback on your essay. That is what you are paying for. But when looking for a job, the relationship is the other way round. They will be paying you to help them provide better goods and services for their customers. It costs money and time to respond, and in addition, they may be accused of discrimination, unfair hiring policies or other forms of bias.
AI has made matters worse by increasing the ease with which applications can be fired off, as well as filtered out by employers. I’m not sure how to fix this, aside from universities putting much more work into explaining what being in a job is really like and teaching human interaction skills. But that’s not something that fits easily within a university framework. I will ponder more and try to get into the subject in future columns.
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