The generation affected by the AI ​​revolution. Drastic decline in jobs for young people in tech and services

The artificial intelligence revolution is advancing rapidly, and the expansion of the use of new technologies indicates an intensification of the impact in sectors such as energy, the chip and component industry, but also on the labor market, shows an analysis dedicated to the effects of AI.

The AI ​​revolution hits the hardest in young people at the beginning of the journey

The influence of artificial intelligence on the labor market is set to play a bigger role in the public space. The accelerated pace of technological evolution is increasingly influencing the way work and society are transformed. It is expected that this topic will increasingly preoccupy both the political plane, including the US midterm elections next year, and society as a whole.

Young people looking for a job are the most vulnerable

A study by Stanford researchers found that the employment rate was 13% lower for young Americans aged 22 to 25 in fields exposed to the influence of generative AI, compared to other age groups in the same fields. For example, in July this year, there were 20% fewer young software developers than in the fall of 2022, and 11% fewer employed in customer service roles.

While the massive demand for digital services during the pandemic probably played a role, the trend cannot be explained in this light alone. For employees aged 26 to 30, the employment rate in software development and customer relations was relatively stable, while for those over 35 it increased. The most pronounced difference for software engineers was between mid-career (ages 41-49) and early-career (ages 22-25), nearly 30 percentage points from when ChatGPT was launched. The gap is so wide, and with a tendency to increase over time, that the hypothesis that young people are disproportionately affected is strongly supported by the data.

The results are based on information from a large payroll processor and apply even after correcting for distortionary effects at the level of individual firms. For those in other, less AI-influenced fields, or those with more experience, the employment rate has been stable or even continued to rise. An important distinction to understand what some of the solutions could be: workforce reductions occur where artificial intelligence is used to automate, instead of augmenting the possibilities of employees, XTB analyst Claudiu Cazacu points out.

Companies are restructuring their workforce

Posting for entry-level jobs fell 35% from January 2023 to this fall in the US. The form of organization in large companies is also in the sights of transformations, with the elimination of some intermediate management positions, leading to the loss of relatively well-paid jobs. A flattening of the organizational structure, including in giant companies such as Amazon, has already been observed.

A Democratic senator anticipates social problems ahead, especially for those who have paid the high – and rising – price of a college education in the US. The unemployment rate for those aged 20 to 24 with a college degree reached 9.3 percent in August, up from 7.4 percent two years earlier, well above the aggregate U.S. rate of 4.3 percent. According to Mark Warner, in the next two to three years, up to 25% of young graduates could join the ranks of those applying for unemployment benefits.

The predictions of one of the most famous researchers and founders in the field of AI, Dario Amodei of Anthropic (the startup recently valued at 350 billion dollars) are even more severe: as the technology improves, 50% of the jobs for the early adopters could disappear. Anthropic announced this summer a model that can switch tasks, perform research and use agents to interact with other software tools, while keeping a memory of its actions for up to 7 hours. This, without meal breaks, coffee, or discussions with colleagues at the water dispenser, emphasizes the strategy consultant of XTB Romania.

The AI ​​revolution is having a disproportionate effect on early careers. In this way, the entire process of career advancement is affected, and the consequences are lasting. Training the next generation of professionals means presence in common spaces and numerous interactions, repetitive processes through which employees can reach over time to acquire the knowledge, social training and relationships to become capable seniors. Closing the doors to the first access to the labor market for some young people actually means eliminating the chances of a sustainable career.

Deep transformations are, to a certain extent, inevitable. This does not mean, however, that hoping that things will work themselves out without any special training would be an appropriate strategy, or at least one with acceptable risks. Technology is not only eliminating, but also creating new types of jobs.

For some agile and informed young people, the chance will lie in the quick discovery of newly emerging needs on the labor market, but their effort needs support and organization, skills that are acquired over time. For other experienced employees, the productivity and creativity benefits will accrue over time.

At the same time, the current structure of training for the labor market tends to quickly become anachronistic. Without a rapid re-evaluation and rewriting of the training processes, of the way universities operate, without the creation of new forms of education, with a quick response to the consequences of technology, without communication and understanding of new directions, in a rapidly changing environment, the risk of losing young and valuable human resources is increasing, adds Claudiu Cazacu, strategy consultant at XTB Romania.