Job prospects for early-career workers took a turn for the worse last year.
In the first quarter of the year, the job market for 22-to-27-year-olds “deteriorated noticeably,” according to a New York Fed report. Later, Fed Chair Jerome Powell admitted that AI might be partly to blame. Companies that would have ordinarily hired recent graduates are now increasingly trying to have AI assistants automate that work, Powell explained. By the end of the year, the job market for these young workers was at its harshest since the worst days of the pandemic.
Now, a global survey of CEOs by consulting firm Oliver Wyman indicates that things could get even worse over the next two years.
According to the survey, the share of CEOs saying that they were looking to reduce junior roles over the next year or two doubled to 43% from 17% just last year. Only 17% of CEOs said they are shifting hiring to focus on more junior positions.
Instead of young workers, executives are increasingly focusing on hiring older workers. Roughly 30% of respondents said they are shifting hiring to more mid-level roles, up from only 10% last year.
The change is AI-driven, the report concludes.
“Notably, the CEOs with the longest planning horizons are the most likely to plan headcount reductions,” the report said. “That suggests they expect a structurally leaner organization not as a cost measure but as the destination — the endpoint of an AI-augmented operating model that requires fewer people, deployed differently.”
AI was a top-three priority for most CEOs, and more than 90% said they are deploying AI in their companies, though 67% are still at the planning or pilot stages.
Artificial intelligence in its current state is best at automating tasks that an early-career worker could be expected to perform at a company, making this demographic particularly vulnerable to AI-driven cost-cutting initiatives.
Despite the widely held belief among top-level executives that AI will be so transformative that a lot of white-collar work can be automated away in the near future, the majority don’t actually see a substantial return on their AI investments.
More than half of respondents said it was still too early to assess whether this AI deployment is actually returning the promised productivity gains.
Only 27% of CEOs said the return on AI investment had actually met or exceeded expectations, down from 38% just a year ago, and nearly a quarter said they had seen absolutely no impact on revenue. This is “not a crisis of confidence,” the report suggests, but “a recognition that redesigning work at scale is slower and more difficult than early enthusiasm suggested.”
Interestingly enough, the handful of executives who lead companies that are actually seeing a return on investment from AI reported a relatively higher rate of shift towards junior workers than those who are not seeing returns, even though the majority still preferred mid-level employees over juniors.
“A contrarian subset of the most advanced AI adopters see the technology increasing the value of entry-level talent rather than replacing it,” the report says.
Though mid-level employees seem better off than younger workers in this new equation, the overarching trend is still a shift away from hiring. The survey showed that 74% of CEOs are either freezing or reducing headcount, up from 67% last year. The most aggressive cuts are taking place in the tech, media and telecommunications sectors.
These AI-driven headcount reduction initiatives could prove to be more risky in the long term, though.
“Headcount reduction that outpaces meaningful AI deployment can leave organizations exposed, and overreliance on systems that are still maturing introduces its own vulnerabilities,” the report says.
One particularly tricky aspect is the trend seen with younger workers. Less hiring of early-career workers means that these AI-exposed industries are giving fewer opportunities for on-the-job training and career growth to younger workers. That’s potentially catastrophic not only for these 20-somethings but also for the future of the workforce, which, according to this survey, is going to be dominated by mid-level employees. As companies are shifting away from giving opportunities to junior employees to cut costs, they are simultaneously jeopardizing their talent pipeline.
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