The job market for 22 to 27-year-olds declined “significantly” in the first quarter of the year, the New York Fed reports. Later, Fed Chairman Jerome Powell acknowledged that AI may be partly to blame. Powell noted that companies that typically hired recent graduates are now trying to automate that work with AI assistants. By the end of the year, the job market for these young workers was at its tightest 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 thinking of reducing junior roles in the next one or two years doubled to 43% from 17% last year. Only 17% of CEOs said they are making hiring changes to focus on more junior positions.
Officials are focusing on hiring older employees rather than younger employees. Nearly 30% of respondents said they were shifting hiring to more mid-level roles, up from just 10% last year.
The report concludes that the change is AI-driven.
“Specifically, CEOs with the longest planning horizons are the most likely to plan headcount reductions,” the report said. “This suggests they expect a structurally lean organization not as a cost measurement 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, although 67% are still in the planning or pilot stage.
Artificial intelligence in its current state is best at automating the tasks that an early career worker might be expected to perform at a company, making this demographic particularly sensitive to AI-driven cost-cutting initiatives.
Despite the widely prevalent belief among top-level executives that AI will be so transformative that a lot of white-collar tasks can be automated in the near future, the majority do not actually see substantial returns on their AI investments.
More than half of the respondents said it is still too early to assess whether this AI deployment is actually returning the promised productivity benefits.
Only 27% of CEOs said returns on AI investments have actually met or exceeded expectations, down from 38% a year ago, and nearly a quarter said they have seen no impact on revenues at all. The report states that this is “not a crisis of confidence”, but “a recognition that large-scale redesign work is slower and more difficult than initially anticipated.”
Interestingly, the handful of executives who have led companies that are actually seeing returns on investment from AI have reported a relatively higher rate of shift toward junior employees than those who are not seeing returns, although the majority still prefer mid-level employees over junior ones.
“A contrasting subset of the most advanced AI adopters see the technology as enhancing the value of entry-level talent rather than replacing it,” the report said.
Although mid-level workers are better off than younger workers in this new equation, the broader trend is still away from hiring. The survey revealed that 74% of CEOs are either laying off or reducing the number of employees, up from 67% last year. The most aggressive cuts are taking place in the technology, media and telecommunications sectors.
However, these AI-driven workforce reduction initiatives may prove to be riskier in the long run.
“Reductions in headcount can leave organizations exposed compared to meaningful AI deployments, and over-reliance on systems that are still maturing introduces its own vulnerabilities,” the report said.
One particularly intriguing aspect is the trend seen with younger workers. Hiring fewer early-career workers means these AI-exposed industries are offering younger workers fewer opportunities for on-the-job training and career development. This is potentially devastating not only for these 20 people but also for the future of the workforce, which, according to this survey, is going to be dominated by mid-level employees. As companies move away from giving opportunities to junior employees to cut costs, they are simultaneously putting their talent pipeline at risk.
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