XTB ANALYSIS, Claudiu Cazacu: The AI ​​revolution hits those at the beginning of the journey hardest. The new generation faces the most difficult job market in recent years

Investors breathed a sigh of relief after Nvidia’s quarterly report, which shattered expectations, both in terms of profit and sales. For the current quarter, revenues are estimated at $65 billion, $2.9 billion above the average forecast by analysts, while the profit recorded in the third quarter increased by 65% ​​compared to the same period last year.

The AI ​​revolution continues, and the increased use of new tools signals an acceleration of the effects, including in areas such as energy, the chip and related components industry or the labor market, says Claudiu Cazacu, strategy consultant at XTB Romania.

The influence of artificial intelligence on the labor market is set to play a more important role in the public space. The accelerated pace of technological evolution is increasingly influencing the way work and society are transformed. This issue is expected to become increasingly important both on the political front, including in the US midterm elections next year, and in society as a whole.

Young people looking for work 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 of this year, there were 20% fewer young software developers than in the fall of 2022, and 11% fewer employees in customer service roles.

While the massive demand for digital services during the pandemic likely played a role, the trend cannot be explained in this light alone. For employees aged 26-30, the employment rate in software development and customer service was relatively stable, while it increased for those over 35. The biggest gap for software engineers was between those in their mid-career (41-49) and those in their early years (22-25), at nearly 30 percentage points since ChatGPT launched. The gap is so wide, and has been growing over time, that the hypothesis of disproportionately affecting young people seems to be strongly supported by the data.

The results are based on data from a large payroll processor and apply even after adjusting for confounding effects at the individual firm level. For those in other fields less impacted by AI, or those with more experience, the employment rate was stable or even continued to increase. 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, employee capabilities, points out Claudiu Cazacu.

Companies are restructuring their workforce

Advertising for entry-level jobs fell by 35% from January 2023 to the fall of this year in the US. The organizational structure of large companies is also in the spotlight, with the elimination of middle management positions, leading to the loss of relatively high-paying jobs. A flattening of organizational structure, including at giant companies such as Amazon, has already been observed.

A Democratic senator foresees social problems in the future, especially for those who have paid the high – and rising – price of a university education in the US. The unemployment rate for those aged 20 to 24 with a university degree reached 9.3% in August, up from 7.4% two years earlier, well above the aggregate US rate of 4.3%. 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) are even more severe: as the technology improves, 50% of jobs for those at the beginning of the journey could disappear. Anthropic announced in the summer a model that can alternate tasks, conduct research and use agents to interact with other software tools, while retaining the memory of its actions, for a duration of up to 7 hours. This, without lunch breaks, coffee, or discussions with colleagues at the water dispenser, emphasizes the strategy consultant of XTB Romania.

The AI ​​revolution has a disproportionate effect on those at the beginning of their careers. In this way, the entire process of career advancement is affected, and the consequences are lasting. Preparing the new generation of professionals means being present in common spaces and numerous interactions, repetitive processes through which employees can eventually acquire the knowledge, social training and relationships to become capable seniors. Closing the gates for some young people for their first access to the job market actually means eliminating the chances of a sustainable career.

Profound transformations are, to a certain extent, inevitable. This does not mean, however, that hoping that things will be solved by themselves, without any special training, would be an appropriate strategy, or at least one with acceptable risks. Technology not only eliminates, but also creates new types of jobs.

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

At the same time, the current structure of labor market preparation tends to quickly become anachronistic. Without a rapid re-evaluation and rewriting of training processes, of the way universities operate, without creating new forms of education, with a quick response to the consequences of technology, without communicating and understanding 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.

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