The Impact of Remote Work on Unemployment Among New Graduates

For the past few years, artificial intelligence (AI) has often been blamed for the sluggish absorption of entry-level workers. However, the latest research shows that the trend of working from home or remote work is actually the main factor behind the increasing unemployment rate among new graduates.

Based on data from the Federal Reserve Bank of New York, the unemployment rate for college graduates under the age of 29 increased from 3.1% to 3.7% in the last nine years. Conversely, unemployment among more experienced graduates (over 29 years old) actually decreased slightly from 1.9% to 1.8%.

This phenomenon is most evident in jobs that can be done remotely, such as software engineering and financial analysis. The research found that remote work contributes up to 64% of the total increase in youth unemployment since the pandemic.

On the other hand, jobs that require physical presence, such as nurses, do not show a permanent age gap. After a brief surge in 2020, recruitment rates for physical roles have returned to normal and are now a bright spot in the labor market.

A study published by the National Bureau of Economic Research highlights that while remote work can increase the productivity of senior workers, it has a negative impact on young workers. In the office, young workers benefit greatly from direct guidance and spontaneous feedback sessions.

Without face-to-face interaction, new graduates experience what is known as the loss of network effects. Companies that operate fully in a distributed manner tend to be reluctant to hire young workers who need a lot of guidance and prefer to hire senior staff who are considered more secure and independent.

Although many companies attribute layoffs to the adoption of AI, economists call this phenomenon AI-washing. They argue that companies are using technology as an excuse for layoff decisions that were actually planned or triggered by changes in work models.

“There is no real evidence of massive job losses due to AI,” said Torsten Slok, chief economist at investment firm Apollo. Instead, the push for AI is actually increasing demand for new experts and engineers.

For Gen Z, this reality is beginning to be realized. A Gallup survey shows that this age group is among the least likely to favor fully remote work arrangements, as they feel they are missing out on social interaction and crucial career development opportunities early in their careers. (Fortune/I-2)