The Real Reason Why Gen Z is Struggling to Find Work Revealed
Artificial intelligence (AI) is frequently blamed for the difficulties faced by Generation Z (Gen Z) in securing employment. However, recent research from the Federal Reserve Bank of New York (New York Fed) reveals a different primary cause.
In a report published via the Liberty Street Economics blog on 1 June 2026, the New York Fed stated that the post-Covid-19 trend of remote work has become the largest factor hindering new graduates and young workers from entering the workforce. New York Fed research economist Natalia Emanuel estimates that remote work systems explain about 64% of the increase in unemployment rates among young university graduates in recent years.
“We estimate that remote work can explain 64% of the recent increase in unemployment among young college graduates. The timing of this surge suggests that remote work, not generative AI, explains most of the rise in youth unemployment,” wrote Emanuel, as quoted by Business Insider on Wednesday (3/6/2026).
These findings emerge amidst growing concerns that AI is replacing human jobs. In recent years, many companies have implemented efficiency measures and layoffs citing the use of AI technology, creating a perception that such technology is the primary enemy of young job seekers. However, research also authored by economics professors Emma Harrington and Amanda Pallais found that a more dominant factor stems from changes in work patterns since the pandemic.
According to the researchers, the number of jobs that can be performed remotely has increased fourfold since 2020. This situation has made companies more cautious about recruiting new graduates, as training processes and skill transfers are deemed more difficult to conduct within teams that are virtually dispersed.
“Companies may not want to recruit new graduates into dispersed teams because it is more difficult to teach required skills remotely,” the researchers noted.
This phenomenon reinforces what is being termed the “Gen Z career squeeze,” a condition where it is increasingly difficult for young workers to penetrate the labour market. Simultaneously, managers tend to favour experienced candidates who require less training compared to fresh graduates. The research also shows that the rise in unemployment among young graduates actually began before AI was widely utilised in the workplace. The unemployment rate for young workers in sectors allowing remote work rose by nearly one percentage point between the 2017-2019 and 2022-2024 periods. Conversely, the unemployment rate for more senior workers in the same sector actually experienced a slight decrease.
Similar views have been expressed by several economists. Torsten Sløk, Chief Economist at Apollo Global Management, recently stated there is no evidence that AI is causing massive job losses. On the contrary, he believes AI is helping to drive the creation of new businesses in the United States. Meanwhile, separate research conducted by Peter John Lambert from the London School of Economics and Yannick Schindler also found that exposure to work-from-home (WFH) systems is a stronger indicator in explaining the weakening of early-stage recruitment.