Artificial intelligence has been replacing workers, and that can make colleges less valuable. CNBC detailed in a video released on YouTube that covers how AI is impacting recent graduates and how it can affect the economy.
"The rise of youth unemployment is worrisome," University of Chicago Assistant Economics Professor Anders Humlum told CNBC. "For the individual worker, we can see that graduating in a recession leaves long-lasting scars for decades after."
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Too Many People Chasing A Small Number Of Jobs
College educations have become more accessible to Gen Z compared to boomers, and that has resulted in a rapidly growing pool of college-educated job applicants. Burning Glass Institute Chief Economist Gad Levanon said that the oversupply of workers is playing a role in high unemployment rates, with AI making matters worse.
"We have a glut of people with a bachelor's degree, their wage growth is growing more slowly, and with AI continuing to automate more and more jobs, I expect that the trend will continue." Levanon said in the video.
Young professionals are feeling the brunt of AI job cuts. The technology has removed many entry-level jobs. Unemployment rates for older workers have held relatively steady amid the AI boom, according to CNBC.
"When you zoom in on the young workers, they seem to be struggling," Humlum told CNBC.
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Overhiring During COVID May Be Playing A Role
Not everyone is convinced that the AI rollout has made it harder for younger professionals to find work.
"The overhiring they did in the COVID era, when they didn't actually need to, the results of that are being seen now," Perplexity CEO Aravind Srinivas told CNBC. "Correlation doesn't imply causation. It's not because of AI that people are losing jobs."
Levanon believes that correction took place in 2023 and COVID hiring sprees shouldn't be an excuse for current unemployment rates. Although AI has disrupted entry-level jobs, career network platform Handshake has seen rising demand for professionals who know how to use AI tools.
"Employers are interested in early talent that is familiar and comfortable using AI," Handshake Chief Education Strategy Officer Christine Cruzvergara told CNBC.
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What Youth Unemployment Rates Mean For The Economy
Rising youth unemployment rates isn't just bad for the youth, but it can put pressure on consumer spending. Not only can this hurt in the short run, but a long-term trend toward budget tightening can result in significant changes.
"If these workers have a hard time getting into jobs now, that impacts spending, them going out, and buying things." Indeed Hiring Lab Senior Economist Cory Stahle told CNBC.
Growing unemployment rates among young professionals may also be an early indicator of an economic slowdown. Levanon believes that this trend can also fuel wealth inequality.
"It's a big problem today, and it will become an even bigger problem in the future," he said.
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