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AI-driven automation cuts Gen Z entry-level jobs 13% since late 2022, impacting future earnings and labour markets

Key Takeaways

  • Entry-level jobs for Gen Z are declining rapidly, with a 13% drop since late 2022 in sectors heavily affected by AI such as software development, customer service, and data entry.
  • AI is automating foundational tasks, eroding traditional career entry points and hindering early professional development for young workers.
  • Youth unemployment risks intensifying, with long-term economic consequences such as reduced lifetime earnings and weaker consumption patterns.
  • Investment opportunities exist in AI-adjacent sectors such as education technology and workforce upskilling, though disparities in adaptation threaten productivity and equality.
  • Policy and employer responses, including curriculum reform and targeted hiring incentives, are essential to mitigate widening employment divides.

Artificial intelligence is reshaping the labour market in profound ways, with emerging evidence suggesting it is eroding the foundational entry-level roles that young workers, particularly those from Generation Z, rely on to build their careers. Recent studies highlight a stark decline in such positions, especially in sectors vulnerable to automation, raising concerns about long-term economic mobility and workforce development.

The Erosion of Entry-Level Opportunities

A comprehensive study from Stanford University, published in August 2025, reveals that since the widespread adoption of generative AI tools around late 2022, employment in entry-level jobs for workers aged 22 to 25 has fallen by 13% in fields heavily exposed to AI, such as software development, customer service, and data entry. This decline stands in contrast to more stable employment trends among older workers in similar roles, indicating that AI is not merely augmenting tasks but outright replacing the routine functions that traditionally served as on-ramps for inexperienced graduates.

The implications are particularly acute for Generation Z, born between 1997 and 2012, who are entering the workforce amid this technological upheaval. These young professionals often depend on entry-level positions to gain practical experience, develop soft skills, and climb the career ladder. Without these opportunities, many face prolonged unemployment or underemployment, exacerbating issues like student debt burdens and delayed financial independence. Analysts at the World Economic Forum have noted that AI’s automation of basic tasks is widening global talent pools while narrowing local entry points, potentially leading to a bottleneck in career progression.

Sector-Specific Impacts

In software and coding roles, for instance, AI tools are automating code generation, debugging, and quality assurance—tasks that once formed the bulk of junior positions. A report from LinkedIn, dated May 2025, warns that this “breaking” of the career ladder’s bottom rung could stifle innovation by limiting the influx of fresh talent. Similarly, in customer service, chatbots and AI-driven support systems are handling inquiries that entry-level staff would previously manage, resulting in fewer hires for these foundational jobs.

Bill Gates, in commentary from August 2025, emphasised that even if young workers master AI tools, they may not be insulated from these disruptions, as the technology evolves faster than educational systems can adapt. This sentiment echoes findings from a Fortune article, which points to headwinds for Gen Z applicants due to skill mismatches and the preference of employers for AI efficiencies over human labour in low-complexity roles.

Economic and Social Ramifications

The broader economic fallout could be significant. With entry-level jobs diminishing, youth unemployment rates—already elevated in many regions—may rise further. In the United States, for example, the Stanford study documents a 16% drop in affected sectors for young workers, controlling for firm-level shocks. This trend risks creating a “lost generation” effect, where delayed career starts lead to lower lifetime earnings and reduced consumer spending.

From an investor perspective, this shift underscores opportunities in AI-driven companies but also highlights risks in sectors reliant on human capital development. Firms in education technology and upskilling platforms, such as those offering AI literacy courses, stand to benefit. Analyst models from McKinsey project that by 2030, up to 45% of work activities could be automated, necessitating a $3.4 trillion investment in workforce retraining globally. However, if unaddressed, this could dampen productivity growth, with the International Monetary Fund forecasting a potential 0.5% drag on annual GDP in advanced economies due to labour market mismatches.

Sentiment among institutional investors, as reported by Bloomberg in July 2025, remains cautiously optimistic about AI’s net positive impact on productivity, though with marked concerns over inequality. Verified sources like the OECD indicate that while AI could boost global GDP by 1.2% annually through efficiency gains, the benefits may accrue disproportionately to skilled workers, leaving entry-level pathways squeezed.

Strategies for Mitigation

To counter these challenges, experts advocate for targeted interventions. Educational institutions must integrate AI proficiency into curricula, shifting focus from rote tasks to creative problem-solving and ethical AI deployment. Governments could incentivise apprenticeships or tax credits for companies hiring young talent in augmented roles. For instance, a Generation report from August 2025 highlights that AI adoption among entry-level workers is making tasks easier in some sectors, suggesting a hybrid model where humans oversee AI outputs could preserve job access.

Investor-led forecasts, such as those from Goldman Sachs, model a scenario where reskilling initiatives reduce the entry-level job gap by 20% over the next five years, provided public-private partnerships accelerate. Without such measures, the divide between AI “haves” and “have-nots” could widen, with Gen Z bearing the brunt.

Looking Ahead: Opportunities Amid Disruption

While the narrative is sobering, it’s not entirely bleak. AI is also creating new roles in areas like AI ethics, data annotation, and system maintenance—positions that demand human oversight and could serve as modern entry points. A study from Axios in August 2025 notes that software and customer service are current hotspots for disruption, but this could be a “canary in the coal mine” signalling broader transformations.

For Generation Z, adaptability will be key. Surveys indicate that employers are increasingly valuing AI skills over traditional experience, with some firms fast-tracking young experts into mid-level roles. This pivot could redefine career trajectories, compressing the timeline from entry to expertise but requiring proactive upskilling.

In summary, AI’s disruption of entry-level jobs poses a critical challenge for Gen Z’s career launches, demanding swift policy and educational responses. Investors should monitor labour market indicators closely, as the resolution of this tension will influence long-term economic vitality. As one dryly observes, in the race between technology and human adaptation, the former rarely waits for stragglers.

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