Tag: Entry-level software coding jobs

Has AI Damaged the Tech Job Market for Recent College Grads?

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“Artificial intelligence is profoundly limiting some young Americans’ employment prospects, new research shows.” That’s the opening sentence of a recent opinion column in the Wall Street Journal. The columnist was reacting to a new academic paper by economists Erik Brynjolfsson, Bharat Chandar, and Ruyu Chen of Stanford University. (See also this Substack post by Chandar that summarizes the results of their paper.) The authors find that:

“[S]ince the widespread adoption of generative AI, early-career workers (ages 22-25) in the most AI-exposed occupations have experienced a 13 percent relative decline in employment … In contrast, employment for workers in less exposed fields and more experienced workers in the same occupations has remained stable or continued to grow. Furthermore, employment declines are concentrated in occupations where AI is more likely to automate, rather than augment, human labor.”

The authors conclude that “our results are consistent with the hypothesis that generative AI has begun to significantly affect entry-level employment.”

About a month ago, we wrote a blog post looking at whether unemployment among young college graduates has been abnormally high in recent months.  The following figure from that post shows that over time, the unemployment rates for the youngest college graduates (the red line) is nearly always above the unemployment rate for the population as a whole (the green line), while the unemployment rate for college graduates 25 to 34 years old (the blue line) is nearly always below the unemployment rate for the population as a whole. In July of this year, the unemployment rate for the population as a whole was 4.2 percent, while the unemployment for college graduates 20 to 24 years old was 8.5 percent, and the unemployment rate for college graduates 25 to 34 years old was 3.8 percent.

As the following figure (also reproduced from that blog post) shows, the increase in unemployment among young college graduates has been concentrated among males. Does higher male unemployment indicate that AI is eliminating jobs, such as software coding, that are disproportionately male? Data journalist John Burn-Murdoch argues against this conclusion, noting that data shows that “early-career coding employment is now tracking ahead of the [U.S.] economy.”

Another recent paper written by Sarah Eckhardt and Nathan Goldschlag of the Economic Innovation Group is also skeptical of the view that firms adopting generative AI programs is reducing employment in certain types of jobs. They use a measure developed by Edward Felton on Princeton University, and Manav Raj and Robert Seamans of New York University of how exposed particular jobs are to AI (AI Occupational Exposure (AIOE)). The following table from Eckhardt and Goldschlag’s paper shows the five most AI exposed jobs and the five least AI exposed jobs.

They divide all occupations into quintiles based on the exposure of the occupations to AI. Their key results are given in the following table, which shows that the occupations that are most exposed to the effects of AI—quintiles 4 and 5—have lower unemployment rates and higher wages than do the occupations that are least exposed to AI. 

The Brynjolfsson, Chandar, and Chen paper mentioned at the beginning of this post uses a larger data set of workers by occupation from ADP, a private firm that processes payroll data for about 25 percent of U.S. workers. Figure 1 from their paper, reproduced here, shows that employment of workers in two occupations—software developers and customer service—representative of those occupations most exposted to AI declined sharply after generative AI programs became widely available in late 2022.

They don’t find this pattern for all occupations, as shown in the following figure from their paper.

Finally, they show results by occupational quintiles, with workers ages aged 22 to 25 being hard hit in the two occupational quintiles (4 and 5) most exposted to AI. The data show total employment growth from October 2022 to July 2025 by age group and exposure to AI.

Economics blogger Noah Smith has raised an interesting issue about Brynjolfsson, Chandar, and Chen’s results. Why would we expect that the negative effect of AI on employment to be so highly concentrated among younger workers? Why would employment in the most AI exposed occupations be growing rapidly among workers aged 35 and above? Smith wonders “why companies would be rushing to hire new 40-year-old workers in those AI-exposed occupations.” He continues:

“Think about it. Suppose you’re a manager at a software company, and you realize that the coming of AI coding tools means that you don’t need as many software engineers. Yes, you would probably decide to hire fewer 22-year-old engineers. But would you run out and hire a ton of new 40-year-old engineers?“

Both the papers discussed here are worth reading for their insights on how the labor market is evolving in the generative AI era. But taken together, they indicate that it is probably too early to arrive at firm conclusions about the effects of generative AI on the job market for young college graduates or other groups.

How Well Are Recent College Graduates Doing in the Labor Market?

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A number of news stories have highlighted the struggles some recent college graduates have had in finding a job. A report earlier this year by economists Jaison Abel and Richard Deitz at the Federal Reserve Bank of New York noted that: “The labor market for recent college graduates deteriorated noticeably in the first quarter of 2025. The unemployment rate jumped to 5.8 percent—the highest reading since 2021—and the underemployment rate rose sharply to 41.2 percent.”  The authors define “underemployment” as “A college graduate working in a job that typically does not require a college degree is considered underemployed.”

The following figure shows data on the unemployment rate for people ages 20 to 24 years (red line) with a bachelor’s degree, the unemployment rate for people ages 25 to 34 years (blue line) with a bachelor’s degree, and the unemployment rate for the whole population (green line) whatever their age and level of education. (Note that the values for college graduates are for those people who have a bachelor’s degree but no advanced degree, such as a Ph.D. or an M.D.)

The figure shows that unemployment rates are more volatile for both categories of college graduates than the unemployment rate for the population as a whole. The same is true for the unemployment rates for nearly any sub-category of the unemployed lagely because the number of people included the sub-categories in the Bureau of Labor Statistics (BLS) household survey is much smaller than for the population as a whole. The figure shows that, over time, the unemployment rates for the youngest college graduates is nearly always above the unemployment rate for the population as a whole, while the unemployment rate for college graduates 25 to 34 years old is nearly always below the unemployment rate for the population as a whole. In June of this year, the unemployment rate for the population as a whole was 4.1 percent, while the unemployment for the youngest college graduates was 7.3 percent.

Why is the unemployment rate for the youngest college graduates so high? An article in the Wall Street Journal offers one explanation: “The culprit, economists say, is a general slowdown in hiring. That hasn’t really hurt people who already have jobs, because layoffs, too, have remained low, but it has made it much harder for people who don’t have work to find employment.” The following figure shows that the hiring rate—defined as the number of hires during a month divided by total employment in that month—has been falling. The hiring rate in June was 3.4 per cent, which—apart from two months at the beginning of the Covid pandemic—is the lowest rate since February 2014.

Abel and Deitz, of the New York Fed, have calculated the underemployment for new college graduates and for all college graduates. These data are shown in the following figure from the New York Fed site. The definitions used are somewhat different from the ones in the earlier figures. The definition of college graduates includes people who have advanced degrees and the definition of young college graduates includes people aged 22 years to 27 years. The data are three-month moving averages.

The data show that the underemployment rate for both recent graduates and all graduates are relatively high for the whole period shown. Typically, more than 30 percent of all college graduates and more than 40 percent of recent college graduates work in jobs in which more than 50 percent of employees don’t have college degrees. The latest underemployment rate for recent graduates is the highest since March 2022. It’s lower, though, than the rate for most of the period between the Great Recession of 2007–2009 and the Covid recession of 2020.

In a recent article, John Burn-Murdoch, a data journalist for the Financial Times, has made the point that the high unemployment rates of recent college graduates are concentrated among males. As the following figure shows, in recent months, unemployment rates among male college graduates 20 to 24 years old have been significantly higher than the unemployment rates among female college graduates. In June 2025, the unemployment rate for male recent college graduates was 9.8 percent, well above the 5.4 percent unemployment for female recent college graduates.

What explains the rise in male unemployment relative to female unemployment? Burn-Murdoch notes that, contrary to some media reports, the answer doesn’t seem to be that AI has resulted in a contraction in entry-level software coding jobs that have traditionally been held disproportionately by males. He presents data showing that “early-career coding employment is now tracking ahead of the [U.S.] economy.”

Instead he believes that the key is the continuing strong growth in healthcare jobs, which have traditionally been held disproportionately by females. The availability of these jobs has allowed women to fare better than men in an economy in which hiring rates have been relatively low.

Like most short-run trends, it’s possible that the relatively high unemployment rates experienced by recent college graduates may not continue in the long run.