Goldman Sachs economist warns Gen Z tech workers are first on the chopping block as AI shows signs of shaking up the labor market

The unemployment rate for young people between 20 to 30 years old in the tech sector has increased by about 3% since the beginning of the year, according to Joseph Briggs, senior global economist of Goldman Sachs’ research division.

“This is a much larger increase than we’ve seen [in] the tech sector more broadly or a larger increase than we’ve seen for other young workers,” Briggs said in an episode of the bank’s “Goldman Sachs Exchanges” podcast that aired Tuesday.

AI adoption in the workplace so far has been modest: About 9% of companies have used the technology regularly for the production of goods or services in the past two weeks, according to Goldman Sachs’ recent report, “Quantifying the Risks of AI-Related Job Displacement,” co-authored by Briggs. However, employment in the tech sector has dipped in the last few years, coinciding with the release of OpenAI’s ChatGPT—disrupting more than 20 years of consistent job growth in the industry.

The bank predicts AI will displace about 6-7% of the total workforce.

The proliferation of AI adoption is bound to have an outsized impact on the tech industry, with Microsoft, Google, Meta, and other tech giants laying off a nearly 30,000 workers collectively as they shift investments toward AI. But while millennials were the learn-to-code generation, new-to-the-workforce Gen Z is striking out on tech jobs. Beyond AI hurting tech-sector opportunities, the rise of automation is also disrupting entry-level positions in particular, with entry-level jobs postings in the U.S. diminishing by about 35% since January 2023.

Gen Z is feeling the pressure. Nearly half of Gen Z job hunters in the U.S. believe AI has reduced the value of their college degrees, according to an April World Economic Forum report.

“The story is one where the overall impacts on young workers in the labor market, speaking from an aggregate perspective, is small,” Briggs said. “But if we start zeroing in and zooming in on these specific industries where we are seeing AI be used to drive efficiency gains, there are signs that headwinds are emerging there.” 

Gen Z’s broader employment woes

More broadly, young people are entering into a job market that is “low-hiring, low-firing,” Briggs argued. In other words, while AI may be changing the labor landscape, Gen Z workers must also contend with a job market less friendly to new hires.

“There’s been a lot of questions around the lagged hiring rates or the difficulties facing recent college graduates,” he said. “I’m sure that we all know people who have had trouble finding jobs or a harder time than they would have normally following recent graduations.”

Briggs said he is “definitely seeing these lower hiring rates for recent college grads.” The Federal Reserve of New York found last month that the unemployment rate among recent college grads increased to about 5.5%, which is now roughly the same rate as young men who didn’t attend college. For all young workers between 22 and 27 years old, the unemployment rate is 6.9%.

Brad DeLong, a professor of economics at University of California, Berkeley, wrote in a recent Substack post that young people shouldn’t blame AI at all for their unemployment woes, but look to the litany of economic uncertainties—from trade wars to inflation—for reasons why they can’t get hired.

As companies adopt a wait-and-see policy as they learn more about the ramifications of President Donald Trump’s economic policies, they are not firing employees so much as just waiting to hire, DeLong argued. AI has meanwhile become a scapegoat for businesses conscious of their decisions to bide their time instead of expand, he said.

“Blaming AI allows both policymakers and business leaders to avoid grappling with deeper, structural issues—such as the mismatch between what colleges teach and what employers need, or the long-term stagnation in productivity growth that has made firms more cautious about expanding payrolls, or short run policy uncertainty,” DeLong wrote.