Why Is the Job Market so Tough for Younger Workers?

Much of the COVID-19 pandemic already feels like ancient history: showing paper vaccine cards to get into bars, hoarding toilet paper and the Netflix docuseries about a zoo keeper named Joe Exotic, for example. But many of the virus’ effects on the workplace have stuck around. 

We may no longer be hyperfixated on office air quality or sitting 6 feet apart, but plenty of Americans were sent home in March 2020 without knowing that they were saying goodbye to working in-person full time, possibly forever. Last year, 35% of employees did at least some of their work at home, according to a recent study from the Bureau of Labor Statistics. 

That’s great for working parents, pet owners, people with disabilities and rural residents, but studies show there’s one population group that’s struggling in the new landscape: Early-career workers and college grads hunting for jobs, who are finding they have fewer opportunities than they once did. While unemployment for college grads younger than 29 averaged 3.1% in 2017 to 2019, it jumped to 3.7% in 2022 through 2025, according to data from the Federal Reserve Bank of New York. Meanwhile, the unemployment rate for more experienced college grads fell to 1.8% from 1.9% over the same time period. 

Rookie Risk

Companies, whether they be tech startups in Silicon Valley, banks on Wall Street or somewhere in between, have traditionally jumped at the opportunity to hire rookie candidates. Recent college grads offer firms the ability to train new team members in their unique work style, and build highly-motivated employees who may not yet have roots or caregiving responsibilities into future business leaders. 

For a recent study published in the Administrative Science Quarterly, researchers found that remote positions required 25% more skills, more experience and slightly higher educational credentials than their non-remote counterparts (same title, same employer, same year). The study included an analysis of more than 50 million job postings across 28 European countries and nearly 40 interviews with hiring managers in the US. The researchers found similar results in an online experiment with about 1,250 hiring managers.

The reasons include remote work increasing the applicant pool, making a higher threshold necessary, and hiring managers prioritizing measurable credentials like degrees more when there will be less face-to-face interaction. Researchers think the largest factor, however, is that remote work has made training more challenging. 

“When a job is remote, it’s very hard to have on-the-job training and on-the-job support, which is really important when the junior or fresh graduates enter the work. They really need mentors or they need to watch how others are doing,” Shinan Wang, a co-author of the study and doctoral candidate at the Kellogg School of Management at Northwestern University, told The Daily Upside. “Firms therefore increase their hiring requirements … they simply want people who already have the skills.” 

The findings were exacerbated for fully remote jobs, with the data for hybrid ones looking more like that of in-person positions. 

The AI Effect 

With companies pouring money into artificial intelligence and AI-washing their layoffs, it’s no surprise that much of the concern for the higher unemployment rate among young college grads has centered around automation. Nearly half of recent grads say AI is already impacting hiring in their field, according to a survey earlier this year from ZipRecruiter. 

The tech may be less culpable, however, than remote work. Economists who authored a recent analysis by the Federal Reserve Bank of New York estimate that working from home is behind 64% of the recent rise in unemployment among young college grads. 

Similarly to the previous study, they concluded that employers may be hesitant to hire new grads for teams that are spread out because it makes teaching harder. While the study suggests remote work’s impact on the labor market for young people predates the massive impacts of AI, it may not be an either-or situation, added Emma Harrington, an assistant professor of economics at the University of Virginia and co-author of the NY Fed’s study. 

“In the long run, it may just be both instead of one or the other: both forces that are making it harder and harder for people to get jobs initially and also ramp up in their career going forward,”  Harrington said. 

A Long-Term Problem?  

Economists will probably be studying the impact of the pandemic, remote work and AI on young workers for years to come. So while it’s difficult to speculate, Harrington said it’s likely that fewer opportunities for face-to-face mentorship and AI potentially automating tasks that entry-level workers would otherwise do are building on each other. Young workers may not be hired as often for remote jobs, and those who are may not get the regular feedback they need to progress. Even those who work in person could have trouble, if mid-level workers are in the office less than they used to be. 

“If the mentees go in but the mentors are at home, you’re only halfway there, which means you haven’t gotten anywhere,” Harrington said. 

There are more optimistic takes, however, one being that companies are still figuring out what the remote world is going to look like and defining hybrid practices and policies. In that case, workplaces may allow more remote days than before the pandemic but coordinate them better so people can still spend ample time with their colleagues in person. There’s also speculation that some of the unemployment trends may be driven by pandemic-era schooling and shutdowns. 

“A college degree where some of your college time was spent remote, or a college degree when some of your college and high school time was spent remote, may just not bear quite as much human capital as those same degrees would have previously,” Harrington said. “That suggests that this may be a little more transitory as opposed to a permanent shift in the economy.” 

History Repeats Itself 

There’s also the broader perspective. The macro low-hire, low-fire environment has been beneficial for people who have jobs but particularly difficult for younger workers who need to get hired in the first place. That’s not an atypical pattern in this stage of an economic cycle, said Adam Schickling, a senior economist at Vanguard. 

“Normally, when you get towards the latter part or the late stages of a business cycle, or after you’ve had a pretty prolonged economic expansion, which we’ve essentially been in since the Global Financial Crisis with the short blip in 2020 … firms are just starting to hire fewer workers,” Schickling said. “They try to increase efficiency with the labor force they have.” 

Experts have found that workers who start their careers in looser labor markets tend to earn less and progress slower than their luckier peers who entered the workforce amid better conditions. While the impact can last for more than 10 years, Schickling said the labor market isn’t likely to remain as challenging for entry-level job seekers as it is now.

“I do think that the labor market is going to actually get better for younger workers over a five-year time horizon,” he added.