Remote work promised flexibility for employees, and even endless travel for digital nomads. But for young employees, remote work might be coming for their jobs instead—not AI.
A recent study by the Federal Reserve found that remote work might be leaving young workers sidelined amid the rising unemployment rate that followed the 2020 pandemic.
Despite headlines warning that AI is coming for jobs, the study found that the factors contributing to unemployment for recent graduates predates the AI boom. While AI will play a role in defining employment patterns for younger generations moving forward, it is the modes of work that are having a larger impact today.
The study compared the unemployment rate for individuals working in “remotable jobs” and “non-remotable jobs,” categories which were determined by analyzing if the tasks for a given job can be easily done remotely. The study found remotable jobs to be in sectors like software engineering, whereas nonremotable jobs included mechanical engineering.
The findings revealed that job prospects might be more challenging for young employees going into a remote job than for the non-remotable peers. For instance, the unemployment rate for young people increased by almost 1% between 2017-19 and 2022-24, while that of older employees decreased during the same period.
“This relative increase in young people’s unemployment coincided with the pandemic and has remained elevated since then, as have rates of remote work,” the study said.
For young individuals in nonremote jobs, however, the labor market might be a bit more favorable than its counterparts. While the relative unemployment rate also ticked in 2020, the rate declined back to its baseline after the pandemic.
The study also estimates that around 64% of the increase in unemployment among recent college graduates can be attributed to remote work, as employers become reluctant to hire employees who will need training remotely.
“That remote work has weakened incentives to hire young workers by impeding on-the-job training,” the study added. “Employers may not want to hire fresh graduates onto distributed teams because it is more difficult to teach them the requisite skills from afar.”
But the implications of the study stretch farther than just landing a first job, as early career experiences help shape an individual’s trajectory. The study points out that young people who enter the workforce during lean periods—like a recession, or today’s entry-level remote job freeze—tend to have slower career progressions and earn less than their peers who started in better conditions.