Why you can't get a job
Guest post from Ramp's economist
In most headlines about the bleak post-grad job market, AI is often cited as the culprit. But — I’ve recently started to wonder — is AI entirely to blame? And if not, what is?
I asked this question of my friend Ara when we met up for coffee last month. Ara is an economist at Ramp, a spend platform for businesses, and like any serious economist, he doesn’t blindly trust the headlines — he looks into what the data actually says. So I asked him if he’d be interested in collaborating on a letter about why young people are struggling to get jobs. Luckily for Business Casual readers, he said yes. Here’s Ara.
Why Young People Can’t Get Jobs
Three possible explanations
AI probably isn’t taking young people’s jobs. Although the job market for young college graduates is weakening, it started before ChatGPT.
This chart shows it well. Young graduates’ relative unemployment, the difference between their unemployment and the average unemployment rate started increasing in 2009.
Not that AI hasn’t had any effects on the labor market. Information sector employment, which includes software development, has declined despite a boom in AI investment from tech companies. But in general, overall employment is up, and despite the recent slowdown in job creation, there is no evidence of broad job losses caused by AI. In fact, a New York Fed survey recently found that companies adopting AI are, on net, increasing hiring.
The sectors affected by AI so far are too concentrated, and the effects too recent, to explain a several-year trend in weak hiring of young college grads. Articles that assert AI is causing layoffs tend to cherrypick from a few specific companies and sectors that don’t match broader trends in the labor market. Meanwhile, articles that dispute AI’s impact on young college grad hiring stop short of explaining why, then, their job market is getting weaker.
There’s little data we can use to answer this question. Government data that cross-tabulates on multiple dimensions (like age + education + employment status) tends to rely on small samples and be pretty noisy. But here are three possible reasons why young people can’t get jobs.
Possibility 1: Interest rates are high, and new grads are kind of a risky investment.
Interest rates set the cost of borrowing money, which businesses use to grow and invest in new talent. Right now, the cost of borrowing is near its highest point in two decades. When money is expensive to borrow, businesses are less likely to take a risk on new talent they’ll have to train and onboard.
It’s kind of like how Hollywood keeps making the same sequels and franchises. When it’s expensive to produce something, you’ll double-down on the model that works. In the job market, that means picking more experienced candidates, relying on your existing team, and delaying new hire decisions as long as possible.
Possibility 2: More Americans have gone to college, so it’s less of a differentiator.
Over 40% of employed Americans have at least a bachelor’s degree (it was 24% in 1992). That’s about 30M more people competing for college grad jobs. And while the number of jobs requiring a bachelor’s degree has also increased, when more people go to college, that means college on its own is a weaker signal of job market preparedness, relative to other candidates.
Meanwhile, in areas like construction and manufacturing, we have a shortage of skilled workers. It’s a hot job market for young people who are skilled in a trade, or willing to train up. And they don’t necessarily need a college education to get highly paid work.
Possibility 3: Some of it might be AI.
The decline in tech sector jobs is real and significant, and I think underrated by economists right now. The Bureau of Labor Statistics projects a net-increase in hiring of software developers due to AI, but then why is employment falling? I still haven’t seen an adequate explanation for this discrepancy. According to Ramp AI Index, AI adoption is highest in the tech sector, and model companies routinely benchmark new releases against their ability to do coding tasks.
While I don’t anticipate broad job market losses driven by AI, it makes sense that we would see some sectors, perhaps those typically seen as safe jobs for college grads, see slowdowns in hiring.
So that’s three possible reasons. They’re not mutually exclusive (it’s likely a combination of these factors and others). Only one of them has to do with AI. And unlike the other reasons, AI can’t explain the longer trend.
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I’m an economist at Ramp, a spend platform for businesses, where I lead Ramp Economics Lab. I study how businesses respond to macroeconomic trends. Recently, I’ve been using spend data from our platform to show how AI, tariffs, and policy uncertainty affect investment decisions.
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 | A guest post by
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US workers are the same job market factors as those in Europe, Asia, Africa, South America, and Canada.
The job market has shifted since COVID. Critical job skills have been redefined. Working from home translated to being in competition with other workers worldwide.
Thoughtful analysis!