New study sheds light on what kinds of workers are losing jobs to AI

A new Stanford study, leveraging ADP data, reveals generative AI is significantly disrupting the labor market by disproportionately impacting entry-level workers. Since 2022, early-career employment in AI-exposed sectors has seen a 13% decline, with specific fields like software engineering and customer service experiencing up to a 20% drop, contrasting sharply with employment growth for more experienced workers. This dynamic suggests AI is replacing rote tasks common in entry-level roles, while older workers' tacit knowledge and soft skills offer greater resilience, signaling a significant structural rearrangement of the workforce rather than broad job destruction.

Analysis

A new Stanford study, utilizing robust payroll data from ADP, provides quantitative evidence that generative AI is actively displacing entry-level workers in exposed sectors. Since 2022, employment for early-career professionals in these fields has declined by 13%, with a more acute drop of approximately 20% observed in software engineering and customer service. This trend is juxtaposed with employment growth ranging from 6% to 9% for more experienced workers in the same roles, indicating that AI is substituting for the codified, 'book-learned' knowledge typical of new graduates rather than the tacit, experience-based skills of senior employees. The findings suggest a significant structural labor market rearrangement, not merely a net job destruction event. While some roles are automated, the study also points to a growing demand and a 12% starting salary increase for workers skilled in leveraging AI, signaling a shift towards AI-augmented roles and creating a bifurcated outlook for the junior workforce.

Key Decisions for Investors

• Re-evaluate holdings in business process outsourcing (BPO) and IT services firms that rely heavily on large pools of entry-level talent for tasks in customer service and basic coding, as they face the highest risk of disruption.
• Investors should identify and favor companies that are not just implementing AI for cost-cutting but are also investing in upskilling their workforce to create augmented roles, which is a likely indicator of a sustainable long-term productivity strategy.
• Monitor human capital metrics more closely, as the growing premium on experienced workers could increase labor costs for senior talent and create future talent pipeline challenges for companies that excessively automate entry-level hiring.