Economists anticipate AI will visibly reshape labor markets in 2026, raising concerns for graduates entering professions historically considered secure. Molly Kinder of the Brookings Institution worries about employers' stated intentions to use AI for efficiency and labor cost reduction, suggesting a potential underestimation of future transformation. However, her previous research with the Yale University Budget Lab found little evidence that generative AI was causing job losses or accelerating occupational shifts faster than past technological changes like computers and the internet.
While some analysts link recent layoffs to AI, Ben May of Oxford Economics suggests this might be a way for companies to present a positive message to investors, rather than attributing cuts to weak demand or prior over-hiring. Nevertheless, some studies indicate that early AI effects are indeed impacting young workers, with weaker hiring and employment in AI-advanced sectors like tech and finance, as well as in customer service and support roles susceptible to automation. Tera Allas of McKinsey noted a clear pattern of sharper declines in UK job postings for occupations highly exposed to AI, although this doesn't necessarily mean companies have realized significant cost savings or fully deployed AI.
AI's impact on employment appears nuanced. The OECD's Stefano Scarpetta cites research showing small businesses using generative AI did not cut jobs; instead, they scaled, reduced workload, and relied less on external consultants, suggesting AI could complement worker skills rather than displace them. However, for online gig workers such as freelance graphic designers and copywriters, there's been strong evidence for over two years of reduced work volumes and pay rates since ChatGPT's launch. Junior coding jobs in the US have also seen nearly a 20% decline in employment for young software developers since late 2022, consistent with AI's potential influence.
A Stanford study, updated in August 2026, found that employment for workers aged 22-25 in the most AI-exposed occupations is 19% lower than their peers in less exposed fields. This phenomenon is primarily driven by lower hiring rates for entry-level workers in AI-impacted sectors, rather than increased firings. Kinder believes that as AI handles early career "grunt work," the entry points into many professions will need significant reinvention, noting that young people who followed traditional career paths are finding these jobs vulnerable. Over 180,000 corporate job losses have been linked to AI since May 2023, with 112,000 occurring in 2026 alone, according to Challenger, Gray and Christmas.
In some cases, highly skilled workers who train AI systems risk having their expertise encoded into software, potentially leading to replacement by lower-skilled workers supported by the very AI they helped develop. This dynamic extends across various occupations where digital work traces become training data, causing workers to potentially undermine their own bargaining power by supplying data to companies that then use AI to perform their tasks. While the net impact on overall employment from AI implementation seems minimal, with roughly 10% reporting increases and 10% reporting decreases, AI is primarily displacing tasks rather than entire jobs, especially for roles with clearly defined, self-contained tasks like those often found in freelance or junior tech positions.
