Gen Z is facing consequences due to limited experience as AI replaces their roles. Meanwhile, older employees remain secure—at least for the time being, according to a warning from the Dallas Fed.

AI’s Impact on the Workforce: Young Employees Face Challenges, Experienced Workers Thrive

As artificial intelligence transforms white-collar industries, younger Gen Z professionals are encountering rising unemployment, while seasoned employees are managing to adapt and even benefit, according to recent research from the Federal Reserve Bank of Dallas.

J. Scott Davis, assistant vice president at the Dallas Fed and author of the study, explains that the integration of AI into the workplace is more nuanced than simply replacing jobs with machines. In sectors heavily influenced by AI, experienced staff are leveraging the technology to delegate routine tasks, freeing them up to focus on work that contributes greater value to their organizations.

“If AI were just automating roles, we’d see both wages and employment numbers fall,” Davis notes. However, his research shows that the effects of AI differ widely across industries, largely depending on the skills required for entry-level positions.

“The value of job experience is rising in fields exposed to AI,” Davis writes. “Young professionals, whose expertise is mainly theoretical and easily automated, are likely to encounter tougher job prospects.”

Davis points out that while entry-level employees often excel in academic knowledge, these skills are more susceptible to automation. In contrast, older workers possess practical insights gained through years of experience, which are harder for AI to replicate.

Global Trends: Young Workers in Tech and Finance Most Affected

Worldwide, the disruption caused by AI is most pronounced among younger employees in technology and finance. A February report from Ireland’s Department of Finance found that employment among young workers dropped by 20% between 2023 and 2025, while jobs for those aged 30 to 59 increased by 12%.

Similar patterns are emerging in the United States. One study revealed that since 2021, employment in the top 10% of AI-impacted sectors—such as law, finance, and education—has declined by 1%. The youngest workers, aged 22 to 25, have been hit hardest, while employment for older professionals has grown, according to Stanford researchers.

Changing Job Titles and Company Structures

AI is already reshaping organizational charts. Boris Cherny of Anthropic, who developed Claude Code, recently suggested that the traditional “software engineer” role—a staple entry-level job in major tech firms—could disappear by the end of 2026. Cherny himself has stopped coding since November, delegating all coding tasks to Claude.

“A year ago, few people understood or used AI agents,” Cherny recalls. “Now, they’re an integral part of our workflow.”

However, not all tech giants are following the same path. IBM recently announced plans to triple its hiring of Gen Z entry-level staff—including software developers—despite the perception that AI can handle these roles. Nickle LaMoreaux, IBM’s chief human resources officer, emphasized at a recent event that companies investing in entry-level talent now will be best positioned for future success.

“The organizations that focus on hiring entry-level workers in the current climate will be the ones that thrive in the next three to five years,” LaMoreaux said.

Wages Remain Stable Despite AI Job Losses

Davis’s research also indicates that AI-driven job reductions have had minimal impact on wage growth. In fact, many of the roles most affected by AI show the largest wage gaps between experienced and entry-level employees.

• Since fall 2022, wages in computer systems design have climbed by 16.7%, compared to the national average of 7.5%.
• In the most AI-exposed industries, wages increased by 8.5%, even as entry-level positions fell by 16%, according to Davis and a Stanford study.

Conversely, jobs like fast-food cooks, ticket agents, and dry cleaners—where AI can replace both new and seasoned workers—are seeing wage declines.

“AI’s ability to both substitute for entry-level staff and enhance the productivity of experienced workers has significant implications for how we structure work,” Davis observes. He suggests that the traditional approach of gradually building expertise through entry-level roles may need to be reconsidered.

“Companies may find that using AI makes the conventional model of employee development less cost-effective, at least in the short term,” Davis writes. “However, excluding new hires from the career ladder isn’t viable long-term. As AI adoption grows, organizations will need to rethink how entry-level workers gain practical experience.”

This article was originally published on Fortune.com.