Remote Work, Not AI, Driving Rise in Unemployment Among Young Graduates, Fed Study Finds

The growing prevalence of remote work is making it more difficult for companies to effectively mentor and train new employees, leading to a decline in hiring among young and less-experienced workers, according to a study released Monday by the U.S. Federal Reserve (Fed).

According to the research, many people assume that advances in generative artificial intelligence (AI) are reducing employment opportunities. However, the study found that remote work accounts for approximately 64 percent of the recent increase in unemployment among young college graduates, making it a far more significant factor than AI.

Researchers noted that the average unemployment rate among college graduates under the age of 29 stood at 3.1 percent between 2017 and 2019. That figure increased to 3.7 percent during the 2022–2025 period.

The study found that unemployment has risen most sharply in occupations where remote work is more common. In these sectors, the unemployment rate among young graduates increased by nearly one percentage point between the 2017–2019 and 2022–2024 periods.

According to the report, employees working alongside colleagues in an office environment benefit from immediate feedback, informal learning opportunities, and mentorship from senior staff. These interactions help young workers develop skills and gain valuable workplace experience.

By contrast, when employees work remotely, these opportunities for learning and professional development are significantly reduced, making it more difficult for new hires to integrate and improve.

As a result, many organizations are increasingly relying on experienced employees rather than investing in training inexperienced workers.

The researchers supported this conclusion by analyzing internal data from a major Fortune 500 company. During the COVID-19 pandemic, when the company's offices were closed, hiring of inexperienced and entry-level workers declined substantially. Recruitment of younger employees only resumed after offices fully reopened.

Experts say that while remote work offers flexibility and convenience for experienced professionals, it can present significant challenges for individuals at the beginning of their careers.

They argue that gaining practical workplace experience, receiving mentorship, and building professional networks remain easier in face-to-face office environments, which continue to play a crucial role in the career development of young workers.