The rise of remote work may be responsible for nearly two-thirds of the increase in unemployment among young college graduates since the pandemic, according to an analysis from the Federal Reserve Bank of New York.
In a blog post published by Liberty Street Economics, researchers Natalia Emanuel, Emma Harrington and Amanda Pallais estimated that remote work can explain 64% of the increase in unemployment among college graduates aged 18 to 28 between the pre-pandemic period and recent years.
The finding challenges a growing narrative that generative artificial intelligence is primarily responsible for the labor market difficulties facing younger workers. Instead, the researchers argue that the expansion of remote work has reduced employers' willingness to hire inexperienced workers who typically require more training, mentorship and on-the-job feedback.
"Youth unemployment has risen dramatically since the pandemic, as has the prevalence of remote work," the authors wrote. "Our analysis suggests that these trends are related."
According to the research, unemployment among college-educated workers under age 29 increased from an average of 3.1% between 2017 and 2019 to 3.7% between 2022 and 2025. By comparison, unemployment among more experienced college graduates edged down from 1.9% to 1.8% over the same period.
The divergence was particularly pronounced in occupations that can be performed remotely, such as software engineering and other knowledge-based roles. In those fields, unemployment among younger workers increased substantially after the pandemic, while unemployment among older workers remained relatively stable.
By contrast, in occupations that generally require workers to be physically present, unemployment among young graduates briefly increased during the pandemic but returned to pre-pandemic levels shortly afterward, according to the researchers.
The authors contend that employers may be reluctant to place entry-level workers on distributed teams because remote environments can make it more difficult to provide the coaching and skill development that younger employees often need.
To explore that dynamic, the researchers examined proprietary data from a Fortune 500 company. They found that workers who sat closer to colleagues received more feedback and mentorship than those who worked farther away or remotely. The effects were especially pronounced for younger employees.
The company also shifted its hiring patterns during the pandemic. When offices were closed, it hired fewer inexperienced workers and more experienced employees. After offices reopened, hiring of younger workers resumed. However, for positions on distributed teams, the company continued to favor more experienced candidates.
The researchers said those hiring decisions suggest employers may view proximity as an important factor in developing early-career talent.
The timing of the increase in youth unemployment also casts doubt on claims that AI is the primary driver of current labor market challenges for recent graduates, according to the study. The rise in unemployment among younger college graduates began before generative AI became widely adopted, and the differences between younger and older workers remained even after researchers controlled for occupations' exposure to AI.
While the authors acknowledged that AI could play a larger role in future employment patterns, they concluded that remote work has "meaningfully contributed" to the recent challenges facing young college graduates.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.