Why Gen Z Wants the Office Back

Everyone assumes AI is making it harder for young workers to land their first job, but what if remote work is the real culprit? In the latest IBKR Podcast episode, Jeff Praissman sits down with Nasdaq’s Michael Normyle to explore surprising new research on junior hiring, hybrid work and the future of career development.

Summary – IBKR Podcasts Ep. 398

The following is a summary of a live audio recording and may contain errors in spelling or grammar. Although IBKR has edited for clarity no material changes have been made.

Jeff Praissman

Hi everyone, this is Jeff Praissman with Interactive Brokers Podcast. It’s my pleasure to welcome back to IBKR Podcast Studio, Nasdaq’s Michael Normyle. How are you, Michael? 

Michael Normyle

Hi, doing well. Glad to be back. Thanks. 

Jeff Praissman

Love having you come in for our monthly podcast talking about the economy and all other things. And for our listeners, before we even get started, you can find more from Michael on Nasdaq’s website and then also on our own website under education—plenty of podcasts, webinars, articles, and so forth. Michael, today we’re gonna kind of talk about something a little bit different than our typical economic discussions, and we’re gonna kind of, you know, we both read the same article. 

It’s “What If Remote Working, Not AI, Is to Blame for Weak Junior Hiring?” by John Burn-Murdoch in the Financial Times. And I wanted to ask you, just to kind of kick it off, how convincing is the case that remote work, not AI, is the primary driver of the decline in entry-level hiring? 

Michael Normyle

Yeah. So I think the premise of the article is pretty surprising since a lot of people in recent years have pointed to recent labor market weakness, especially among younger workers, and how that’s lined up with the advent of generative AI, and then making the link that AI is somehow responsible for this weakness in hiring, especially among younger workers. But this article cites a study, “The Broken Ladder” by Lambert and Schindler, and I think it makes a pretty convincing statistical but also logical case that remote work is actually the main driver of this weaker entry-level hiring. So in terms of the statistical evidence, they analyzed two hundred and forty-three million new hires and four hundred and seven million job postings across the US, UK, Canada, and Australia from twenty seventeen to twenty twenty-five. And then they paired that with the exposures to gen AI and remote work by the occupations of those hires and postings. And so using that data, they found that when you test AI exposure and remote work exposure separately, they both predict roughly the same decline in junior hiring. But then when you put both of those variables in the same model at the same time, the AI effect basically disappears while that remote work effect holds firm, and that pattern survives across every variation of the model they did: different countries, different industries, different ways of measuring AI exposure, different statistical methods. 

And so then this whole modeled finding is made more credible when they go the extra step to say it’s not just about exposure. They also tested what happened at firms that actually adopted remote work in twenty twenty-one and twenty twenty-two, and then found that the results mirrored those modeled results. So a lot of evidence here to show that really remote work may be the bigger culprit than AI in this decline in junior hiring that we’ve seen across four major economies. 

Jeff Praissman

But what was interesting too, though, is it seemed to kind of disproportionately reduce demand for junior workers while leaving senior hiring relatively unaffected. How, why do you think remote work is kind of having that effect on the two different lifespans in your employment history, basically? 

Michael Normyle

Yeah, and I think this gets to the kind of logical explanation that I alluded to, that it comes down to the fact that early career workers need more supervision than experienced hires, and they develop skills, they acquire knowledge, they build relationships in the workplace by observing and working alongside more experienced workers. Doing this remotely, it’s definitely possible, but there’s more friction in that process. So then it takes more time from senior workers because there’s these extra frictions. It’s costlier to bring on these junior workers in that sense that it takes them longer to develop. And then from the junior worker perspective, if your development is extended, then that may mean it takes you longer to get promoted. And so none of that logic applies to hiring a senior worker. They already have the skills. They need less hand-holding, and they can kind of hit the ground running comparatively. And so that makes the calculus for senior hires essentially unchanged, while it becomes less favorable for those junior hires. 

Jeff Praissman

And you mentioned earlier sort of the studies where they’re having AI exposure and then remote work, but once remote work was introduced and factored in, that kind of AI exposure sort of went away. So what was the evidence that suggested that the link between AI exposure and the weak junior hiring breaks down once the remote work is factored in? 

Michael Normyle

Yeah, and that’s really the most interesting piece of the puzzle here. And the authors, they call it an omitted variable bias problem. And that’s just because a lot of AI-heavy jobs, AI-exposed jobs, like software developers, management consultants, data scientists, they’re also the jobs that are most amenable to remote work. And so if you only look at AI exposure in your model, you might actually be picking up the remote work effect at the same time. And so when you have work-from-home exposure and AI exposure being highly correlated, when you have that model only testing the gen AI impact, then gen AI looks responsible. But then when you control for remote work, that’s why you see the AI impact largely disappear while the work-from-home impact pretty much holds. 

Jeff Praissman

And there’s also some specific fields where remote work really seemed to hurt junior hiring, like tech and law. Why are there certain fields like those that seem more affected by weaker hiring in junior roles? 

Michael Normyle

Yeah, and this kind of makes the case, I think, when you look at those two sectors, for remote work being perhaps the bigger culprit than AI. Because in tech, the conventional narrative really has been that AI is taking these coding jobs because it’s so well-suited towards coding, and especially at the junior level. But coding is also one of the most remote-friendly jobs out there. And so in the Lambert and Schindler study, when they control for that, that AI explanation really weakens. The junior hiring slowdown in tech looks a lot more like a remote work story than an AI story. And then legal work is less exposed to AI than software development, for example, because lawyers, they’re not being replaced by code generators at the same rate as gen AI models. But legal work is also very amenable to remote work, especially for more knowledge workers, like corporate lawyers. And so junior hiring in law has also come down quite sharply. And so that’s what you would expect if it were remote work being the driver, not AI. So you’re seeing that decline in both industries, and that’s kind of what’s pointing to really remote work being the bigger factor than AI. 

Jeff Praissman

So let’s take AI kind of completely out of the picture and kinda just talk about the contrast between, ’cause it seems like there’s basically remote-friendly roles and in-person-friendly roles. And sort of the contrast between them, is that what’s really driving these hiring trends? 

Michael Normyle

Yeah, I think so. I mean, and this kind of post-COVID period is effectively a natural experiment to this question. So if you look at receptionists, for example, which is a role that’s got quite a lot of AI exposure because AI can automate scheduling and those types of things, but it’s also inherently an in-person job. Junior hiring for receptionists has actually held up quite well compared to more remote-work-exposed roles. And when you contrast that with a lawyer or financial analyst, where there’s less AI exposure perhaps, but the roles are more heavily remote, that’s where we’ve seen junior hiring come down. And so that’s really the exact opposite pattern of what you would see if you thought that the dominant narrative of AI replacing junior workers was really true. And so, you know, if AI were the main driver, you’d expect that those most AI-exposed roles would suffer the most. But the data shows it’s really the most remote-work roles that are being impacted. And I think the interesting thing that adds to the case of the paper is showing that this is happening across very different labor markets, right? I mentioned they looked at the US, the UK, Canada, and Australia, and across those four different countries, four different labor markets, we see the same pattern, where essentially the junior share of new hires is down 8 to 11 percentage points relative to the 2019 baseline. And of course, comparing it to 2019 makes sense because that’s really before we saw this massive increase in remote work and also gen AI. And so that’s really where you get the case that it’s work-from-home exposure, not AI exposure, that’s really most responsible. 

Jeff Praissman

And I think one thing people don’t necessarily think about is just sort of the cost and complexity of onboarding and training junior employees. Does remote work increase that cost, or lower that cost? 

Michael Normyle

Yeah, I mean, I touched on it, I think, a little bit in our earlier discussion here, but for everyone who’s worked in an office before, I think you realize that a lot of the benefit is informal, where you overhear a senior colleague dealing with a difficult client call, or you get pulled into a meeting and you see how these decisions are being made, or you ask a quick question at somebody’s desk and you have an answer in 30 seconds. And that’s not stuff that’s as natural in a remote environment, and I think the paper cites some research showing that remote work does raise the cost of supervising and monitoring workers and slows on-the-job learning. So one study they cite found in-person onboarding raised labor productivity and reduced attrition even at firms that are otherwise remote. 

So just doing onboarding in person. And then another found just one office day per month relative to fully remote raises productivity and increases communication between workers and managers. So that’s a pretty low bar that they’re setting here in these studies. 

So, from the firm’s perspective, you’re paying these entry-level workers a salary while they’re still on the learning curve, and you’re spending senior time, you know, senior managers’ time, managing and teaching them. And so there’s uncertainty about when the payoff is gonna happen, really. And so that’s really the challenge, where remote work maybe extends that process and makes it less appetizing for businesses to hire these junior workers in a relative sense here. 

Jeff Praissman

So I would imagine also that companies are… Yeah, they probably have to be a little bit more selective now with entry-level hiring too, right? Because remote work is really, as you said, making it more than a little bit harder to train and evaluate junior talent since they’re not kind of seeing them in person every day. 

Michael Normyle

Yeah, and I think that’s what the data is suggesting here. It’s not that we’re just seeing fewer junior hires. We’re seeing job postings raising the bar for experience. So the study’s tracking not just who gets hired, but also what employers are asking for in their job ads. And so by 2025, there’s been about a three-percentage-point decline in the share of job postings requiring three years of experience or less among those high-remote-work jobs. And so that’s companies shifting to focusing on workers with a little bit more work experience, where maybe there’s less hand-holding needed and stuff like that. And that FT article does make another suggestion for what could be the cause here. So companies that struggled to train and manage remote junior workers may start setting a higher bar for that hiring, and then when those posts maybe don’t get filled, that can compound, and that’s the kind of trend that we’re seeing here. So that could create a bit of a self-reinforcing cycle where there’s fewer postings, fewer hires, and then fewer junior workers as well. 

Jeff Praissman

And the one thing—the article also, I was a little surprised by this when I first read it, but after thinking about it, it really makes a lot of sense. You know, it suggests that younger workers are really not that enthusiastic about fully remote roles. I think that’s something that maybe younger workers are getting a little bit of a bad rap, or people that don’t have exposure to them think, “Oh, all these young, right-out-of-college kids want fully remote roles.” And it actually seems to be quite the opposite, right? 

Michael Normyle

Yeah. And I think you make a great point there, where that might be the perception, but that differs from the reality. I think it also makes sense when you think about it, where these Gen Z workers understand that they need to get this work experience, they need to get trained, and so it’s in their best interest to not have these fully remote jobs. And so the data that the article is citing here is from a Gallup poll, and it found that Gen Z is actually the generation most opposed to fully remote work. So only 23% of Gen Z prefer fully remote, compared to 35% each for millennials, Gen X, and boomers. And then Gen Z instead prefers hybrid at the highest rate, which is 71%. And then boomers prefer fully in-person at the highest rate, but that’s just 10%. So in general, across the board, people tend to prefer a hybrid work environment at the biggest rate here. And the Gallup poll did suggest that there’s a few reasons for this, at least in their interpretation. And the first is just that Gen Z is least likely to be parents. And so the survey showed 39% of parents born after 1989 prefer fully remote compared to 29% for non-parents in that same age group. So just if you’re a parent with younger kids, it’s a bit easier to have that flexibility of being fully remote. But another factor is that Gen Z feels the loneliest while working remotely, with 27% of them compared to 21% for millennials, 15% for Gen X, and 10% for baby boomers, which also might be related to the fact that maybe you don’t have a partner at home or a child at home and things like that. So there are a few different factors that come down to that reasoning. 

Jeff Praissman

Yeah, I mean, hybrid w- hybrid work really does seem like a nice middle ground. Sort of, you get that in-person structure, but also, you get that opportunity to, you know, work from home a day or two a week and sort of be able to have that work-life balance as well, not dealing with a commute if you have a longer commute or, you know, being able to, if you have younger children, make sure that you can get them from school or whatever you need to do. Michael, beyond remote work and AI, are there other structural factors that are making it harder for recent graduates to enter the workforce? 

Michael Normyle

Yeah, and I think this is– it’s a bit beyond the scope of this paper, so I’ll just kind of give you my thoughts, and they’re not e- they’re not even so much structural factors as more somewhat cyclical. So the paper’s looking at hiring relative to 2019, and they see that, you know, about an eight to ten percent decline in the junior share of new hires since 2019. 

And these are… And that’s across the US, UK, Canada, and Australia. And so these are all economies that saw relatively large rate hike cycles in the last few years that were designed to cool off the labor market and inflation. And so that doesn’t explain the drop in the share of junior hires, but I think the softer labor market does make it easier for companies to be pickier and perhaps opt for a person that has some more experience. So maybe you were considering a junior hire, but you could maybe, you know, you’re getting people applying that maybe have a few more years of experience or something like that. So that’s an option for you. And plus, with hiring having slowed, we’ve definitely seen people staying in their jobs longer, at least in the US, and so that means fewer openings, and it might be the case more where people are waiting until they have a new job in hand before they quit a current job. So might be some factors that are also contributing here. 

Jeff Praissman

And, how should companies rethink training and development if hybrid work really becomes sort of the long-term nur- norm, which it probably, probably will, sort of that middle ground? 

Michael Normyle

Yeah, and I think the paper’s pretty direct on this. And so essentially, the authors argue if it is remote work rather than AI that’s the main driver of this decline in junior hiring, that actually makes the solution a lot simpler, right? Because you don’t need wage subsidies, you don’t need universal basic income or te- you know, some kind of AI tax policy. You just need better management practices that are adapted to these hybrid environments. And so that just means being more intentional about these things that used to happen organically in the office, whether it’s structured mentorship programs, deliberate knowledge-sharing sessions, clear onboarding tracks for remote or junior hybrid hires. And so that means you’re making sure that the one or two days, or maybe three days, in person each week are actually used for the high-bandwidth interactions that benefit these junior workers, and not just work that could’ve been done at home anyway. 

Jeff Praissman

Got it. And probably the most important question for our listeners, especially our younger ones: this weakness in junior hiring, do you think this is gonna be s- is this cyclical, or is this sort of a longer-term structural shift? I mean, my personal opinion is at some point, like, we gotta hire someone. Like, the older experienced workers are gonna age out at some point, so I hope it’s more cyclical than long term. 

Michael Normyle

Yeah. I mean, I think based on the research, it does look reasonably structural in this sense, but getting back to our last discussion here, it’s something that can be fixed. And so it just requires companies to adopt these strategies that make the mentorship and hiring and onboarding and training of remote workers or j- or junior workers better relative to the processes that are in place currently. 

And once I think we see that, that’s where we start to see the share of junior hires rebound. So I don’t think it’s like an overnight change that we’re gonna see, but I think there’s definitely a path to a rebound in the share of junior hires once these changes are more broadly adopted to account for this environment. And it’s, I think it’s also something that companies are kinda gonna figure out just as they’re getting more practice with it, right? So it’s been a few years at this point, and I’m sure companies are making improvements on that front already. 

Jeff Praissman

Michael, as always, this has been great. For our listeners, you can find more from Michael on our website, interactivebrokers.com, under education, or at nasdaq.com. Michael, thanks again. Love having you coming in here for our monthly discussions on the economy. 

Michael Normyle

Yeah. Thank you. Thanks. Glad to be back.