Consulting group McKinsey has advised firms to maintain investment in entry-level roles for young people after evidence emerged that the rise of artificial intelligence had seen a reduction in headcount.
In a blog post, McKinsey acknowledged that job adverts had fallen most for occupations most exposed to AI, a trend that could lead to “long-term talent gaps”. This meant that businesses needed to rethink how they integrate AI and how they invested in future skills, said the blog.
AI rollout
Data skills gap getting in way of AI progress
At the end of June, recruitment analysts reported that the big four accountancy firms were cutting hundreds of jobs and pulling back sharply on graduate recruitment, as AI replaced the junior roles once filled by school and university graduates.
Among the companies replacing junior roles with AI were Deloitte, EY, KMPG and PwC – which cumulatively employ around 100,000 people across the UK.
KPMG made the steepest cuts, trimming its 2023 graduate intakes from 1,399 to just 942.
Deloitte reduced its own scheme by 18%, while EY and PwC followed with 11% and 6% cuts respectively.
James O’Dowd of executive search firm Patrick Morgan told City AM in response: “The Big Four are looking at AI very seriously to replicate junior work more cost-effectively”.
Analysis by Adzuna supported this view, finding that entry-level opportunities had fallen by nearly a third since the advent of widely available generative AI tools at the end of 2022.
McKinsey’s blog post argues that while the trends raised concerns for young graduates, “the real story is more complex, with AI acting alongside broader economic forces. For their part, to avoid long-term talent gaps, businesses need to rethink both how they integrate AI and how they continue to invest in future skills.”
McKinsey’s latest global survey revealed that nearly 80% of the world’s largest companies – typically with tens of thousands of employees – reported using AI in at least one business function. In the UK, while smaller firms are lagging behind, over a third of mid-sized businesses (with more than 250 employees) said they were now using these technologies.
Productivity gains elusive
However, said the blog, “broad-based” productivity improvements remain elusive. Although 92% of global businesses plan to ramp up investment in generative AI in the next three years, just 1% believe their efforts have reached maturity. Only around 20% report a tangible impact on enterprise-level earnings. “The tools exist, but integrating them into workflows and changing how people work is proving challenging,” says McKinsey.
It argued that the paradox of “widespread usage but unrealised gains”, reflects a gap between surface-level adoption and deep transformation. Many companies have deployed tools like chatbots and employee copilots – the “horizontal” use cases. These were easier to scale but only delivered modest, diffuse benefits. By contrast, 90% of the more powerful “vertical” use cases – where AI fully automates specific business processes – remained stuck in pilot mode.
The blog stated: “If significant productivity gains from AI are still in the future, you might expect companies to maintain their usual approach to recruitment – all other things equal. But other things are not equal, either at the macroeconomic level or when it comes to the anticipated impact of AI.”
Geopolitical tensions, cautious households saving more and consuming less, tighter public finances, and rising employee costs were of course all factors in the recruitment slow down, McKinsey conceded, but there were also signs that the advent of AI and large language models were dampening hiring intentions. Since enterprise-wide productivity gains had yet to materialise, “this cannot be in response to large-scale output improvements”.
Generative AI
Some of the biggest declines were in jobs that have been predicted to have the highest impacts from generative AI. These include software developers and other IT workers, as well as professionals in data, design, media, research, legal, HR, finance, and business.
McKinsey warned that if entry-level hiring continued to slow – whether for AI-exposed professional roles or for the kinds of lower-skilled jobs that often give graduates their start – organisations risked leaving gaps in their future workforce. “Once that pipeline breaks, it’s hard to rebuild,” it said.
Avoiding this meant investing in change management, rethinking job design, reskilling and training, and building the internal capability to continuously adapt, wrote the blog authors. “Crucially, it also means identifying which tasks are best automated – and which need human creativity, judgment, and relationships,” it added.
It was important to continue to invest in early-career talent because these hires would shape tomorrow’s AI strategies, culture, and competitiveness. “Doing so requires a shift in mindset: treat graduate and junior roles not as short-term costs, but as long-term assets,” the post stated.
Sign up to our weekly round-up of HR news and guidance
Receive the Personnel Today Direct e-newsletter every Wednesday
Latest HR job opportunities on Personnel Today
Browse more human resources jobs
