The short-term saving that becomes a long-term problem
Here is the trap most businesses are walking into with their eyes open. AI is very good at exactly the work junior staff have always done first: routine research, drafting, analysis and administration. Automate it, and the immediate maths looks great. Fewer graduate salaries, faster output, leaner teams. But those same tasks are the training ground through which inexperienced people become experienced ones. Remove the bottom rung and you do not just save money, you quietly stop building the mid-career managers and skilled tradespeople you will need in a decade.
The warning is not coming from the fringe. University of Auckland Business School Professor Rod McNaughton puts it bluntly: the risk is not that AI wipes out jobs wholesale, but that “it may remove some of the first rungs of the career ladder.” His conclusion is aimed squarely at owners and boards. “If firms become much more efficient at the bottom of the organisation, but stop bringing people through, they may eventually discover that they have weakened their own talent pipeline.”
The numbers are already ugly for the young
New Zealand’s youth unemployment rate hit 15.2 percent in the September 2025 quarter, up from 13.1 percent a year earlier. That is close to three times the wider working-age rate of 5.3 percent. Drill down and it gets worse: 22.3 percent of 15 to 19 year-olds and 10.7 percent of 20 to 24 year-olds were out of work.
The broader labour market is stabilising. Filled jobs rose 0.3 percent in July 2026 to 2.36 million, with health care, public administration and construction growing. But one major sector went backwards: professional, scientific and technical services fell 1.1 percent year-on-year. That is precisely where graduate and entry-level professional roles live.
Employers are already acting on it
This is not a hypothetical. A global IDC survey of 5,500 organisations found 91 percent reported AI had already changed or displaced roles. Among the New Zealand employers surveyed, more than half said AI was driving significant job displacement and they were slowing or stopping entry-level hiring. Nearly nine in ten expected an entry-level slowdown within three years, and more than three-quarters flagged fewer on-the-job learning opportunities as a major concern.
Even the central bank has named the risk. Reserve Bank Governor Anna Breman told the finance and expenditure select committee that while she did not expect it to be a medium-term problem, some employers “might be reluctant to employ younger people, and might instead deploy AI tools,” particularly in the short term. When the RBNZ writes a risk into its monetary policy communications, it is worth paying attention.
Where it bites hardest
The most acute case is engineering and manufacturing. Fortitude Group recruiter Hayley Pickard points out those sectors already carry an ageing skilled workforce and too few apprentices coming through. “AI and automation may assist with programming, documentation, planning and process improvement, but they cannot replace the years of hands-on learning required to become a capable machinist, toolmaker, engineer or tradesperson.” Her framing for owners is the sharpest of the lot: “If businesses remove those opportunities now, where will their experienced workforce come from in five, 10 or 15 years?”
University of Otago Associate Professor Paula O’Kane makes the same point about leadership pipelines: future leaders “often cut their teeth on the entry-level jobs that AI can target.” Her advice is to think about the gap now, “rather than meeting this issue in 5-10 years, when they haven’t got the talent.”
AI is not the only culprit, and that makes it worse
Before anyone pins this entirely on AI, the causes are contested. A May 2026 working paper from Warwick, LSE and Oxford researchers argues that flexible and remote work embedded during the pandemic may be the bigger driver, because distributed teams make it harder to justify hiring staff who need close supervision. BERL analysis describes a pattern of “limited employment,” where young people cycle through benefits, insecure work and rolling study rather than building durable careers.
That the causes are multiple and reinforcing should not comfort anyone. It means the erosion of the entry rung is structural, not just a downturn that reverses when growth returns. McNaughton is careful not to blame AI wholesale, warning against “jumping from high youth unemployment to saying AI is causing it.” The point stands regardless of cause. Businesses that treat AI purely as a headcount cut at the bottom are optimising a spreadsheet today and hollowing out their succession plan for tomorrow. Use it to make junior staff productive faster, not as an excuse to stop hiring them at all.
Sources
- RNZ: Is AI eliminating the first rung of employment ladder? (2026-09-07)
- University of Auckland: If entry-level jobs are disappearing, how do young people get started? (2026-04-21)
- The1News: Is it really AI closing the door on junior jobs in NZ, or is it remote work? (2026-07-15)
- Stats NZ: Unemployment rate at 5.3 percent in the September 2025 quarter
- Stats NZ: Unemployment rate indicator (2026-05-06)
- Stats NZ: Employment indicators July 2026 (2026-08-28)
- BERL: Youth unemployment, the AI future, and the rise of limited employment
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