Advanced degrees, STEM backgrounds and sales experience boosted as AI reshapes labor market

On-the-job training and service roles are losing ground as employers seek those who already possess high skill and experience.

The rise of artificial intelligence in workplaces has prompted Harvard economists to examine its actual impact on employment patterns and hiring practices. A new study by David Deming and Lawrence H. Summers reveals that AI is reshaping the labor market in ways that differ from initial fears about widespread job displacement.

Key findings: Harvard’s research into occupational churn demonstrates that AI is driving companies to seek more highly skilled and trained employees.

• Data shows an increase in hiring of workers with advanced training and expertise, as employers recognize the need for staff who can optimize AI technology benefits
• Companies are offering higher compensation packages to attract candidates with the necessary skills to work alongside AI systems
• The share of STEM jobs grew significantly from 6.5% in 2010 to nearly 10% in 2024, representing a 50% increase in the labor market share

Sectoral shifts: The introduction of AI has created notable changes in employment patterns across different industries.

• Low-paid service sector jobs have experienced a decline, reversing the growth trend seen from the 1980s to early 2000s
• Retail sales positions have seen particularly steep decreases, largely due to AI adoption in e-commerce
• High-tech companies are increasing their hiring of salespeople and subject matter experts to support AI-related products

Market dynamics: Multiple factors beyond AI are influencing current labor market trends.

• High wages and COVID-19 disruptions have contributed to the contraction in service sector employment
• E-commerce companies’ early adoption of AI for targeted marketing has accelerated changes in retail employment
• The transformation mirrors historical patterns seen with other technological breakthroughs like electricity and desktop computers

Industry adaptation: Companies are actively adjusting their hiring strategies to accommodate AI integration.

• Salesforce has increased sales staff hiring specifically to support their AI agent software offerings
• Organizations are placing greater emphasis on recruiting candidates with science and engineering backgrounds
• Traditional hiring practices are being reevaluated to align with AI-driven workplace evolution

Looking ahead: Market evolution suggests need for strategic workforce planning: The ongoing transformation of work through AI implementation requires companies to carefully consider their long-term hiring strategies and workforce development plans.

• Like previous technological revolutions, AI’s full impact on employment may yield unexpected opportunities, similar to how personal computers eventually led to the gaming industry surpassing Hollywood in size
• Organizations should focus on recruiting candidates who can effectively work alongside AI systems while maintaining the flexibility to adapt to future developments