A Nobel economist figured out 60 years ago that people learn best on the job. The Atlanta Fed says AI is making that almost impossible

Sixty years ago, an economist named Kenneth Arrow sat down and worked out something that seemed almost too obvious to say: workers get better at their jobs by doing them. The insight was simple, but Arrow, who would go on to win the Nobel Prize, formalized it into a theory with sweeping implications. Learning, he wrote, “can only take place through the attempt to solve a problem and therefore only takes place during activity.” Experience wasn’t just good for workers, he argued—it was the engine of productivity growth for firms and, ultimately, the entire economy. Now, as artificial intelligence chips away at the entry-level jobs that once served as the on-ramp to white-collar careers, researchers at the Federal Reserve Bank of Atlanta are dusting off Arrow’s 1962 paper and warning that companies racing to automate their way to lower payroll costs may be sawing off the branch they’re sitting on. The unemployment rate for young degree-holders is now consistently higher than overall unemployment, a reversal from recent labor trends that many blame on AI replacing entry-level knowledge work. Some segments of college graduates are now grappling with unemployment at a similar rate as peers without a degree, suggesting a college education might become harder to justify, and the appeal of a secured posting in an office job could be losing its shine. But take away enough entry-level jobs, and those white-collar employers will start hurting too. That’s the conclusion of a paper published last week by researchers at the Federal Reserve Bank of Atlanta, analyzing the tradeoffs on both sides of the managerial aisle of automating junior office jobs. Arrow argued that innovation and productivity growth were byproducts of experience and practice. The Fed researchers applied this framework to the drudgeries of entry-level work, arguing that the experience is foundational to building up expertise required for senior roles. Crucially, the type of repetitive activity