AI and the
vanishing first job

India’s AI debate asks: Will AI destroy more jobs than it creates? The real question is whether AI will weaken the career ladder when the country needs millions of new workers to climb it. Around 11 million young people will enter India’s labour market every year over the next two decades, according to the World Bank. IMF estimates suggest that, if labour-force participation rises to 60%, India would need 148 million jobs by 2030 and 324 million cumulatively by 2050. India created roughly 12 million jobs a year during 2012-23.Invoking the Industrial Revolution as a comparison is understandable. Earlier technological transformations displaced workers but eventually created new industries and occupations. But industrialisation unfolded over generations. Generative AI is diffusing much faster and directly into cognitive and administrative tasks such as writing, coding, translation, customer support, document processing, and routine analysis – many of which have traditionally provided the first rung on the formal-sector career ladder. This does not mean AI will simply eliminate these occupations. The IMF’s framework distinguishes between AI exposure and actual displacement. The more important question is whether firms reorganise their tasks around AI quickly enough to change who gets hired and at what career stage.India enters the AI transition with a structural disadvantage. Its movement from agriculture into services bypassed much of the labour-intensive industrialisation experienced by advanced economies.An estimated 90.2% of India’s workforce has secondary education or less, while 88.2% work in elementary-skilled or semi-skilled occupations. Entry-level employment is therefore crucial. A first job is not income; it produces human capital.The first job has an option value: it creates capabilities that make the second job possible. AI could profoundly disrupt this process for workers. A firm may use AI to produce the same output with fewer junior employees while retaining experienced workers who supervise the technology. For a young graduate: how do you acquire the experience required for the second job if the first job disappears? That is a broken career ladder.India’s dilemma is that productivity gains could coexist with weaker pathways into those gains. Reuters reported in May 2026 that multinational firms in India were pursuing growth with fewer workers, using AI and automation, while shifting hiring towards specialised skills.The consequences may also be gendered. Formal service-sector employment can provide an important pathway into paid work. If AI reduces routine administrative, customer-service, and back-office work without comparable alternatives, women could be disproportionately affected not only through job losses, but through a narrowing entry door.Skilling is not sufficientSkills without demand are not an employment strategy. If AI allows firms to perform tasks previously assigned to ten entry-level workers with five, training another five does not create five jobs. The constraint shifts from labour supply to labour demand. India’s AI policy must therefore become labour-market policy.First, encourage sectors where technology is more likely to complement workers, such as healthcare, education, tourism, logistics, construction, care, green infrastructure, and labour-intensive manufacturing. Second, strengthen incentives for apprenticeships, trainee positions, and early-career hiring, because firms may underinvest in entry-level human capital whose wider returns they cannot capture. Third, build real-time labour-market intelligence on shrinking and expanding occupations and demanded skills. Finally, assess AI not only through productivity and cost savings but also hiring, wages, training, and occupational progression.India should not slow AI adoption to protect existing jobs. AI can lower innovation costs, raise productivity, and open markets. But these gains must create enough new firms, tasks, and employment opportunities to compensate for those the technology eliminates.The real test is whether young workers still enter formal employment, entry-level wages rise, apprenticeships expand, workers progress from junior to middle-level occupations, women enter and remain in paid work, and AI creates new firms and markets.India’s demographic dividend was never simply a large young population. It was a promise that young Indians could move into increasingly productive employment. AI could fulfil that promise or expose its weakness. The greatest risk may not be mass unemployment, but that the first job disappears quietly, one occupation at a time, before policymakers realise that the rung to the second job has gone with it.India’s AI strategy should therefore be judged not by whether machines replace workers, but by whether the economy continues creating pathways through which workers become more productive, more skilled, and better paid.(Atul is an associate professor of Economics at the University of New South Wales Bengaluru; Charan is a former RBI Chair Professor of Economics, IIM Bangalore)

Source: Deccan Herald