The Entry-Level Paradox:
Why Cutting Junior Positions for AI Gains May Cost You the Future
Walk into any major consulting firm, investment bank, or Big Four accounting practice today, and you'll notice something striking: the analyst and associate classes are significantly smaller than they were just three years ago. The same pattern is repeating across technology companies and law firms.
What began as a necessary correction to pandemic-era overhiring has evolved into something far more concerning: a fundamental restructuring of how professional services firms develop talent, driven by the imperative to demonstrate return on AI investments.
The Compelling (Short-Term) Math
The economics seem obvious:
First-year analyst/associate: $150,000-$200,000 (all-in cost)
Enterprise AI subscription: $30 - $100 per user per month
AI capabilities: Financial modeling, document review, market research, initial drafts
For firms under pressure to show tangible AI ROI, the calculus seems straightforward. Replace expensive junior labor with AI, have senior staff review AI output instead of junior work product, and watch margins improve in the next quarterly report.
According to recent Harvard research, firms actively integrating AI have reduced junior hiring by up to 40% in some sectors, with entry-level job postings declining 35% nationally since January 2023.
This Isn't Just About Pandemic Corrections
2023-2024's hiring slowdowns were blamed on economic uncertainty. But 2025 reveals a different pattern. Firms are explicitly redesigning their workforce pyramids. Investment banks are cutting back on analyst programs. Major law firms are reducing first-year associate classes. Tech companies that once hired hundreds of new graduates now hire dozens.
Critically, even firms experiencing revenue growth are maintaining these reduced junior staffing levels. This isn't about demand—it's a structural shift in how work gets done. Wharton professor Ethan Mollick bluntly states: "The training pipeline that was always implicit has broken."
The Hidden Cost: Breaking the Apprenticeship Model
The traditional apprenticeship model isn't just a functional training program. It's how firms develop a workforce with judgment, client relationships, and institutional knowledge that differentiate great firms from mediocre ones.
A first-year consultant building market sizing models isn't just learning Excel. They're developing intuition about what questions to ask when the data is incomplete, which assumptions matter, and how to communicate uncertainty. A junior banker perfecting pitch books is learning to anticipate client concerns and understand deal dynamics. An associate reviewing contracts is building pattern recognition about problematic terms.
These capabilities require the struggle of creating work products and learning from feedback. When AI handles the initial draft and seniors only review the output, where does the next generation develop expertise? Mollick warns this creates an "apprenticeship dilemma." The tools that make experienced professionals more productive inadvertently undercut the talent pipeline needed to sustain their fields.
The Deeper Irony: Cutting Off AI-Native Talent
By eliminating entry-level hiring, firms are severing their connection to the exact talent they need to win the AI-enabled future.
The generation entering the workforce now are the first AI natives. They don't remember life before smartphones. They've been experimenting with AI tools since ChatGPT launched. These are the people who will most naturally integrate AI into professional workflows and discover applications senior practitioners haven't imagined. They aren’t burdened with decades of pre-AI frameworks and workflows.
When you eliminate entry-level programs, you lose access to:
The physics major building custom GPT applications since sophomore year
The liberal arts major who's been using AI for research and writing for three years
The CS graduate who understands both code and business strategy
These talented people could be teaching your experienced workforce new ways to leverage AI. Instead, they're launching their own AI-enabled practices or joining firms that recognize this advantage.
The Principal-Agent Problem
The pressure on executives is real. Their Boards have forced them to invest in AI capabilities. They need to demonstrate ROI or be judged ineffective. Personnel costs are their largest line item. Cutting junior hiring produces immediate, measurable results. But is this the promise of AI that the Board wanted?
This is a classic principal-agent problem. The executives making these decisions may retire or move on before adverse consequences fully materialize. The firms—and their future leadership—will bear the cost of a hollowed-out talent development system.
The Portfolio Effect: A Systemic Challenge
For PE and VC professionals, this pattern will be replicated across your portfolio companies, unless you intervene strategically.
Every company with customer success associates, financial analysts, SDRs, supply chain coordinators, associate product managers, content marketing associates, or HR coordinators faces the same pressures and makes similar calculations. Replace junior staff with AI to show immediate ROI. The aggregate effect across a portfolio could devastate long-term enterprise value.
The challenge compounds across portfolios: Each portfolio company faces unique cultural considerations, different levels of AI readiness, and varying appetites for change. A one-size-fits-all approach fails. Yet without coordination, you risk portfolio companies each making suboptimal decisions about junior talent in isolation.
Industry research suggests this creates a "talent doom cycle": firms that overcut junior layers will face talent bottlenecks in 1-4 years, creating dependency on the external talent market with inflated compensation requirements. For portfolio companies, this translates directly to slower growth and margin compression over time.
Alternatively, the opportunity for value creation by building AI-augmented apprenticeship models can lead to:
Lower attrition among high-performers who see clear advancement paths
Faster time-to-productivity for new AI-native hires trained on AI-augmented workflows
Innovation from within as AI-fluent juniors identify efficiency opportunities seniors miss
Competitive moats from proprietary approaches to AI-human collaboration
Building these capabilities requires portfolio-level coordination. The firms winning here aren't leaving this to chance. Rather, they're partnering with experienced operators who can assess current state across portfolio companies, design tailored transformation approaches, and execute change management at scale.
The Real Path Forward: Bridging the Implementation Gap
Firms that will thrive won't be those that replaced junior staff with AI. They'll be those that reimagined the apprenticeship model to incorporate AI from day one. This means:
Bringing in entry-level talent and training them to work alongside AI
Investing in programs that develop AI-augmented judgment, not manual execution
Recognizing that ROI on talent development is measured in years, not quarters
The Competitive Advantage
Firms that maintain robust entry-level hiring while redesigning those roles for AI-native capabilities will build substantial advantages:
Pipeline of talent that understands both fundamentals and AI transformation
Destination for top graduates while competitors struggle
Leadership bench that cost-cutting competitors will lack
The Question for Boards
Are you governing for this quarter's margins or for growth?
Because right now, in conference rooms across your portfolio, executives are choosing the former while telling themselves they can solve for the latter later.
NextAccess Authors: Scott Kosch and Valerie VanDerzee
NextAccess guides organizations through AI transformation by fostering sustainable change that optimizes operational excellence while ensuring individuals are engaged, upskilled, and empowered to flourish. We specialize in helping our clients achieve breakthrough improvements in productivity, efficiency, and quality by unlocking the full potential of their people and capabilities.
Want to learn more?
Message Scott Kosch or Valerie VanDerzee to schedule a complimentary 30-minute consultation to explore how we can help your organization.