In 1865, English economist William Stanley Jevons observed that the invention of the Watt steam engine — which improved the efficiency of the coal-fired steam engine — made coal a more effective energy source. Jevons called it “a confusion of ideas” to assume the efficiency born from this invention would reduce coal consumption. That efficiency actually dramatically increased consumption even as the total amount of coal required for a particular task fell. There’s now a term for this seemingly contradictory idea: the Jevons paradox.
In a note on Tuesday, Apollo Global Management’s influential chief economist Torsten Slok applied the Jevons paradox to the AI age. In this scenario, labor is playing the role of coal, meaning as AI adoption increases, the technology will beget more jobs, not fewer. Slok calls this the Jevons employment effect. As the cost of professional work falls as AI makes tasks more efficient, the market for those tasks will actually expand. The total number of firms and workers in those fields—from law to accounting to consulting—will grow.
The problem is that the future, to paraphrase a common saying, is like a foreign country. The Jevons paradox works when a cheaper input unlocks new demand that didn’t previously exist. Steam engines didn’t just make existing coal uses more efficient, they opened entirely new frontiers of industrial production that weren’t possible before. The key question for the AI era is whether cheaper legal memos, financial models, and consulting decks will similarly unlock dormant, unmet demand at scale—or whether most of that demand was already being served, and AI is simply doing the same work with fewer people.
The history of automation offers a more ambiguous record than the Jevons framing suggests. ATMs didn’t expand bank teller employment in the long run. Accounting software gutted bookkeeping jobs even as the broader accounting industry grew — the growth accrued to a smaller number of higher-skilled CPAs, not to the entry-level workforce displaced by QuickBooks. The Jevons Paradox may hold at the industry level while producing profound disruption at the worker level; we just don’t know yet. A close look at youth unemployment dynamics both supports, and undermines Slok’s central point.
Slok’s own data point cuts both ways. Yes, youth unemployment has fallen and new business formation is at historic highs. But Slok attributes this to young people starting companies, not to a boom in entry-level associate hiring at law firms or Big Four accounting shops. That’s actually a story about entrepreneurship reshaping labor market structure—not Jevons-style expansion of traditional professional employment.
The Dallas Fed published a study in January 2026 finding that workers ages 22–25 in the most AI-exposed occupations have experienced a 13% decline in employment since 2022, per Stanford research, a trend driven by young workers failing to enter those jobs in the first place. The research reveals that AI isn’t firing young people, instead quietly closing the door on entry-level hiring. The Dallas Fed notes the aggregate unemployment impact is still small (about 0.1 percentage points).
The Vanguard finding is encouraging, and Salesforce’s entry-level hiring push is a real signal worth watching. But it would be premature to treat today’s labor market as evidence that the Jevons effect is already winning. It’s possible that AI will expand some markets while contracting others, and the distributional question, who captures the gains, matters as much as the aggregate employment number. A world with more lawyers but fewer law firm associates, more financial analysis but fewer junior analysts, is not obviously a victory for the workers most at risk.
Slok may ultimately be right that cheaper inputs don’t shrink industries. But they do tend to restructure them, and for the workers caught in the restructuring, the paradox offers cold comfort.
