Economic Factors and AI Hinder Job Market Growth | Opinion

The video game industry operates in cycles, with periods of growth followed by consolidation and then more growth. However, the industry has experienced a significant downturn in recent years, with numerous layoffs and studio closures resulting in thousands of job losses. Despite some companies growing during this time, they were unable to absorb the laid-off staff, leading to a substantial reduction in the industry's overall headcount. The latest employment survey from InGame Job reveals a disappointing trend, with more people involuntarily unemployed and fewer individuals voluntarily changing jobs. This suggests a climate of insecurity, where people prioritize job security over career advancement. For those seeking employment, the market has become increasingly competitive, with few open positions and many applicants, allowing employers to reduce salary offers and freeze wage increases. The primary reason for this situation is the sharp rise in borrowing costs following years of low interest rates. Higher interest rates have reduced companies' appetite for risk-taking, particularly in the games industry, which is already vulnerable due to rising development costs and stagnant per-user revenues. The result is an industry where only successful titles generate significant revenue, while others struggle to break even. The situation has not improved in recent years, as interest rates remain high and risk appetite remains low. Additionally, the industry is experimenting with generative AI technology, but attitudes towards its potential vary greatly between developers and executives. While developers are cautious about AI adoption due to its error-prone nature and potential to create more work in the long run, executives are more optimistic, driven by sales pitches from AI companies seeking to unlock further investment. This disconnect has led to senior executives delaying hiring decisions, awaiting the potential benefits of AI. However, this approach may ultimately harm the industry, as skilled workers remain unemployed and potentially leave the industry for good. While AI is not the primary cause of the current employment climate, the expectation of AI-driven productivity gains is further reducing companies' willingness to hire. The effects of this trend may be felt for years to come, as game development cycles can last up to half a decade. Studios that misplaced their bets on AI revolutionizing development may suffer the consequences for an extended period. In contrast, companies that exercise caution and capitalize on the current surplus of talent may reap significant commercial benefits in the future.