AI-Generated Cover Letters Disrupt Job Market, Wages Plummet

In the past, cover letters served as a valuable tool for employers to identify promising job candidates, particularly those with employment histories that did not align with their career ambitions. However, the recent rise of large language models has dramatically changed the dynamic.

As of November 2025, jobseekers can now produce perfectly targeted cover letters at the touch of a button, touching on all the requirements stated in a job advertisement. This has led to a significant increase in the length of cover letters, with the median length rising from 79 words pre-AI to 104 words post-AI. For applications written using the platform's own AI-powered tool, the median length is even higher, at 159 words.

The influx of AI-generated cover letters has also diminished their value for employers. Prior to the AI era, a well-written cover letter was worth an extra $26 per task on the platform, a significant sum. However, this premium has now disappeared, as employers can no longer reliably distinguish between strong and weak candidates.

The researchers estimate that wages on the platform are now 5% lower and hiring 1.5% lower than in a world without AI-powered cover letters. Employers, unable to effectively identify top talent, have cut new hires' pay, and more often end up recruiting lower-quality candidates. While this benefits businesses in the short term, the losses suffered by workers outweigh the gains for employers.