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We should feel sorry for ambitious young people. For decades, the path to a good life was clear: go to college, graduate, get a job, then enjoy the benefits. But today's young people, while hardworking and dedicated, seem to have fewer options than before. Pursuing a career in the tech sector? Big companies are cutting jobs. In the public sector?
It no longer has the prestige it once had. Engineer? Most innovation, from electric vehicles to renewable energy, is now happening in China. Lawyer? Artificial Intelligence will soon take its place. And let alone become a journalist. Across the West, young graduates are losing the privileged position they once enjoyed; in some cases, they have already lost it. Employment data signals this shift.
Matthew Martin of the consultancy Oxford Economics analyzed Americans aged 22 to 27 with a bachelor's degree or higher. For the first time in history, their unemployment rate is higher than the national average. The rise in unemployment among young graduates comes largely from those looking for work for the first time.
This trend is not limited to America. In the European Union, the unemployment rate for young people with higher education is approaching the general level for their age group, which also includes young people without higher education (see chart 1). Britain, Canada, Japan seem to be following the same trend. Even the most elite young people, such as MBA graduates, are suffering.
In 2024, only 80% of Stanford Business School graduates had found jobs three months after graduation, down from 91% in 2021. Until recently, the “graduation premium,” the fact that graduates earned more than others, was on the rise (see chart 2). But it has recently fallen, including in the US, Britain and Canada.
Using data from the New York Federal Reserve on young Americans, it is estimated that in 2015, college graduates had an average salary 69% higher than those with only a high school diploma. By last year, the premium had fallen to 50%.
Is it a bad thing that graduates are losing their privileges?
Job satisfaction is also lower. A comprehensive survey suggests that in the US the “graduate satisfaction gap,” the difference in job satisfaction levels between graduates and non-graduates, is now about three percentage points, down from a long-term gap of seven points.
Is it a bad thing that graduates are losing their privileges? Ethically, not necessarily. No group has the right to be above average. But practically, maybe it does. History shows that when smart people, or those who think they are, perform worse than they believe they deserve, bad things happen.
Peter Turchin, a scholar at the University of Connecticut, argues that “elite overproduction” has been the direct cause of every kind of unrest over the centuries, with “counter-revolutionaries” leading the revolt. Historians identify the “problem of surplus educated people” as one of the factors that led to the revolutions of 1848 in Europe.
Luigi Mangione would be part of this counter-elite. Mangione, a graduate of the University of Pennsylvania, should have had a very good life. But today he is accused of murdering the director of a health insurance company. More significant is the fact that many people understand and share the feelings of exclusion that he experienced: he has received over $1 million in donations.
Why are graduates losing their status?
Perhaps because of the expansion of mass college admissions, which has lowered standards. If colleges admit less talented applicants and do a poorer job of training them, employers may over time expect less of a difference between graduates and non-graduates. A recent study, by Susan Carlson of Pittsburgh State University and her colleagues, suggests that many students today are functionally illiterate.
A worrying number of English literature students fail to understand Charles Dickens's novel "Bleak House." Many of them are confused by the first line: "Michaelmas term lately over, and the Lord Chancellor sitting in Lincoln's Inn Hall." Of course, some universities offer worthless courses to candidates who shouldn't be there. On the other hand, there is little correlation between the number of graduates and the long-term wage premium: both rose in the US during the 1980s.
Moreover, if you talk to students at most universities, especially elite ones, you will realize that they are not stupid. Students at Stanford are extremely smart. In the past, some students at Oxford and Cambridge would happily accept even a low grade, just to pass. Today, that is unthinkable.
A new paper by Leila Bengali of the San Francisco Federal Reserve and her colleagues offers another reason to question the “graduates are less skilled” thesis. They find that the change in the college premium “reflects largely demand-side factors, namely the slowing pace of technological change that favors skills.” Put simply, employers can now find workers without college degrees to do jobs that previously belonged only to graduates.
Diploma with excellent results? Nobody cares
This is especially true for jobs that require basic technological knowledge. Until recently, many people could only learn how to use a computer in college. Today, everyone has a smartphone, and even those without a college degree are tech-savvy. The consequences are clear. In almost every sector of the economy, educational requirements are becoming less stringent, according to data from the job site Indeed.
The US professional and business services sector employs more people without a college degree than it did 15 years ago, even though their numbers in the population have declined. Employers have also cut jobs in industries that traditionally favor college graduates. In the EU, the number of 15-24 year-olds employed in finance and insurance fell by 16% from 2009 to 2024. In the US, there are only slightly more jobs in “legal services” than in 2006.
For a British student hoping to make money, the obvious path was a job in a bank. But since 2016, the number of young people in the legal and financial sectors has fallen by 10%. By the third season of the series “Industry,” which follows the lives of several recent university graduates at a London bank, most of the main characters have left or passed away.
Artificial Intelligence cannot be blamed for the decline in opportunities. This technology seems to be able to automate entry-level knowledge jobs, such as filing or simple legal work. But the trends described in this article began before ChatGPT. There are many factors at play. Many industries that traditionally employed people with university degrees have struggled recently. Years of tepid activity in mergers and acquisitions have reduced the demand for lawyers. Investment banks are no longer as aggressive as they were before the global financial crisis of 2007-2009.
Is university still worth it?
Americans seem to be deciding “no.” From 2013 to 2022, the number of students enrolled in bachelor’s degree programs fell by 5%, according to data from the OECD. But in most rich countries, where higher education is cheaper because it is partly funded by the state, young people continue to flock to universities. Excluding the United States, enrollment in OECD countries rose from 28 million to 31 million in the decade to 2022. In France, the number of students increased by 36%; in Ireland by 45%.
Governments are subsidizing useless degrees, encouraging young people to waste time on worthless studies. Students may not even be choosing the right majors. Outside the US, the percentage of students in the arts and social sciences is largely on the rise. So, inexplicably, is enrollment in journalism majors. If these trends reflect young people’s expectations about the future of work, then they are in trouble indeed./The Economist
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