WHY TODAY´S GRADUATES ARE SCREWED / THE ECONOMIST

Crammed and damned

Why today’s graduates are screwed

The bottom has fallen out of the job market

Pity the ambitious youngster. 

For decades the path to a nice life was clear: go to university, find a graduate job, then watch the money come in. 

Today’s hard-working young, however, seem to have fewer options than before.

Go into tech? 

The big firms are cutting jobs. 

How about the public sector? 

Less prestigious than it used to be. 

Become an engineer? 

Lots of innovation, from electric vehicles to renewable energy, now happens in China. 

A lawyer? 

Artificial intelligence will soon take your job. 

Don’t even think about becoming a journalist.

Across the West, young graduates are losing their privileged position; in some cases, they have already lost it. 

Jobs data hint at the change. 

Matthew Martin of Oxford Economics, a consultancy, has looked at Americans aged 22 to 27 with a bachelor’s degree or more. 

For the first time in history, their unemployment rate is now consistently higher than the national average. 

Recent graduates’ rising unemployment is driven by those who are looking for work for the first time.

The trend is not just apparent in America. 

Across the European Union the unemployment rate of young folk with tertiary education is approaching the overall rate for the age group (see chart 1). 

Britain, Canada, Japan—all appear to be on a similar path. 

Even elite youngsters, such as MBA graduates, are suffering. 

In 2024, 80% of Stanford’s business-school graduates had a job three months after leaving, down from 91% in 2021. 

At first glance, the students eating al fresco at the school’s cafeteria look happy. 

Look again, and you can see the fear in their eyes.

Until recently the “university wage premium”, where graduates earn more than others, was growing (see chart 2). 

More recently, though, it has shrunk, including in America, Britain and Canada. 

Using data on young Americans from the New York branch of the Federal Reserve, we estimate that in 2015 the median college graduate earned 69% more than the median high-school graduate. 

By last year, the premium had shrunk to 50%.

Jobs are also less fulfilling. 

A large survey suggests that America’s “graduate satisfaction gap”—how much more likely graduates are to say they are “very satisfied” with their job than non-graduates—is now around three percentage points, down from a long-run advantage of seven.

Is it a bad thing if graduates lose their privileges? 

Ethically, not really. No group has a right to outperform the average. 

But practically, it might be. 

History shows that when brainy people—or people who think they are brainy—do worse than they think they ought to, bad things happen.

Peter Turchin, a scientist at the University of Connecticut, argues that “elite overproduction” has been the proximate cause of all sorts of unrest over the centuries, with “counter-elites” leading the charge. 

Historians identify “the problem of an excess of educated men” as contributing to Europe’s revolutions of 1848, for instance. 

Luigi Mangione would be a member of the counter-elite. 

Mr Mangione, a University of Pennsylvania graduate, should be living a prosperous life. 

Instead, he is on trial for the alleged murder of the chief executive of a health insurer. 

More telling is the degree to which people sympathise with his alienation: Mr Mangione has received donations of well over $1m.

Why are graduates losing their privileges? 

Maybe the enormous expansion of universities lowered standards. 

If ivory towers admit less-talented applicants, and then do a worse job of teaching them, employers might over time expect fewer differences between the average graduate and the average non-graduate. 

A recent study, by Susan Carlson of Pittsburg State University and colleagues, suggests that many students today are functionally illiterate. 

A worrying number of English majors struggle to understand Charles Dickens’s “Bleak House”. 

Many are bamboozled by the opening line: “Michaelmas term lately over, and the Lord Chancellor sitting in Lincoln’s Inn Hall.”

Certainly some universities do offer rubbish courses to candidates who should not be there. 

On the other hand, there is little correlation between the number of graduates and the wage premium over the long term: both grew in America in the 1980s, for instance. 

Moreover, talk to students at most universities, especially elite ones, and you will be disabused of the notion that they are stupid. 

Those at Stanford are ferociously intelligent. 

Many at Oxford and Cambridge once lounged around, and even celebrated a “gentleman’s third”, if they were so honoured. 

No longer.

A new paper by Leila Bengali of the San Francisco branch of the Fed, and colleagues, is another reason to question the graduates-are-thick explanation. 

They find that the change in the university wage premium mainly “reflects demand factors, specifically a slowdown in the pace of skill-biased technological change”. 

In plain English, employers can increasingly get non-graduates to do jobs that were previously the preserve of graduates alone.

First-class? Nobody cares

This is especially true for those jobs that require the rudimentary use of technology. 

Until relatively recently, many people could get to grips with a computer only by attending a university. 

Now everyone has a smartphone, meaning non-graduates are adept with tech, too. 

The consequences are clear. 

In almost every sector of the economy, educational requirements are becoming less strenuous, according to Indeed, a jobs website. 

America’s professional-and-business services industry employs more people without a university education than it did 15 years ago, even though there are fewer such people around.

Employers have also trimmed jobs in graduate-friendly industries. 

Across the EU the number of 15-to-24-year-olds employed in finance and insurance fell by 16% from 2009 to 2024. 

America has only slightly more jobs in “legal services” than in 2006. 

Until recently, the obvious path for a British student hoping to make money was a graduate scheme at a bank. 

Since 2016, however, the number of twentysomethings in law and finance has fallen by 10%. 

By the third season of “Industry”, a television drama about graduates at a London bank, a big chunk of the original cast has been pushed out (or has died).

It is tempting to blame AI for these waning opportunities. 

The tech looks capable of automating entry-level “knowledge” work, such as filing or paralegal tasks. 

Yet the trends described in this piece started before ChatGPT. 

Lots of contingent factors are responsible. 

Many industries that traditionally employed graduates have had a tough time of late. 

Years of subdued activity in mergers and acquisitions have trimmed demand for lawyers. 

Investment banks are less go-getting than before the global financial crisis of 2007-09.

So is college worth it? 

Americans seem to have decided not. 

From 2013 to 2022 the number of people enrolled in bachelor’s programmes fell by 5%, according to data from the oecd. 

Yet in most rich countries, where higher education is cheaper because the state plays a larger role, youngsters are still funnelling into universities. 

Excluding America, enrolment across the OECD rose from 28m to 31m in the decade to 2022. 

In France the number of students went up by 36%; in Ireland by 45%. 

Governments are subsidising useless degrees, encouraging kids to waste time studying.

Students also may not be picking the right subjects. 

Outside America, the share in arts, humanities and social sciences mostly grows. 

So, inexplicably, does enrolment in journalism courses. 

If these trends reveal young people’s ideas about the future of work, they truly are in trouble.