For decades, a clear promise defined the aspirations of young adults worldwide. If you went to university—even if you accumulated some debt—you got a ticket to the middle class. That ticket guaranteed a white-collar job and a salary premium over non-graduates. It also paved the way to homeownership. That promise has been broken – the golden ticket turned out to just be a coupon for 10% off a student loan.

We are witnessing a rare economic shift. A growing economy usually rewards the effort taken to get an education. Yet today, the economy has been expanding while the door for graduate employment has been closing. In May 2024, Oxford Economics reported a statistic that defines this new era. For the first time in 45 years, the unemployment rate for recent university graduates in the United States exceeded the national average. Now while this is not great - it is by no means a disaster - as US unemployment - while rising is still hovering near all-time lows.

This inversion is partly a story of supply. In 1960, only about 5 percent of young people in the UK went to university. By 2007, that figure had risen to 43 percent. The United States saw a similar trajectory, with the share of adults holding a degree jumping from 7.7 percent in 1960 to nearly 38 percent in 2023. The degree - which was once a rare signal of elite capability, has become a baseline expectation. As scarcity disappeared, so did the pay premium.

It is not just the number of graduates that have been growing either, there has been grade inflation too. In the UK, for example - the proportion of students awarded a First-Class degree went from 7 percent in the mid-90s to 26 percent today. The problem with grade inflation like this is that - if everyone is special, no one is.

In September 2025, unemployment among 20–24-year-olds in the United States hit 9.2 percent, rising sharply from 7 percent a year earlier. Broader data from Bloomberg reveals that Americans with four-year degrees now account for more than 25 percent of all unemployed workers. This ratio has climbed to an all-time high, surpassing even the temporary peak reached during the pandemic layoffs of March 2020. The crisis can be seen in the frantic activity required to just stand still. According to High Fliers Research, final-year students in the UK now make an average of 21.7 job applications each. This nearly doubles the number of applications made just two years ago in 2023 - yet success rates have plummeted to their lowest levels in three decades. Only 27 percent of UK final-year students had a job lined up by February 2025, down from 33 percent two years earlier. Graduate job postings have plummeted in key sectors: falling 78 percent in human resources, 46 percent in marketing, and 42 percent in accounting. While this is happening - the supply of graduates keeps rising, with over 465,000 finishing their first degree in the UK last year.

John Burn-Murdoch, the chief data reporter at the FT, highlights that the most striking feature of this new landscape is the gendered nature of the divide. The collapse in graduate hiring has hit young men the hardest.

Detailed employment data from the US reveals that the unemployment rate for recent male graduates has jumped from under 5 percent to 7 percent over the last year. For female graduates, the rate remains unchanged. Women gained 135,000 jobs last year, including nearly 50,000 in healthcare alone. Men cluster in fields like tech and finance. These sectors have been purging entry-level roles after pandemic-era hiring binges. They are also aggressively embracing automation. Large Language Models now perform tasks young men were once hired to do, such as writing basic code, analyzing spreadsheets, and managing data. Bloomberg reported last month that OpenAI had hired more than 100 ex-investment bankers to train its AI on how to build financial models as it looks to replace the hours of grunt work performed by junior bankers across the industry.

This technological shift towards AI has started breaking the hiring process too. Generative AI allows applicants to spam hundreds of custom cover letters and resumes out to hiring firms with a single click. The Economist describes how a good cover letter - used to help distinguish between high- and low-quality applicants. Employers - now flooded with indistinguishable applications, struggle to differentiate between candidates.

This creates a classic "lemons problem," a concept introduced by the economist George Akerlof in 1970. In Akerlof’s model, when buyers can’t distinguish between high-quality goods (or peaches) and low-quality goods (lemons – a slang term in America for a car that’s found to be defective after it has been bought.), their fear of buying a lemon drives down the price they are willing to pay. This drives sellers of high-quality goods out of the market, leaving only lemons.

In the graduate job market, the "goods" are job applications. When employers are flooded with thousands of AI-generated, indistinguishable cover letters, they lose the ability to identify the high-quality candidates who invested time and effort. The signal is drowned out by noise. Just as buyers in Akerlof's market stopped buying used cars, employers are stopping the open hiring process. They retreat to offline networks and nepotism to find people they feel they can trust. The issue is that if everyone sounds perfect on paper, the only signal left is a personal introduction.

On the job training - has long depended on repetitive work. Junior lawyers spent their first few years reviewing thousands of pages of contracts while accountants checked audit logs. Junior investment bankers spent years building excel models and PowerPoint slideshows for pitches. This work – while tedious - served a critical function. By grinding through this repetitive work for years – juniors both proved themselves and learned how to do their job well.

Artificial Intelligence has started to sever this link. According to the FT, at Simmons & Simmons, - a UK based international law firm - a custom AI tool named "Percy" now handles document review and legal summarization. Presumably, the first thing Percy worked out was how to make a font size small enough so the disclaimer doesn’t seem longer than the document and the second was 'How to bill 26 hours in a 24-hour day. Percy’s already partner material.

Some of the basic tasks that AI is being used for at law firms once taught “the trade” to fleets of trainee lawyers. Juniors have now begun evolving from "doers" generating first drafts into "checkers" verifying AI output. But verifying the soundness of a contract or the security of a piece of code requires judgment – and the problem is that fresh graduates rarely possess this skill. Discernment requires experience – but companies are increasingly reluctant to provide that experience.

New technology is just one factor compounding the pressure on young job seekers. It joins a perfect storm of macroeconomic forces that make novice employees - a potential financial liability.

Firms are dealing with constantly changing tariff rules in the United States - the biggest consumer market in the world. American firms don't know what their raw materials will cost or if the consumer will accept higher prices - they have no idea what their margins will be if they might have to swallow some of the cost increase. Foreign firms don't know if they will be able to export at all, or if they’ll face higher competition in their domestic markets from redirected Chinese exports. When a company has no visibility as to what their costs will be or what demand will look like, they often freeze up. They postpone big decisions until they have greater visibility. The constantly changing nature of these tariffs makes the situation particularly difficult for businesses - and is likely reducing growth both at US-based firms and international firms.

Recent analysis from Goldman Sachs adds weight to this gloomy outlook. Their researchers found that private-sector layoff announcements in October reached their highest level on record outside of a recession. Furthermore, WARN notices—which companies must file before mass layoffs—have ticked up to levels not seen since 2016. While initial jobless claims remain low, these leading indicators suggest the US labor market is weakening.

All of this uncertainty has led to a "great freeze" in the broader job market. We are seeing a "low-hire, low-fire" dynamic – which has been termed “Job Hugging” - where incumbent employees stay put, reducing the churn that typically opens up entry-level spots at firms. With quit rates falling, the ladder is getting blocked somewhat from the top down.

Governments around the world have been busy raising minimum wages to combat the cost-of-living crisis. While the US minimum wage has stayed low – higher minimum wages have been imposed by many states. The Economist recently wrote about how academics have recently been getting cold feet about the effects of high minimum wages. While they may help the lowest earners, they fundamentally alter the calculus of hiring. By lifting the pay floor for entry-level workers closer to that of experienced staff, these policies may have inadvertently erased the distinction between the two groups. In the past, a lower starting salary offset the cost of on-the-job training. Today, graduates are more expensive. When the cost of an inexperienced worker rivals that of a worker with a few years of experience, the rational employer chooses the proven candidate every time. Since trainees can’t generate immediate value to justify their new price tag, firms close the door to hiring them. The Economist quotes a paper by Hannah Farkas of Columbia University who found that big increases in the wage floor led employers to making working schedules less predictable and the work less safe – with a higher incidence of workplace injuries - in effect they make the job worse to compensate for it paying more.

This leaves graduates in a precarious position – where they face a frozen job market while grappling with the highest living costs in a generation. Inflation has eroded their purchasing power, housing costs have skyrocketed in the cities where jobs exist, and many carry significant student debt. They are priced out of employment by wage floors and priced out of life by the cost of living.

Employers increasingly retreat to offline hiring and personal networks. This disadvantages working-class graduates who have fewer family connections with the ability to influence hiring decisions. The trust between recruiter and applicant has evaporated due to the use of AI systems. Faced with 21.7 applications per student—many generated by AI bots—recruiters turn off the firehose.

Students see the door closing and respond by buying a bigger key. Enrollment in Master’s programs has skyrocketed in recent years. It's like trying to fix a leak in your boat by drilling another hole to let the water out. If your Bachelor's in History didn't get you a job, surely a Master's in Advanced History will convince Open AI that you can write code.

Fear is one of the drivers of the growth in advanced degree programs – but the returns to earning a master’s degree have started shrinking too. Research shows that 40 percent of US master’s programs deliver no real financial benefit. In Britain, graduates with master’s degrees often earn similar salaries to those with a bachelor’s degree by age 35. Students have found themselves in an arms race of credentials that devalues the very qualifications they chase.

Not all degrees are created equal. Analysis by the Foundation for Research on Equal Opportunity – a US based think-tank highlights a stark divide. While engineering, nursing, and economics degrees can offer a lifetime Return on Investment of over half a million dollars - degrees in creative arts, social care, agriculture, English, philosophy, education, and psychology frequently result in a negative financial return. The "ticket" to the middle class is no longer a generic degree; it is a specific, market-aligned skillset.

According to researchers at Georgetown University - the subject that you pick matters more than the university you attend. While the worst US colleges provide their students with next to no value. In general - people who enroll in America’s public universities get a better return on investment than students who go to the more prestigious private non-profit ones – which – despite being nonprofits - tend to be significantly more expensive.

Interestingly, research shows that men face a higher opportunity cost for attending university - as men are more likely to work in skilled trades—like plumbing, electrical work or construction—which offer high earnings without the need for a degree, the financial sacrifice of four years out of the workforce is harder to justify.

As the glass-walled office door closes, another door opens to the warehouse, the construction site, and the classroom. Bloomberg reports that there has been a surge in applications for roles graduates once ignored like substitute teachers and prison guards. According to the article, an Atlanta based traffic-flagging company now receives up to 80 job applications a week, compared with just ten five years ago. While the overall jobless rate remains fairly low at 4.3% - those out of work are lingering in unemployment for longer. Some of these less glamorous jobs offer what many office roles no longer guarantee: stability. They are hard to automate, and turnover in these roles is falling.

Paradoxically, the Zoom revolution that everyone was excited about in 2020 has reinforced the value of physical presence. Corporate travel is rebounding to pre-pandemic levels because businesses have rediscovered a simple truth: people buy from people. We thought Zoom would kill business travel a few years ago, but it turns out that nobody closes a million-dollar deal with a person who is secretly wearing pajama bottoms. Unless you’re selling pajama bottoms, in which case—great move!

Sales roles, which require travel and face-to-face relationship building, remain robust against automation. The willingness to get on a plane is becoming a competitive advantage.

While the job situation has been tough for college graduates in the Anglosphere – it is not a global problem, Southern Europe offers a surprising bright spot. Italy’s graduate unemployment rate is at its lowest since records began in the 1990s. Greece has fallen from 40 percent during the debt crisis to just over 10 percent. Spain and Portugal show stability or improvement. These economies avoided the tech-and-finance binge of the 2020s and now benefit from EU recovery funds - stimulating demand for engineers and project managers.

Corporate structures appear to be changing. According to the American Society of Employers - the old pyramid shaped organizational structure, with just a few senior executives at the top - more managers and high value contributors in the middle and then lots of entry level workers at the bottom, is giving way to a diamond shaped structure which is lean at the base and fat in the middle.

While a diamond structure might sound fancy - it really just means there's a bunch of stressed middle managers floating in mid-air with no one below them to fetch coffee or fix the formatting in their PowerPoint slides. The bottom rung of the ladder hasn't just been removed; it's been sold for scrap to pay the consultant who recommended removing it.

Firms are heavy with mid-career specialists and hire fewer trainees than ever before. This saves on the expense of training today - but risks hollowing out leadership pipelines. According to the FT, some recruiters are warning that failing to hire juniors today - puts a company's existence at risk within 15 years.

Dan Priest - the chief AI officer at pwc told the Economist that the structure might eventually shift to an hourglass - where AI hollows out middle management – essentially the opposite of what we are seeing today. This would allow AI-native graduates to leapfrog into leadership. However, that optimism does rely on an entry mechanism that currently appears to be broken. I’m not sure how likely it is.

Graduate jobs are by no means extinct, but they are scarcer, more competitive, and harder to get chosen for – to find one you will have to rely more on networking than on spinning up AI cover letters and making online applications. Geography, gender, and sector seem to all be shaping outcomes – and it matters much more today what subjects you choose to study. AI may be having an impact on graduate hiring, but economic uncertainty, credential inflation, and structural change are all playing important roles too.

Despite the headwinds, the overall unemployment rate remains low by historical standards – if you are searching for a job – it’s at least not during a recession – and it should work out for you, but you do need to adopt different strategies to separate yourself from the crowd. The "paper ceiling" is cracking – your employability is not all down to academic qualifications anymore. The provable skills you have matter more than the credential itself. The skills in the highest demand today involve a mix technical and human-centric abilities. Skilled tradespeople, and specialist programmers remain in high demand. The economy is not broken, but it is changing.

For graduates, adaptation is essential. This means mastering AI tools, building networks, and choosing resilient sectors that are likely to continue growing due to demographic trends such as healthcare and advanced manufacturing. For employers, the question is whether short-term savings justify the long-term risk of not having a pipeline of qualified workers. For policymakers, the task is to align education with reality.

The first rung of the career ladder is still there. It just takes more effort—and more ingenuity—to reach.

If you found this video interesting you should watch the video I made a few years ago on finding a job during the pandemic next – as all of those ideas of how to find a job during a tough job market still make sense today. Don’t forget to check out our sponsor Shokz – especially during their buy one get one free promotion period before Christmas. Have a great day and talk to you in the next video – bye.