Room for Progress in College Graduates’ Transition to the Labor Market

A college degree does not guarantee financial success, but it does represent students' best chance of achieving economic prosperity. Even so, finding a stable, well-paid job after graduation is not always easy, and young adults just beginning their careers often need time to transition into the labor market. In this post, we take a closer look at unemployment and underemployment rates among recent college graduates compared to older graduates and examine how rates vary by major.

Recent graduates have higher unemployment rates than mid-career graduates. The unemployment rate among bachelor's degree holders ages 22 to 27 is 5.5%, compared to 3.0% among older college graduates ages 35 to 44, according to American Community survey data for 2022 and 2023. Notably, unemployment rates for college graduates are significantly lower than those of non-college graduates in the same age range (8.6% ages 22 to 27, 5.3% ages 35 to 44).

Patterns are similar for underemployment, which we define as college graduates working in a job where less than half of the workers have at least a bachelor's degree. Among recent college graduates, 35% are underemployed, compared to only a quarter of college graduates ages 35 to 44. These numbers align with recent evidence suggesting that many recent graduates who are underemployed eventually transition to better jobs.

Even though underemployment is far from optimal, recent college graduates who are underemployed still earn more than those who did not attend college, seeing on average a 21% wage premium relative to high school graduates in the same age range. Recent graduates who are underemployed are more likely to work in office and administrative support occupations and in sales, while high school graduates are more likely to work in lower-wage physical jobs (e.g., construction laborers, truck drivers, and material movers) and service jobs that require little or no experience or training (e.g., cashiers, cooks, and servers).

Unemployment and underemployment vary by field of study as well. Recent graduates who major in quantitative and most occupation-specific fields (like computer science, engineering, and nursing) tend to have much lower underemployment than those with majors like marketing, general business, and sociology.

Notably, some majors with lower unemployment have higher underemployment, and vice versa. For example, recent graduates in business have lower unemployment (4.4%) but higher underemployment (44%) than all recent graduates, while the reverse is true for economics.

Higher underemployment among recent graduates in certain majors does not mean those degrees are not valuable. However, more time or additional schooling might be needed for graduates to build their careers and secure higher-paying jobs. For example, 41% of recent graduates in biology are underemployed, but only 16% of mid-career graduates are. We also see substantial decreases in underemployment over time for those with degrees in psychology and English language and literature. Interestingly, people with these majors are more likely to have advanced degrees by the time they are 35 to 44. In contrast, underemployment remains high among mid-career workers with majors in business management and marketing.

There are also some majors, such as criminal justice and fire protection, that offer occupation-specific training geared toward jobs that do not typically require a bachelor's degree. Underemployment is more prevalent in these majors for both recent and mid-career graduates. However, unemployment is very low in these fields.

More research is needed to understand which student groups and majors are more prone to underemployment, and whether all majors are providing skills that graduates need in the job market. In addition, our higher education institutions can do more to forge smoother transitions between college and the labor market. Several interventions aim to facilitate this transition, ranging from experiential learning coursework and career mentorship programs to internships, job shadowing, and co-ops. While there is strong causal research supporting the positive effects of internships on employment and earnings outcomes, evaluating the effectiveness and feasibility of other initiatives is a critical step toward determining the best ways to help graduates succeed in the job market.

Stay tuned for more on how graduates are faring after college.