The problem of underemployed college graduates – and 5 things students can do about it now

A 4-year college degree has long been seen as the key to economic prosperity. A large number of studies have shown that college graduates enjoy not only a better financial future than the average individual without a degree, but they also realize several personal benefits, including higher job satisfaction, better health, and greater participation in civic life.

However, new research suggests that the employment realities for college graduates are more nuanced. While it’s still the case that the typical college graduate has better job opportunities than peers without a degree, a bachelor’s degree doesn’t guarantee occupational success.

In fact, a recent report discovers that among workers with a terminal BA/BS, slightly less than half are employed in a college-level job 1 year after graduating.

The other half isn’t faring so well. They’re underemployed – working at jobs that don’t require a college degree or that fail to make use of the skills associated with it. That’s 1 main takeaway from Talent Disrupted: Underemployment, College Graduates, and the Way Forward, a 2024 report prepared by the Burning Glass Institute and the Strada Education Foundation.

Combining public census data with résumé information from sources like the Lightcast Career Histories Database, the Bureau of Labor Statistics, and the American Community Survey, the researchers identified the 2022 employment status of 18.6 million individuals who had completed college between 2012 and 2021. The full sample included 10.8 million graduates with a bachelor’s degree, 6.3 million with a master’s, and 1.6 million with a doctorate or equivalent.

The researchers then examined the extent of underemployment among this sample, the factors associated with being underemployed, and several characteristics associated with college graduates being able to transition away from underemployment.

How prevalent is underemployment?

1 year after graduating, 48% of terminal BA/BS graduates were employed in college-level jobs; 10 years after completion, that percentage increased to 55%.

The status of the 52% of baccalaureate graduates who were initially underemployed – defined as not working at a job where most workers had or were required to have a bachelor’s degree – also improved over time, declining to 45% after ten years.

However, to a surprising extent, that first job predicted the direction of future employment. Most graduates who begin in college-level jobs remain in them, while initially underemployed graduates largely stay stuck in underemployment.

Approximately 27% of underemployed graduates move out of underemployment within 10 years of graduation, while 21% of graduates employed in college-level jobs fall into underemployment in that period.

» Also read: Public vs private colleges: which is a better deal?

Here’s another way to look at it. Graduates who start out underemployed are about 3.5 times more likely to remain underemployed ten years after college compared to those graduates who begin in a college-level job.

Among initially underemployed graduates, 88% were what the researchers termed “severely underemployed” 5 years after college, meaning they were working in jobs that required a high school education or less — office support, retail sales, food service, construction, transportation, and manufacturing jobs are examples.

Underemployment is persistent, and it’s also costly. A recent graduate working at a college-level job earns 60,000 annually on average, about 88% more than someone with only a high-school diploma ($32,000). By contrast, underemployed college graduates earn an average of $40,000 annually, about 25% higher than the average earned by someone with no education beyond high school.

What factors were associated with underemployment?

The odds of securing college-level jobs were affected by the type of college graduates attended, the experiences they had there, and their demographics. Here are a few examples.

College major

Graduates with degrees in public safety and security, recreation and wellness studies, and less math-intensive business fields were more than twice as likely to be underemployed than graduates with degrees in health, engineering, or math-intensive business fields. The underemployment rate was also low for those studying education.

Although it’s often assumed that STEM (Science, Technology, Engineering, Math) degrees almost guarantee well-paid, college-level jobs, that’s not true for all STEM majors. Graduates from the most quantitatively rigorous fields were more likely to take college-level jobs than those majoring in other STEM fields.

» Also read: Why the UC schools are so good for first-gen college students

For example, engineering, mathematics, and computer science majors fared better than those with degrees in biology and life sciences. Likewise, math-intensive business fields such as accounting and finance yield higher rates of college-level employment than general business, human resources, and marketing fields.

Looking at a list of the highest-paying majors underscores this trend, especially in comparison to the worst majors.

Remember these results covered the period of 2012-2021. Job markets can change very quickly, and in the past 12-18 months several major tech companies such as Google, Amazon, and Meta have announced layoffs affecting thousands of workers with degrees in computer science, according to CNBC.

Some of that downsizing is a correction to the over-hiring companies pursued right after the worst of the pandemic, and some of it reflects attempts to maximize profits during a period of inflation. Nonetheless, the longer-term job market still looks relatively strong for graduates with strong quantitative backgrounds.

» Also read: Online degrees that pay well

Type of institution attended

5 years after completion, 58% of graduates from for-profit institutions were underemployed, compared to 46% underemployment among graduates from public colleges and 43% for graduates of private, nonprofit schools.

The chances of being underemployed also differed for graduates of schools serving specific racial/ethnic groups. Graduates of Historically Black Colleges and Universities (HBCUs) were 15% less likely to be underemployed, while graduates from Hispanic Serving Institutions (HSIs) were 3% less likely to be underemployed compared to graduates of other institutions.

Selectivity

Graduates from more selective colleges were more likely to land college-level jobs. 10 years after graduation, 38% of graduates from more selective colleges were underemployed, compared to 45% from selective colleges and 50% from inclusive institutions.

The country’s most selective colleges tend to be the best educational investment in terms of ROI.

This result is not surprising given the better career service resources and more extensive alumni networks such institutions typically provide. In addition, as the report notes, graduates from these schools are advantaged because “employers assume that the college’s selection process is a proxy for intelligence, motivation, industry, and talent.”

Internships

One of the strongest factors linked to graduates securing college-level jobs was whether they participated in a college internship. Internships – particularly those that are paid – convey several advantages, including on-the job training, a network of workplace connections, and often an audition for a position with the employer sponsoring the internship.

The researchers found the odds of being underemployed after completing a bachelor’s degree were 49% lower for students who participated in an internship during college compared to those who did not. This boost held up across all different kinds of institutions and many different majors.

 » Also read: Our guide to working while in college

Gender and Ethnicity

10 years after college, 49% of male graduates and 44% of female graduates were underemployed. In addition, 53% of Black graduates were underemployed, compared to 49% of Hispanics/Latinos, 46% of Whites, and 38% of Asians.

» Also read: 6 strategies colleges are using after ban on race-conscious admissions

How can college students minimize the risks of underemployment?

Talent Disrupted outlined 5 factors students should consider that can help them gain better careers.

What can policy makers and college leaders do?

Policymakers and university leaders also can reduce the problem of underemployment by following 4 policies recommended in Talent Disrupted:

• Increase opportunities for paid internships.
• Provide detailed data about the specific economic outcomes of individual degree programs (in the meantime, check out the Degreechoices program-level rankings of college degrees, with nursing as an example).
• Invest more in advisors, mentors, and career services staff so that students have better education-to-employment guidance.
• Fund colleges so that students can have affordable access to more expensive degree programs like data science, engineering, and nursing that also yield the best employment outcomes. The report recommends revising state higher education funding formulas so institutions can expand enrollment in high-cost programs.

It’s fashionable these days to question the worth of attending college. For example, a recent Wall Street Journal article claimed that Americans are losing faith in the value of college and that most families are “looking for alternatives.” As the cost of education increases and employers shift their attention to skills rather than degrees, it’s no surprise that Americans are losing confidence in the value of a college degree.

The Talented Disrupted report will probably add to such skepticism even though it confirms the fact that on average college graduates are better off economically than those with less education, even though that advantage is not shared by all graduates.

The good news is that college students can still influence the economic outcomes associated with their degrees by making good decisions about where they attend school, what they study there, and whether they participate in job-enhancing experiences like internships.