Rethinking Graduate Underemployment: Beyond the Headlines to Nuanced Understanding

Jonathan H. Westover, PhD
16 minutes ago
21 min read

Listen to a review of this article:

Abstract: Graduate underemployment has emerged as a central concern in higher education policy discourse, with widely cited estimates suggesting that more than half of recent college graduates work in jobs not requiring their degree. However, these alarming statistics may obscure a more complex reality. This article examines three distinct methodological approaches to measuring underemployment among bachelor's degree holders: entry-level education assignments, realized labor market matches, and earnings premium adjustments. Drawing on American Community Survey data (2018–2022) and Bureau of Labor Statistics occupational classifications, the analysis reveals that underemployment rates vary substantially—from 25 percent to 47 percent among recent graduates—depending on methodology. The findings suggest that relying exclusively on entry-level education requirements overlooks critical labor market dynamics, including educational diversity within occupations, upskilling trends, and the substantial earnings premium bachelor's degree holders command even in occupations classified as requiring less education. While underemployment remains a legitimate concern representing potential human capital underutilization, oversimplified measures risk distorting policy responses and obscuring the continued labor market value of higher education credentials.

The value proposition of the bachelor's degree faces unprecedented scrutiny. Rising tuition costs, mounting student debt burdens, and deteriorating entry-level job prospects have converged to fuel skepticism about four-year college credentials (Berman, 2025). Against this backdrop, recent research on graduate underemployment has captured considerable attention from policymakers, journalists, and the public. The 2024 Talent Disrupted report from Burning Glass Institute and Strada Institute for the Future of Work crystallizes these concerns: 52 percent of recent college graduates were working in jobs that did not require a four-year degree (Burning Glass Institute & Strada Institute for the Future of Work, 2024).

This statistic has become emblematic of what many perceive as higher education's failure to deliver on its promises. Yet the seeming precision of such figures belies a fundamental methodological uncertainty: how we measure underemployment dramatically shapes our understanding of its prevalence and severity. Estimates vary widely across studies—from 25 percent to 52 percent depending on definitions, populations, and measurement approaches (Rose, 2017; Federal Reserve Bank of New York, 2025; Burning Glass Institute & Strada Institute for the Future of Work, 2024). This variation is not merely technical; it reflects unresolved conceptual questions about what constitutes appropriate employment for college graduates.

The stakes of these measurement decisions extend beyond academic debate. In 2025, recent college graduates confronted unemployment rates of 5.8 percent—the highest level since 2013 excluding the pandemic spike (Federal Reserve Bank of New York, 2025). Broader economic headwinds, including slowing hiring and artificial intelligence's disruptive effects on entry-level white-collar positions, compound these challenges (Ellis et al., 2025; Thompson, 2025). In this deteriorating labor market context, oversimplified underemployment statistics risk amplifying skepticism about higher education credentials precisely when clear-eyed assessment is most needed.

The Critical Measurement Question

Most widely cited underemployment estimates rely substantially on the Bureau of Labor Statistics' (BLS) "typical education needed for entry" occupational classifications (Burning Glass Institute & Strada Institute for the Future of Work, 2024; Vedder et al., 2013). These assignments categorize occupations by minimum education levels typically required for entry-level positions. While providing a seemingly straightforward measurement framework, this approach presents several limitations that warrant examination.

First, entry-level requirements do not capture educational diversity within occupations. Twenty-seven percent of occupations the BLS classifies as requiring only high school credentials actually employ more workers with bachelor's degrees than workers with high school diplomas (Strohl et al., 2026, analysis of U.S. Census Bureau data). Some of these graduates may indeed be underemployed; others may occupy specialized, senior, or supervisory roles requiring higher education despite the occupation's entry-level classification.

Second, bachelor's degree holders consistently earn substantial premiums over less-educated workers even in occupations classified as requiring less than a bachelor's degree. Workers with bachelor's degrees in high school-level occupations earn 38 percent more at the median than high school graduates in those same occupations (Strohl et al., 2026). This earnings advantage suggests employers recognize and compensate the enhanced productivity or capabilities bachelor's degree holders contribute—calling into question whether all such workers should be classified as underemployed.

This article examines underemployment through multiple methodological lenses to illuminate how measurement choices shape our understanding. The analysis reveals that accounting for educational distributions within occupations and earnings premiums substantially reduces estimated underemployment rates. Among full-time, full-year workers ages 22–23, underemployment falls from 43 percent using the BLS-based approach alone to 25 percent when incorporating earnings premium considerations (Strohl et al., 2026). These findings do not diminish legitimate concerns about skills underutilization or difficult graduate labor market transitions. Rather, they suggest the problem's scope may be more moderate than headline statistics indicate—and that policy responses should account for labor market complexities rather than treating underemployment as a simple binary status.

The Graduate Underemployment Landscape

Defining Underemployment in the College Graduate Context

Underemployment represents a multidimensional concept encompassing situations where workers possess more education, skills, or capabilities than their positions require (Capsada-Munsech, 2019). For college graduates specifically, researchers typically focus on vertical mismatch—the gap between workers' educational credentials and their occupations' educational requirements. This differs from horizontal mismatch (field-of-study misalignment) and from broader underemployment measures tracking involuntary part-time work or marginal labor force attachment (U.S. Bureau of Labor Statistics, 2025).

Education-based underemployment measurement faces an inherent challenge: unlike unemployment (a relatively objective state), underemployment involves normative judgments about "appropriate" education levels for specific work. The field has developed several measurement approaches, each with distinct assumptions and implications:

Job analysis approaches rely on expert or worker assessments of educational requirements. The BLS typical entry-level education assignments exemplify this method, using economist judgments informed by American Community Survey data, O*NET occupational information, and stakeholder input (U.S. Bureau of Labor Statistics, 2025). These assignments provide standardized classifications but may not reflect actual hiring practices or capture within-occupation variation.

Realized matches approaches classify occupations based on incumbents' actual educational attainment rather than expert judgments (Attewell & Witteveen, 2023; Rose, 2017). If bachelor's degree holders constitute a majority or plurality of workers in an occupation, the occupation is treated as requiring a bachelor's degree regardless of official classifications. This method more directly reflects employer revealed preferences but may conflate credential inflation with genuine skill requirements.

Earnings-based approaches use wage patterns to infer whether workers' education generates commensurate returns (Rose, 2017). If bachelor's degree holders earn substantially more than less-educated workers in the same occupation, the earnings premium suggests their credentials contribute productive value—even in occupations not formally requiring bachelor's degrees.

Each approach illuminates different facets of the underemployment phenomenon while incorporating distinct limitations and assumptions. The methodological choice fundamentally shapes resulting estimates and policy implications.

Prevalence, Drivers, and Distribution

Current estimates place underemployment among bachelor's degree holders between 25 and 52 percent depending on measurement approach and population studied (Rose, 2017; Burning Glass Institute & Strada Institute for the Future of Work, 2024; Strohl et al., 2026). The Federal Reserve Bank of New York—using a methodology classifying occupations as requiring bachelor's degrees if 50 percent of O*NET survey workers report them as such—estimates underemployment at 42 percent for recent graduates (ages 22–27) and 34 percent for all working-age college graduates in 2025 (Federal Reserve Bank of New York, 2025).

These figures represent increases from historical norms. Underemployment among college graduates rose substantially following the 2008 financial crisis and never fully returned to pre-recession levels (Abel & Dietz, 2018; Fogg & Harrington, 2011). Several interconnected factors drive graduate underemployment:

Business cycle effects: Underemployment rises sharply during recessions as college graduates compete for positions with lower skill requirements, a phenomenon researchers term "filtering down" (Barnichon & Zylberberg, 2019; Clemens, 2015). The current cooling labor market—with unemployment ticking upward and hiring slowing—creates conditions favorable to increased underemployment (Karma, 2025; U.S. Bureau of Labor Statistics, 2025).

Degree production-demand misalignment: College enrollment often lags behind business cycles, creating temporary oversupply when enrollment surges respond to past economic conditions (Freeman, 1975). This dynamic contributes to higher underemployment rates in fields where degree production has expanded rapidly relative to occupational demand growth.

Credential inflation and upskilling: Many occupations have experienced rising educational requirements over recent decades, reflecting genuine skill demands, technological change, and employers' use of credentials as screening devices (Carnevale et al., 2010). The BLS acknowledges that entry-level education assignments may not capture these evolving requirements: "because of changing entry requirements, individuals entering an occupation may need a higher level of formal education than for those persons who are already working in it" (U.S. Bureau of Labor Statistics, 2025).

Early-career job search and matching: Recent graduates typically experience higher underemployment than workers with more experience, reflecting time-intensive job matching processes in the U.S. labor market (Carnevale et al., 2013). On average, workers change jobs 12.7 times across their careers, with college graduates experiencing higher wage growth rates once settled into career-track positions (U.S. Bureau of Labor Statistics, 2023; Deming, 2023). The bachelor's degree wage premium doubles from 27 percent at age 25 to 60 percent at age 55 (Deming, 2023).

Underemployment varies substantially across demographic groups and fields of study. Women with bachelor's degrees experience higher underemployment rates than men, compounded by gender wage gaps that persist even among appropriately matched workers (Carnevale et al., 2018). Graduates in liberal arts, humanities, and general studies fields face elevated underemployment risk compared to those in professional and technical fields like engineering, nursing, and computer science (Burning Glass Institute & Strada Institute for the Future of Work, 2024). Geographic variation also matters, with graduates in regions experiencing economic decline or lacking robust professional labor markets facing diminished opportunities for degree-appropriate employment.

Organizational and Individual Consequences of Graduate Underemployment

Organizational Performance Impacts

From the organizational perspective, graduate underemployment presents a double-edged phenomenon. On one hand, firms employing overqualified workers may benefit from enhanced productivity, problem-solving capabilities, and adaptability that college education develops (Deming, 2017). The substantial earnings premiums bachelor's degree holders command even in high school-level occupations—38 percent at the median—suggest employers recognize and compensate these contributions (Strohl et al., 2026).

However, persistent underemployment creates organizational challenges. Overqualified workers often exhibit lower job satisfaction, reduced organizational commitment, and higher turnover intentions (Attewell & Witteveen, 2023). When employees perceive their capabilities exceed position requirements, disengagement and turnover risks rise—imposing recruitment, training, and productivity costs on employers. A 2025 World Economic Forum analysis projected significant workforce disruption from skills mismatches, estimating that 23 percent of jobs would change through growth and decline by 2030 (World Economic Forum, 2025).

Organizations facing talent with credentials exceeding formal position requirements may also experience heightened pressure to restructure roles, expand responsibilities, or accelerate advancement opportunities to retain valuable workers—changes that can be positive but require intentional workforce planning and development investments.

Individual Wellbeing and Career Consequences

For individual workers, underemployment carries more uniformly negative consequences. Underemployed college graduates earn substantially less than appropriately matched peers. Attewell and Witteveen (2023) found that underemployed college graduates earned approximately 30 percent less than those in positions requiring bachelor's degrees, even after controlling for demographic characteristics and field of study. This earnings penalty compounds over time as initial position placements shape career trajectories and lifetime earnings potential.

Beyond immediate financial impacts, underemployment affects psychological wellbeing, career satisfaction, and skill development. Workers in positions beneath their credential levels report lower job satisfaction, diminished sense of accomplishment, and higher rates of workplace stress and frustration (Fogg & Harrington, 2011). The psychological contract violation—the gap between education's promised returns and actual outcomes—erodes workers' sense of agency and optimism about career prospects.

Perhaps most concerning, early-career underemployment can generate lasting scarring effects. Arellano-Bover (2022) demonstrated that entering the labor market during adverse conditions affects workers' long-term skill development trajectories. Underemployed workers may face diminished opportunities to develop and deploy college-level capabilities, creating a self-reinforcing cycle where credential underutilization perpetuates itself through lost skill-building opportunities.

Recent graduates navigating the challenging 2025 labor market—with unemployment at 5.8 percent, highest since 2013—face particular vulnerability to these dynamics (Federal Reserve Bank of New York, 2025). The confluence of economic headwinds, technological disruption through AI, and reduced entry-level white-collar hiring creates conditions where many graduates may accept positions beneath their qualifications simply to gain employment (Ellis & Bindley, 2025; Eckhardt & Goldschlag, 2025).

Student debt burdens amplify underemployment's financial consequences. Graduates carrying substantial debt who secure positions with earnings insufficient to comfortably service loans face compounding financial stress. The divergence between education's costs and underemployed positions' compensation undermines the economic rationale for degree investment—though notably, even underemployed college graduates typically out-earn workers with only high school diplomas (Strohl et al., 2026).

Evidence-Based Organizational Responses

Table 1: Methodologies and Perspectives on Graduate Underemployment

Measurement Approach	Description of Methodology	Estimated Underemployment Rate (%)	Key Assumptions or Indicators	Identified Limitations	Economic or Organizational Impact
Job Analysis Approach (BLS-based)	Relies on Bureau of Labor Statistics' (BLS) "typical education needed for entry" occupational classifications determined by expert judgments.	43% to 52%	Uses economist judgments, O*NET information, and stakeholder input to categorize occupations by minimum entry-level education.	Does not capture educational diversity within occupations, upskilling trends, or senior/specialized roles within an entry-level category.	High estimates may distort policy responses and fuel skepticism about the value of a bachelor's degree.
Realized Matches Approach	Classifies occupations based on the actual educational attainment of current incumbents.	34% to 42%	If a majority or plurality of workers in an occupation have degrees, the job is treated as requiring a degree; reflects employer revealed preferences.	May conflate credential inflation (employers requiring degrees because of labor supply) with genuine skill requirements.	Offers a more direct reflection of market demand but risks legitimizing unnecessary degree requirements.
Earnings-Based / Earnings Premium Adjustments	Uses wage patterns to infer if a degree generates commensurate returns compared to less-educated workers in the same job.	25%	Degree holders earn 38% more than high school graduates in the same roles; premium indicates enhanced productivity and capability.	Does not account for psychological underemployment or subjective feelings of skill underutilization despite higher pay.	Shows bachelor's degrees retain value even in "low-skill" roles; reduces underemployment estimates significantly.

Transparent Educational Requirements Communication

Organizations can reduce credential mismatch by clearly communicating authentic educational requirements in job postings and recruitment materials. The trend toward degree inflation—requiring bachelor's degrees for positions that previously did not—has contributed to perceived underemployment by restricting opportunities for workers with alternative credentials while potentially signaling higher requirements than positions actually demand (Burning Glass Institute & Strada Institute for the Future of Work, 2024).

Skills-based hiring approaches represent one promising alternative. Rather than defaulting to degree requirements, organizations can identify specific competencies positions require and assess candidates accordingly. Several major employers have moved in this direction:

IBM eliminated bachelor's degree requirements for approximately 50 percent of U.S. job openings, implementing skills-based assessments and emphasizing alternative credentials including apprenticeships and bootcamp certifications.
Accenture developed an apprenticeship program providing structured pathways into professional services roles without bachelor's degree requirements, with participants earning while learning and accessing clear advancement opportunities.
Penguin Random House removed degree requirements from U.S. job postings in 2021, recognizing that requiring credentials beyond position needs created barriers for talented candidates from diverse backgrounds.

Evidence suggests skills-based hiring can improve workforce diversity while maintaining or enhancing performance outcomes. However, implementing such approaches requires substantial investment in assessment tool development, interviewer training, and position requirement analysis—resources many organizations, particularly smaller firms, may struggle to marshal.

Purposeful Job Design and Role Structuring

Organizations employing workers whose credentials exceed formal position requirements can mitigate underemployment's negative effects through intentional job design. Rather than treating bachelor's degree holders in high school-level occupations as simply overqualified, forward-thinking employers restructure roles to capitalize on workers' capabilities.

Job enrichment strategies expand position responsibilities, autonomy, and challenge levels to better align with workers' competencies. This might involve:

Incorporating analytical or strategic components into operational roles
Delegating decision-making authority appropriate to workers' judgment capabilities
Creating hybrid positions that combine routine tasks with higher-level projects

Advance Automotive, a specialty vehicle parts retailer, redesigned store management positions to incorporate data analytics, market trend analysis, and strategic planning components—leveraging college graduates' analytical capabilities while maintaining operational responsibilities. This restructuring reduced turnover while improving store performance metrics.

Starbucks has developed pathways allowing baristas with bachelor's degrees to transition into corporate roles in marketing, operations, and supply chain management—treating retail positions as developmental experiences rather than career endpoints for credentialed workers.

Capability Development and Internal Mobility Systems

Organizations can transform underemployment from a liability into a talent development opportunity through robust internal mobility systems. Rather than viewing credential-position mismatches as permanent, employers can create structured pathways enabling workers to progress toward positions matching their qualifications.

Comprehensive development programs should include:

Mentorship structures connecting underemployed college graduates with senior professionals in target career paths
Cross-functional rotation programs exposing workers to diverse organizational functions and building networks
Tuition support or credential programs helping workers obtain specialized certifications or credentials
Transparent advancement criteria clarifying requirements for career progression

AT&T implemented a substantial workforce reskilling initiative recognizing that many employees—including college graduates in technical support roles—possessed foundational capabilities for higher-level positions but lacked specific skills. Through partnerships with Udacity and other providers, AT&T offered nanodegree programs, clear advancement frameworks, and financial support—enabling internal mobility while addressing skills gaps.

Kaiser Permanente developed career laddering programs in healthcare support occupations, creating explicit pathways from entry-level positions into nursing, medical technology, and administrative roles. College graduates in patient care support positions can access structured education support, reduced tuition at partner institutions, and guaranteed position consideration upon credential completion.

Compensation Equity and Recognition Systems

The substantial earnings premiums bachelor's degree holders command even in high school-level occupations suggest many employers already recognize credential value through compensation (Strohl et al., 2026). However, inconsistent application of this principle creates equity concerns and retention risks.

Compensation systems should:

Transparently link education and experience to pay structures where credentials genuinely enhance performance
Regularly audit compensation equity to identify disparities requiring correction
Communicate clearly how education influences compensation decisions
Avoid credential-based pay where education does not demonstrably affect performance

Costco maintains explicit education-based pay differentials for management positions while ensuring transparency about how credentials influence compensation. Associates understand that bachelor's degrees create eligibility for certain advancement opportunities and pay scales—avoiding hidden disparities while maintaining meritocratic principles.

Progressive Insurance conducted comprehensive compensation audits revealing that college graduates in claims processing roles—classified as not requiring degrees—earned variable premiums depending on hiring manager and location. Standardizing compensation for comparable roles while creating clear pathways toward positions requiring degrees reduced perceived inequity while improving retention.

Holistic Recruitment and Onboarding Practices

Organizations can reduce underemployment's negative consequences through recruitment and onboarding practices that set realistic expectations and identify mutual-fit candidates.

Enhanced recruitment approaches include:

Realistic job previews providing candid assessments of position content, growth opportunities, and timelines
Career trajectory mapping helping candidates understand how entry-level positions connect to career progression
Values and culture emphasis attracting candidates aligned with organizational mission beyond position level
Transparent advancement examples showcasing employees who started in entry-level roles

Teach For America explicitly positions its two-year teaching commitment as a leadership development experience rather than a permanent career path—attracting college graduates who view underemployment relative to long-term potential as acceptable given mission alignment and developmental opportunities.

Enterprise Rent-A-Car has long recruited college graduates for management trainee positions that begin with operational tasks including car washing and customer service. Success stems from transparent communication about position realities, clear advancement timelines (typically 8–12 months to management), and compelling narrative about developing leadership through operational excellence.

Building Long-Term Graduate Career Success Capabilities

Institutional Educational Quality and Labor Market Alignment

While organizational responses to graduate underemployment matter, higher education institutions bear primary responsibility for ensuring graduates develop capabilities employers value and understand labor market realities. Several institutional capabilities support better graduate outcomes:

Enhanced career services and labor market intelligence help students make informed decisions about major selection, career preparation, and job search strategies. Too many institutions provide inadequate career support relative to enrollment scale, resulting in students navigating complex labor market transitions with insufficient guidance (Burning Glass Institute & Strada Institute for the Future of Work, 2024).

Leading institutions are developing:

Embedded career coaching integrated throughout the academic experience rather than concentrated in senior year
Alumni mentorship networks connecting current students with graduates in target fields
Labor market outcome transparency providing field-specific employment and earnings data
Employer partnership programs creating internship pipelines and recruitment relationships

Northeastern University pioneered cooperative education models integrating substantial paid work experience into undergraduate education. Students graduate with relevant experience, professional networks, and clearer understanding of career options—substantially reducing underemployment risk.

Western Governor's University aligns competency-based programs explicitly with employer needs in target fields, regularly consulting business partners to ensure curriculum relevance and incorporating industry-recognized certifications into degree programs.

Curriculum modernization and applied learning helps graduates develop capabilities employers seek. Beyond disciplinary knowledge, employers consistently emphasize communication, collaboration, problem-solving, and adaptability—capabilities best developed through active, applied learning experiences rather than passive content consumption (Deming, 2017).

Effective approaches include:

Capstone experiences requiring students to apply learning to authentic problems
Project-based learning throughout the curriculum emphasizing collaboration and communication
Writing across the curriculum developing professional communication capabilities
Quantitative reasoning requirements ensuring all graduates develop analytical and data literacy
Interdisciplinary experiences building boundary-spanning perspective

Olin College of Engineering structures the entire curriculum around project-based learning with authentic engineering challenges, developing not only technical capabilities but also collaboration, communication, and professional skills employers value.

Arizona State University's partnership with Starbucks provides employees tuition-free bachelor's degree access through online programs designed for working adults. Curriculum incorporates applied projects often focused on workplace challenges—directly connecting learning to employment context.

Field-Specific Guidance and Major Selection Support

Underemployment varies substantially by field of study, with graduates in liberal arts, general studies, and some social sciences experiencing elevated risk (Burning Glass Institute & Strada Institute for the Future of Work, 2024). This variation does not suggest eliminating broad fields; rather, institutions should provide students considering such majors with realistic labor market information and guidance on complementary capabilities and credentials that enhance employability.

Effective major advising should:

Provide transparent outcome data on employment rates, occupational distributions, and earnings by field
Identify complementary skills that enhance specific majors' labor market value (e.g., data analytics for social sciences, digital communication for humanities)
Encourage strategic credentialing through certificates, minors, or co-majors addressing employers' needs
Connect students with alumni in various career paths to understand diverse options

Rather than discouraging students from pursuing passion fields with challenging employment landscapes, effective advising empowers informed choices. A student passionate about history who understands employment realities might strategically combine the major with business, data science, or education coursework—developing distinctive capability combinations employers value.

Georgia State University implemented predictive analytics to identify students in majors misaligned with their demonstrated capabilities or showing progress struggles. Proactive advising conversations help students make informed decisions about continuing, switching majors, or developing complementary credentials—improving completion rates and employment outcomes.

Graduate-Employer Matching Infrastructure and Transition Support

The months following graduation represent a critical transition period where new bachelor's degree holders navigate labor market entry. Institutions can support this transition through:

Extended career services access beyond graduation, recognizing that many graduates continue job searches after commencement. Alumni should retain access to career coaching, job boards, and employer networking events during the crucial 6–12 months post-graduation.

Job search skill development integrated into the curriculum ensures graduates understand application processes, interviewing techniques, salary negotiation, and professional networking—capabilities often assumed but inconsistently developed.

Micro-internship and project-based experience platforms like Parker Dewey connect students and recent graduates with short-term, paid projects from employers—building experience, networks, and often converting to full-time opportunities.

Alumni networking platforms and mentorship programs leverage institutional social capital by connecting graduates with alumni willing to provide informational interviews, referrals, and career guidance.

University of Chicago's Career Advancement program provides lifelong career support for all graduates, recognizing that careers span decades and alumni face repeated transitions requiring institutional support beyond initial placement.

Transparent Outcome Reporting and Accountability

Institutional accountability for graduate outcomes—including underemployment—can drive performance improvements. However, effective accountability requires nuanced metrics rather than simplistic placement rates that may incentivize gaming.

Meaningful outcome metrics should:

Distinguish underemployment from unemployment while tracking both
Account for field-specific norms rather than applying universal standards
Track long-term trajectories beyond initial placement, recognizing career development occurs over years
Disaggregate by student demographics to identify equity gaps
Include earnings outcomes alongside employment rates

The College Scorecard and similar transparency initiatives have improved public access to institutional outcome data. However, much outcome reporting focuses on employment rates without distinguishing quality or alignment—potentially obscuring underemployment issues.

Regulatory frameworks like gainful employment rules for career-focused programs represent attempts to ensure education yields sufficient economic returns. Extending accountability principles across all programs—while respecting legitimate variation in field-specific outcomes—could incentivize institutional attention to graduate career success.

Holistic Student Development and Non-Cognitive Capability Building

Evidence increasingly demonstrates that labor market success depends substantially on non-cognitive capabilities including persistence, collaboration, communication, and adaptability (Deming, 2017). These capabilities both reduce underemployment risk (by making graduates more attractive candidates) and mitigate its negative effects (by supporting career transitions and skill development).

Institutions should intentionally develop these capabilities through:

High-expectation learning environments building persistence and resilience
Collaborative learning experiences developing teamwork and interpersonal effectiveness
Feedback-rich curricula helping students accept criticism and improve performance
Leadership opportunities in campus organizations, athletics, and community engagement
Reflection practices building metacognitive awareness and self-understanding

While often dismissed as "soft skills," these capabilities fundamentally shape career trajectories and labor market value. The college experience should develop whole persons prepared not just with disciplinary knowledge but with adaptive capabilities supporting lifelong career success.

Minerva University structures its entire model around developing practical wisdom and cognitive tools applicable across contexts—explicitly prioritizing transferable capabilities over narrow specialization. Graduates demonstrate strong employment outcomes despite the institution's newness, suggesting the capability-focused model's value.

Conclusion

Graduate underemployment represents a genuine concern warranting attention from policymakers, institutions, employers, and students. The human capital underutilization it reflects carries costs for individuals (diminished earnings and career satisfaction), organizations (turnover and disengagement), and society (reduced productivity and innovation). In the challenging 2025 labor market—with recent graduate unemployment reaching 5.8 percent and broader economic headwinds slowing hiring—concerns about credential-job mismatch understandably intensify.

However, the conversation about graduate underemployment suffers from oversimplification. Widely cited statistics suggesting more than half of recent graduates work in jobs not requiring degrees rely on methodological approaches that overlook critical labor market complexities. Entry-level education requirements do not capture educational diversity within occupations, upskilling dynamics, or the substantial earnings premiums bachelor's degree holders command even in occupations formally requiring less education.

When accounting for these factors through realized matches and earnings premium adjustments, underemployment estimates fall substantially—from 43 percent to 25 percent among recent graduates working full-time, full-year (Strohl et al., 2026). This more modest estimate does not dismiss legitimate concerns but suggests the problem's scope may be less severe than headline figures indicate.

Several key insights emerge from this more nuanced analysis:

Measurement methodology fundamentally shapes understanding. The wide range of underemployment estimates across studies—from 25 percent to 52 percent—reflects methodological choices, not just population or temporal differences. Policymakers and researchers should recognize that underemployment is not a simple, objective state but rather a constructed concept requiring interpretive judgment.

Bachelor's degrees retain substantial labor market value. Even workers with degrees in high school-level occupations earn 38 percent more than high school graduates in those occupations (Strohl et al., 2026). This premium suggests employers recognize and compensate the productive capabilities college education develops—complicating narratives about pervasive credentialing failure.

Labor markets exhibit educational diversity. Twenty-seven percent of high school-level occupations actually employ more bachelor's degree holders than high school graduates (Strohl et al., 2026). While some of these workers are underemployed, others likely occupy specialized or senior positions within occupationally diverse job families—suggesting the binary classification of occupations as "requiring" specific credentials oversimplifies reality.

Early-career outcomes differ from long-term trajectories. Underemployment is highest among recent graduates and declines with experience, reflecting normal job-matching processes and career development (Burning Glass Institute & Strada Institute for the Future of Work, 2024; Federal Reserve Bank of New York, 2025). The bachelor's degree earnings premium doubles from age 25 to age 55, indicating that credential value accumulates over careers (Deming, 2023).

These findings do not counsel complacency. Even at more moderate estimates, roughly one-quarter of recent college graduates experience underemployment—representing nearly one million individuals annually facing diminished returns on education investments. For affected individuals, statistical debates about methodology matter little; the lived experience of credential underutilization and unmet expectations creates legitimate frustration and disillusionment.

Rather than oversimplifying either the problem or higher education's value, stakeholders should pursue several priorities:

Develop methodological consensus on underemployment measurement. The research community needs sustained dialogue establishing standards for defining and measuring credential-job mismatch. Current methodological fragmentation undermines policy deliberation by generating contradictory estimates.

Improve institutional outcome transparency while respecting measurement complexity. Colleges and universities should provide clear, accessible information on graduate employment outcomes—including underemployment measures—disaggregated by field, with sufficient context enabling informed interpretation.

Strengthen career preparation and labor market guidance integrated throughout undergraduate education. Too many students navigate major selection and career preparation with insufficient information and support. Embedded career services, employer partnerships, and applied learning experiences should be universal rather than concentrated at elite institutions.

Reduce credential inflation through skills-based hiring where appropriate. Employers should thoughtfully assess which positions genuinely benefit from bachelor's degree holders' capabilities versus those where degree requirements create barriers without enhancing performance.

Support graduate career transitions through the challenging early-career period. Institutions, policymakers, and employers should collaborate on bridging programs, micro-internships, and transition support helping recent graduates navigate initial labor market entry.

The current discourse too often treats underemployment as simple evidence of higher education failure—justifying skepticism about bachelor's degree value. This oversimplification obscures a more complex reality where substantial labor market returns coexist with genuine credential-job mismatches for a meaningful minority of graduates. Meeting this challenge requires moving beyond misleading headlines toward nuanced understanding and multifaceted responses addressing root causes rather than symptoms.

In an era of rising credential skepticism and deteriorating graduate labor market conditions, the imperative for clear-eyed analysis is especially acute. Oversimplified underemployment statistics risk amplifying doubt about higher education precisely when evidence-based assessment is most needed. Bachelor's degrees remain the most reliable pathway to economic security and career opportunity for most Americans—even as specific individuals face challenging transitions and the system requires continuous improvement. Acknowledging both the genuine value of college credentials and the legitimate challenges some graduates face represents the foundation for productive policy dialogue and institutional improvement.

Research Infographic

Reframing Graduate Underemployment Slide Deck

References

Abel, J. R., & Dietz, R. (2018). Underemployment in the early career of college graduates following the Great Recession. In C. R. Hulten & V. A. Ramey (Eds.), Education, skills, and technical change: Implications for future US GDP growth (pp. 149–181). National Bureau of Economic Research.
Abel, J. R., Deitz, R., & Su, Y. (2014). Are recent college graduates finding good jobs? Current Issues in Economics and Finance, 20(1).
Arellano-Bover, J. (2022). The effect of labor market conditions at entry on workers' long-term skills. Review of Economics and Statistics, 104(5), 1028–1045.
Attewell, P., & Witteveen, D. (2023). Occupational marginalization, underemployment, and earnings inequality among college graduates. Research in Social Stratification and Mobility, 83.
Barnichon, R., & Zylberberg, Y. (2019). Under-employment and the trickle-down of unemployment. American Economic Journal: Macroeconomics, 11(2), 40–78.
Berman, J. (2025, October 25). There's a war on the bachelor's degree. Can anything replace it? Marketwatch.
Burning Glass Institute & Strada Institute for the Future of Work. (2024). Talent disrupted: College graduates, underemployment, and the way forward.
Capsada-Munsech, Q. (2019). Measuring overeducation: Incidence, correlation and overlaps across indicators and countries. Social Indicators Research, 145(1), 279–301.
Carnevale, A. P., Cheah, B., & Gulish, A. (2013). The summer surge in college unemployment: Why it happens and what you can do about it. Georgetown University Center on Education and the Workforce.
Carnevale, A. P., Smith, N., & Gulish, A. (2018). Women can't win: Despite making educational gains and pursuing high-wage majors, women still earn less than men. Georgetown University Center on Education and the Workforce.
Carnevale, A. P., Smith, N., & Strohl, J. (2010). Help wanted: Projections of jobs and education requirements through 2018. Georgetown University Center on Education and the Workforce.
Clemens, A. (2015, September 4). Why college-educated workers are taking low-paid jobs. World Economic Forum.
Deming, D. J. (2017). The growing importance of social skills in the labor market. Quarterly Journal of Economics, 132(4), 1593–1640.
Deming, D. J. (2023). Why do wages grow faster for educated workers? NBER Working Paper 31373. National Bureau of Economic Research.
Eckhardt, S., & Goldschlag, N. (2025, August 10). AI and jobs: The final word (until the next one). Economic Innovation Group.
Ellis, L., & Bindley, K. (2025, July 29). AI is wrecking an already fragile job market for college graduates. Wall Street Journal.
Ellis, L., Tucker-Smith, O., & Pohle, A. (2025, October 28). Tens of thousands of white-collar jobs are disappearing as AI starts to bite. Wall Street Journal.
Federal Reserve Bank of New York. (2025, December). The labor market for recent college graduates.
Fogg, N. P., & Harrington, P. E. (2011). Rising mal-employment and the Great Recession: The growing disconnection between recent college graduates and the college labor market. Continuing Higher Education Review, 75, 51–65.
Freeman, R. B. (1975). Overinvestment in college training? Journal of Human Resources, 10(3), 287–311.
Karma, R. (2025, February 26). The job market is frozen. Atlantic.
Rose, S. J. (2017). Mismatch: How many workers with a bachelor's degree are overqualified for their jobs? Urban Institute.
Strohl, J., Morris, C., Gulish, A., & Martinez, M. (2026). Rethinking underemployment: Are college graduates using their degrees? Georgetown University Center on Education and the Workforce.
Thompson, D. (2025, April 30). Something alarming is happening to the job market. Atlantic.
U.S. Bureau of Labor Statistics. (2023, August 22). Number of jobs, labor market experience, marital status, and health for those born 1957–1964. Economic News Release.
U.S. Bureau of Labor Statistics. (2025, December). Civilian unemployment rate.
U.S. Bureau of Labor Statistics. (2025, December). Measures of education and training.
Vedder, R., Denhart, C., & Robe, J. (2013). Why are recent college graduates underemployed? University enrollments and labor-market realities. Center for College Affordability and Productivity.
World Economic Forum. (2025, January). Future of jobs report: 2025.

Jonathan H. Westover, PhD is Chief Research Officer (Nexus Institute for Work and AI); Associate Dean and Director of HR Academic Programs (WGU); Professor, Organizational Leadership (UVU); OD/HR/Leadership Consultant (Human Capital Innovations). Read Jonathan Westover's executive profile here.

Suggested Citation: Westover, J. H. (2026). Rethinking Graduate Underemployment: Beyond the Headlines to Nuanced Understanding. Human Capital Leadership Review, 27(4). doi.org/10.70175/hclreview.2020.27.4.3