BREAKINGVIEWS-Graduate job cull spells doom for college degrees

By Aimee Donnellan

DUBLIN, Dec 23 (Reuters Breakingviews) - For decades, higher education has seemed like a no-brainer for many teenagers. Gaining a college or university degree has long been a prerequisite for entering higher-paying professions, meaning that aspiring white-collar workers have little choice but to enroll and stomach the spiralling tuition costs.

That equation, however, is changing. As artificial intelligence spreads across law firms, banks, consultancies, media groups and technology companies, the number of graduate positions may decline. One recent study found that employment levels for U.S. software developers aged 22 to 25 declined by nearly 20% between late 2022 and mid-2025. This dynamic will proliferate in 2026, prompting many would-be freshmen to think again.

Universities date back centuries, but the college degree really came of age after World War Two. In the 1940s, fewer than 20% of Americans had one. By 2022, that proportion had reached nearly 40%. Underpinning that trend was a financial benefit linked to the rise of white-collar services work in the West. Specifically, graduates find it easier to get well-paid desk jobs.

In the second quarter of 2025, for example, salaried employees over the age of 25 with at least a bachelor’s degree earned $1,732 per week, compared with $960 for Americans with a high-school diploma and nothing more. This 80% wage premium, currently equivalent to about $40,000 of additional income a year, has been fairly consistent since 2000, based on data from the U.S. Bureau of Labor Statistics. It’s at the very heart of the implicit contract between students and colleges. Why else would undergraduates in the United States swallow the all-in $500,000 cost of a four-year degree? That estimate comes from the Education Data Initiative and includes everything: tuition, living expenses, loan interest and forgone wages.

The big challenge now comes from AI, which threatens to remove many of the graduate jobs that could justify enrolling in the first place. The most extreme version of this view comes from Dario Amodei, the founder of Claude model developer Anthropic. He said in mid-2025 that AI could wipe out half of all entry-level white-collar jobs within five years and lead to 10% to 20% unemployment rates. Even if that’s hyperbolic, it’s hard to deny that chatbots and virtual agents can do many of the tasks usually assigned to juniors in the financial, professional and IT service sectors.

Microsoft MSFT.O boss Satya Nadella has said that 20% to 30% of the company’s code is now written by AI. June 2025 data from job portal Indeed shows that advertised UK graduate roles fell 12% year-on-year, and sat at their lowest level relative to wider postings since 2018. In the United States, numbers crunched by the Federal Reserve Bank of New York show that monthly unemployment rates among recent college graduates averaged 5.3% in the first half of 2025, compared with 4% for all workers. Historically, those figures have been the other way around, with holders of fresh degrees finding it easier to get work than the rest.

With fewer entry-level roles available, it follows that graduate salaries should fall. A King’s College London study from October found some warning signs. Researchers analysed millions of job postings and LinkedIn profiles between 2021 and 2025, and found that OpenAI’s ChatGPT release in late 2022 marked a turning point. Roles that were highly exposed to AI disruption – like software engineers, data analysts and marketers – witnessed a 23% decline in job postings and 6% compression in advertised wages. The overall results were most concentrated among entry-level jobs.

Facing such grim prospects, the question for high schoolers right now is whether the financial tradeoff of going to college will still make sense when they graduate in four years. The risk is that the bachelor’s degree wage premium shrinks, potentially reaching a point where enrolling is simply not worth the cost. It doesn’t help the mood music that companies like IT consultancy Accenture ACN.N have recently announced thousands of layoffs, including for workers that might struggle to adapt to AI.

Universities can see the writing on the wall, with many now trying to expand into courses related to careers that are more AI-proof. Healthcare has emerged as one of the more resilient professions since nurses, physical therapists and midwives cannot be replaced by large language models. Still, there is a limit to how much universities can pivot away from their heritage in offering a scientific and liberal-arts education.

Some will fail. Since 2000, over 30 British universities have either opened or switched from being a more vocational school, known as a polytechnic. As a result, the sector now looks oversupplied. One in five British universities are exploring mergers to survive, Times Higher Education reported in July. American colleges, meanwhile, are already suffering from slower enrollment rates, which fell 15% between 2010 and 2021 according to the National Center for Education Statistics. Ratings agency S&P Global has noted that U.S. higher-education institutions have struggled in recent years to raise tuition fees fast enough to keep pace with their own cost inflation.

The other big question is what campus deserters will do instead. The military is one option. Last year, the U.S. boosted recruitment in its armed forces by nearly 13%. Meanwhile, defence companies like Thales TCFP.PA and Leonardo LDOF.MI are planning to recruit tens of thousands of new employees in the coming years. Blue-collar workers like carpenters, electricians, welders and plumbers are also in chronically short supply, pushing up salaries. McKinsey wrote in 2024 that wages for skilled tradespeople had risen 20% since 2020.

Companies in other sectors are trying to lure younger workers too. Nissan Motor 7201.T, Amazon.com AMZN.O, Siemens SIEGn.DE, AstraZeneca AZN.L and Pfizer PFE.N are expanding their apprenticeship schemes. They are attempting to convince recruits that it’s possible to start a lucrative career faster and with no student debt. If the recent graduate employment trends continue, young people might not need much convincing.

Follow Aimee Donnellan on LinkedIn.

This is a Reuters Breakingviews prediction for 2026.