Summary
As recent college graduates face a bumpy landing in the job market, concerns about underemployment—a phenomenon in which workers possess more education or skills than their jobs require—are growing. Published estimates of underemployment among those with bachelor’s degrees range from 25 percent to 52 percent, highlighting just how difficult it is for researchers and policymakers to gauge the scope of the problem. While underemployment among college graduates is concerning, how pervasive is it?
Rethinking Underemployment: Are College Graduates Using Their Degrees? sheds light on the difficulty of measuring underemployment and underscores the need for a common approach. The report examines three methodological approaches to measuring underemployment and considers how educational diversity within occupations and the bachelor’s degree earnings premium affect estimates.
How Underemployment Is Typically Measured
Commonly cited underemployment analyses rely on the “typical education needed for entry” occupational assignments produced by the US Bureau of Labor Statistics (BLS). Researchers often use these assignments to classify workers employed in occupations that require less education for entry than they possess as underemployed. This approach yields an underemployment rate of 37 percent for full-time, full-year prime-age workers (ages 25–54) with bachelor’s degrees. While a useful reference point, estimates based solely on BLS entry-level education assignments can be misleadingly high, as they don’t reflect actual hiring patterns and employer preferences in the labor market. For example, 21 percent of workers in occupations categorized as high school or less for entry by the BLS hold a bachelor’s degree or higher.
Source: Georgetown University Center on Education and the Workforce analysis of data from the US Census Bureau, American Community Survey (ACS) 2018–22 (five-year sample); and the US Bureau of Labor Statistics (BLS), Employment Projections (EP), 2023–33, 2024.
Note: This analysis is based on full-time, full-year workers, ages 25–54. Values may not sum to 100 percent due to rounding.
Measuring Underemployment with Realized Matches
To better account for observed labor-market behavior, CEW researchers employed two variations of a realized-matches approach that classifies occupations as bachelor’s degree level or high school level based on the observed educational attainment of workers in those occupations.
– Majority Realized Matches
This variation classifies occupations as bachelor’s degree level if the majority of workers employed in a given occupation hold a bachelor’s degree or higher. This approach yields an underemployment rate of 32 percent for full-time, full-year prime-age workers.
– Plurality Realized Matches
This variation classifies occupations as bachelor’s degree level if the largest share of workers employed in a given occupation holds a bachelor’s degree or higher, reflecting that bachelor’s degree holders make up a plurality, not a majority, of the workforce. This approach yields an underemployment rate of 24 percent for full-time, full-year prime-age workers.
How the Bachelor’s Degree Earnings Premium Affects Underemployment Measures
BLS entry-level assignments also fail to consider the bachelor’s degree earnings premium. Employers are willing to pay workers with bachelor’s degrees more than workers with high school diplomas in the same occupations, indicating that they see the former as performing jobs of higher productivity or value. Accounting for both the BLS entry-level assignments and the bachelor’s degree earnings premium reduces the underemployment rate among full-time, full-year prime-age workers with bachelor’s degrees from 37 percent to 22 percent.
Conclusion
The wide range of estimates and methodologies reveals a critical yet unexplored issue: How we define and measure underemployment is not settled. The policy research community should seek consensus about how best to measure underemployment. Doing so is particularly urgent at a time when major skills shortages loom on the horizon, college graduates face increasing difficulty in finding jobs, and skepticism about pursuing postsecondary education grows.
Resources
In Rethinking Underemployment: Are College Graduates Using Their Degrees? CEW researchers underscore the need for a common approach toward measuring underemployment.
