Graduate underemployment: a detour not a dead end

This blog was kindly authored by Gina Nkwah, Engagement and Delivery Officer at the NHS Alliance and University of Bath graduate.

My peers and I grew up believing that developing high-quality skills through higher education would be the ultimate investment in strong professional opportunities. Yet at some point post-graduation, many of us have had to work in economically precarious positions that do not demand graduate-level competencies. This is termed ‘underemployment’.

Underemployment can be common in any well-prepared graduate’s career trajectory. For one, there are more graduates than graduate jobs each year, resulting in a limited supply of roles that integrate graduate-level skills. Higher Education Statistics Agency’s 2023/24 data finds that 25% of UK graduates working in the UK weren’t in high-skilled employment within 15 months of leaving higher education, with higher figures for graduates holding non-science degrees. In 2024, only 67.9% of working-age graduates were in high-skilled jobs. Nearly one third of UK graduates are currently in roles that do not require the knowledge and skills gained from a degree, compared to Italy, Germany and Scandinavian countries, where less than a fifth of graduates are underemployed.

Artificial intelligence (AI) screening and rising costs for employers  heighten the difficultes applicants face in securing graduate-level roles. When AI systems automatically reject applications based on arbitrary keywords, and employers lack the resources to train new talent, graduates inevitably suffer. As vacancies disappear and rejections abound, graduates are undeniably at a crossroads. Rather than risk long gaps in CVs and dwindling finances, some will eventually settle into less competitive roles which don’t require graduate-level skills.

Multi-year graduate underemployment risks undermining specialist skills developed through university study and hinders lifetime earning trajectories. If an underemployed graduate later applies for higher-skilled roles, a lack of graduate-level work experience on their CV can lead to fewer successful applications. A paper published by the IZA Institute of Labor Economics terms this phenomenon the ‘scarring effect’ and finds that persistent underemployment for 6 months results in an increased probability of later underemployment. This may affect a graduate’s ability to repay student loans, enter the housing market and comfortably participate in other aspects of civic and personal life.

Early underemployment is particularly detrimental for women, Black people, people in low higher education participation areas, and other underprivileged demographics. Research from the IZA Institute of Labor Economics finds that these groups have a higher probability of underemployment at 42 months post-graduation. The scarring effect of underemployment, coupled with pre-existing inequalities faced by these groups, produces a severe impact on labour market outcomes and hinders potential talent.

Critically, reducing graduate underemployment is in everyone’s interest. A graduate’s participation in the labour market, in a role matched to their skills, leads to greater job satisfaction, higher lifetime earnings and faster loan repayments. These outcomes can secure positive individual outcomes while preventing long-term costs to the public purse. Likewise, for higher education institutions, strong graduate employment statistics bolster their competitive edge and student uptake. Better economic outcomes can also impact the likelihood of a graduate pursuing postgraduate education. A 2026 survey of Prospect users, the UK’s biggest graduate careers platform, found that the top concerns about continuing further study were the cost of tuition and the cost of living. Ensuring graduates are in an optimal economic position can support the desire to upskill, essential not just for the sustainability of the higher education sector, but to drive academic exploration irreplaceable by AI.

Practically, how can higher education institutions address and reduce graduate underemployment? Some universities have dedicated professional and pastoral support for study abroad and industry placements. Continual high-quality placement support across all providers strengthens a student’s work ethic, which can increase the likelihood of post-graduation work offers. Where suitable, further collaborations with employers are necessary to address early training concerns as a barrier to hiring young talent. Universities UK finds that 52% of employers said graduates require more development than they had anticipated, which likely occurs when workplaces lack necessary resources to train graduates. New ways of approaching student placements, such as through integrating ‘Learning in the Workplace’ assessments to develop workplace skills, can allow students dedicated time to integrate academic theory into their activities within their placement. These collaborations provide students a stronger foundation to weather a market with limited finances for training graduates.

Higher education institutions are pivotal in strengthening a student’s adaptability and resilience within a technology-mediated recruitment landscape. Students want to see clear career guidance on where human skills remain essential. Universities and colleges can provide hands-on and virtual training or courses to identify how to champion human skills within applications in ways that highlight their long-term value in the workplace. Universities UK’s Future Jobs Roadmap further outlines recommendations to accelerate graduate employability and meet rapidly changing skills needs.

Ultimately, a variety of labour market pressures can make underemployment an inevitable journey in a graduate’s life. The higher education sector is crucial in boosting a student’s fortitude amidst the road bumps, ensuring that underemployment is not a graduate’s career totality.