The rise of artificial intelligence (AI) is reshaping the job market and the value of higher education, particularly for recent college graduates. A series of studies released in 2025 and 2026 reveal that while the college wage premium persists, it has barely changed since 2000. Harvard economists Lawrence Katz and Claudia Goldin noted this stagnation, while a San Francisco Fed paper attributed it to diminishing demand for college-educated workers. The World Economic Forum highlighted a growing wage premium for AI skills, which now command a 23% increase compared to just 8% for a bachelor’s degree alone. Additionally, Dallas Fed economist J. Scott Davis found that AI is reducing entry-level hiring while boosting wages for seasoned employees in occupations affected by AI.
The situation raises pressing questions for college graduates who have pursued degrees in fields considered “AI-proof,” such as psychology and education. A report from the Postsecondary Education and Economic Research Center sheds light on the returns of graduate degrees, revealing troubling trends. For instance, psychology graduate degrees yield a staggering -8% cost-adjusted return, meaning graduates might earn less over their lifetimes than if they had not pursued further education. Clinical psychology, social work, and curriculum and instruction degrees also reported negative returns, while popular fields like computer science barely exceed 6% in cost-adjusted earnings.
Joseph G. Altonji, a Yale economics professor and co-author of the study, emphasized the shifting landscape, advising prospective graduate students to consider the earnings potential of their intended degrees and the related job markets. The percentage of Americans holding graduate degrees increased from 31% in 1993 to 42% in 2022, according to the U.S. Census Bureau. However, the advent of AI is forcing Gen Z—those entering the workforce now—to rethink traditional career paths amidst growing concerns about job security. This sentiment resonates with findings from Anthropic, indicating that AI could theoretically perform most tasks in white-collar fields like engineering, law, and business.
Despite the threats posed by AI, many students continue to pursue advanced degrees, although some are opting out of college altogether. Altonji and his co-author, Zhengren Zhu from Vassar College, utilized data from the Texas Education Research Center to gauge the potential earnings of 121 specific advanced degrees. Their approach goes beyond mere salary comparisons by factoring in what students would have earned had they not pursued further education.
The hidden cost of going back to school
The increasing skepticism among students regarding the value of higher education is evident. Recent data from the Federal Reserve Bank of New York shows that the unemployment rate for recent college graduates has now surpassed that of all workers. While many entering graduate programs may not solely be motivated by salary increases, the need for career pivots remains a key factor.
On average, graduate degrees do boost earnings by approximately 17%, yet the stark differences among fields are notable. Law degree holders and MBA graduates still manage commendable cost-adjusted returns of 41% and 13%, respectively, although these figures pale in comparison to the 173% return seen by those with a Doctor of Medicine (MD) degree, even after accounting for the significant costs of medical education. Meanwhile, engineering disciplines, which face substantial automation risks, are experiencing diminishing returns. For example, electrical and mechanical engineering graduates see only 4% cost-adjusted returns, while computer engineering graduates report just 2%.
Many pursuing master’s degrees in engineering come from undergraduate backgrounds in similar high-earning fields, leading to only marginal gains post-graduation. As Altonji noted, those with degrees in the humanities, such as English, often experience more significant percentage gains in earnings when they pursue further education. This variability highlights the complexity of the current educational landscape, where the promise of a graduate degree can no longer be taken at face value.
As AI continues to evolve and disrupt traditional employment models, graduates—especially in less lucrative fields—are facing an uncertain future. The landscape is prompting a broader reevaluation of what constitutes a valuable degree, particularly as younger generations grapple with the implications of their educational choices in a rapidly changing economy.
See also
Andrew Ng Advocates for Coding Skills Amid AI Evolution in Tech
AI’s Growing Influence in Higher Education: Balancing Innovation and Critical Thinking
AI in English Language Education: 6 Principles for Ethical Use and Human-Centered Solutions
Ghana’s Ministry of Education Launches AI Curriculum, Training 68,000 Teachers by 2025
