Graduate underemployment hits 42.5% as entry jobs shrink: study

ILLINOIS, UNITED STATES — Underemployment among recent college graduates hit 42.5% at the end of 2025 — the highest level since 2020 — as automation and rising skill demands compress the bottom of the labor market, according to data from the Federal Reserve Bank and a white paper released by Express Employment Professionals and The Harris Poll.

Rising skill demands are locking out entry-level candidates

More than four in five hiring managers and 82% of job seekers said entry-level roles now require more skills than in the past. Positions once designed to provide a first foothold — with on-the-job training built in — now expect candidates to arrive work-ready.

Office roles that centered on data entry and scheduling have been automated; workers are expected to manage systems, solve problems and communicate effectively from day one.

“Entry-level work is evolving, and employees and employers need to be aware of the rapid shift so they are not left behind,” said Bob Funk Jr., CEO, president and chairman of Express Employment International.

Sixty percent of hiring managers said it is more efficient to use AI for entry-level tasks than to hire and train candidates — a signal that automation is not just changing how work gets done, but who gets hired to do it.

AI adoption threatens the talent development pipeline

The risk cuts deeper than individual job seekers. While 79% of hiring managers called entry-level roles essential or very important for developing future talent, nearly two-thirds said adopting AI could reduce their overall workforce size.

Companies are simultaneously recognizing the pipeline value of entry-level work and automating the roles that once made up that pipeline.

“From our perspective, the challenge before us is twofold: job seekers need to reset their expectations and employers need to remember how critical entry-level work is — both to their success and the economy’s success,” Funk said.

Problem-solving and communication — cited by 58% and 57% of both hiring managers and job seekers — topped the list of skills built through entry-level roles, underscoring the lasting cost of losing those pathways.

For business process outsourcing (BPO) and outsourcing companies, this talent compression signals a structural shift.

As domestic entry pipelines narrow, firms sourcing early-career talent from markets where entry-level roles remain accessible — and where governments are actively investing in workforce skills — gain a real advantage in workforce continuity.

The shrinking availability of true entry-level work at home is turning international talent sourcing into a long-term workforce strategy, not just a cost decision.