The Degree as a Weakening Signal: Companies Want AI-ready Grads, but Students Aren’t Prepared
by Melissa Carleton
The recent college graduate unemployment rate in the U.S. as of December 2025 was 9.3%, and ServiceNow CEO Bill McDermott warns that it could reach 30% in the near future. The Honest Economist has recognized this phenomenon since September 2025. However, I’ve noticed that during March 2026, relatively more tech industry insiders, such as McDermott, have warned about unprecedented labor market disruption.
Accordingly, students and their families are asking this question: If people go to college only to end up unemployed, what is the value of the degree? To many, it’s clear that the labor market situation is not ideal but unclear whether you're better off with or without a college degree.
In this article, I will underscore how the signaling value of credentials alone is weakening. A credential can still matter for particular job opportunities, but it no longer constitutes proof of competence alone when trying to gain access to these opportunities.
I will first explain how employers view the college degree and how a degree alone does not guarantee a job. I will then explain what this shift means for the cost-benefit analysis of individuals when deciding whether to attend college. Finally, I will suggest solutions for companies that wish to develop what they claim to be AI-ready talent among the recent graduate population. Ultimately, I conclude that a meaningful solution to today’s employment challenges cannot rely solely on companies and must include policy action.
How Employers View Credentials
Increasingly, employers are indicating that they want workers who can quickly build and ship a product. Oftentimes, industry leaders lament that recent graduates are not AI-ready. Their reluctance to hire recent graduates indicates that they view them as more of a liability for their business than a strength. There is a gap between what companies claim to desire and what individuals bring.
I recently attended the conference, “Productivity Gains and Labor Pains: What Will AI Do to Jobs?” at Stanford’s Hoover Institution, which featured two back-to-back sessions with industry leaders and policy makers. The panelists articulated several sharp perspectives on the employment impacts of AI. Many of them acknowledged the fact that the degree-to-job pipeline is vaguely defined and poorly coordinated. For instance, the 57th Prime Minister of the UK, Rishi Sunak, remarked that he has spoken with industry leaders who hope to hire recent grads but lament that they lack the necessary skills. Accordingly, he advocates for policies that promote the re-skilling of students.
What are these skills? They involve coordinating AI tools across multiple workflows and tasks that involve both humans and AI in the mix. The speakers highlighted that C-suite industry leaders have told them that they value employees who can execute technical tasks well and also have indispensable human skills, such as interacting with customers, which AI cannot replicate.
A degree alone cannot provide proof of these capabilities. In the past, a mathematics degree might suggest somebody is analytically sharp. A philosophy degree might suggest that somebody is a deep thinker. It used to be that employers would generally look for a particular degree, such as Economics, but might also value other degrees if they signal an interesting perspective.
Today, employers care much less about degree titles. I would even venture to say that one could list any degree on their resume, and their credibility would be judged by whether they’ve implemented projects or achieved measurable results in a business setting. This is a problem when individuals need the job to get experience and experience to get the job.
There are also fewer workers available that companies are willing to hire. One study found that only 1% of technology graduates are considered work-ready. The study also finds that combining industry certifications with a degree boosts hiring probability. However, not all certifications are endorsed by companies. Later in the article, I argue that a sustainable approach must encourage companies to effectively train recent graduates.
The Trade-Off Job Seekers Face
While employers internally debate what it means to be AI-ready and lament that they cannot find recent graduates who are such, recent graduates themselves have few meaningful signals of what’s expected of them. When they are told vague statements such as companies look for "somebody who can interact well with human customers in the age of AI," it's hard for them to know what that actually means in terms of what skills they invest in during the course of their degree.
Job seekers often describe the following tradeoff. They could spend time investing in more skills, or they could apply to 100 more jobs. Their immediate goal is not to help a company profit; it is to secure a basic living. Any action they take will be aligned with that goal.
If individuals decide to pursue college, they must view the degree for what it is and consider its potential upsides depending on their situation. There are several advantages of earning a college degree in the age of AI. Students can buy time to further clarify their career direction. They can also use the time to network with individuals and build early trust that they can solve a problem by working on short consulting projects. They can also intentionally build their network by meeting students with common interests or speakers from on-campus events.
Finally, as I recommend in this article directed towards high school students and their families, college students can similarly develop their expertise in a particular area. They can seek out a curated set of opportunities, courses, and experiences that align with that area by networking with individuals and receiving warm leads after demonstrating interest, rather than applying to 200 unrelated positions, hoping for a chance.
However, as college comes with a high financial cost and potential debt burden relative to previous times, it’s all the more important that individuals strategize accordingly. It's becoming commonplace for individuals to pursue non-college career paths in response to an AI-driven labor market, such as becoming an electrician and earning $70,000 per year.
If a non-college path brings an individual more security and enjoyment, they should not chase a credential solely for its perceived social value. While college should absolutely be accessible to anyone who wants to attend, it’s also important for individuals to be much more strategic about how they'll use their time during their degree than they had to be in years past.
Fixing a Broken Job-to-Degree Pipeline
Like many aspects of the labor market in the AI age, the degree-to-job pipeline is facing a coordination failure. Company CEOs say they want more recent graduates to be AI-ready. However, their behaviors indicate that they view recent graduate hires as more of a liability than an investment.
When college graduates don't see buy-in from companies to hire them based on a clearly articulated skill set, they become lost. They don't know how to begin developing the necessary skills or what these skills are. Every hour spent developing skills that “might” help them find a job is an hour not spent applying to more jobs.
Meanwhile, companies cannot manufacture such AI-ready graduates; instead, they must actively invest in training these workers. They cannot expect the education system to develop a curriculum that aligns with their ever-shifting priorities.
What would a successful and realistic training program look like? First, companies should hire students from existing degree programs and universities. The roles these individuals would fill could have some overlap with the student's degree. For instance, if the task is technical, then a Computer Science degree may be considered an asset. Once that individual is hired, the company should spend weeks to months training them on their specific workflows.
To accomplish this goal, companies would have to define these workflows and become clear internally on the definition of being AI-ready. While this may involve some organizational back-and-forth for the company, it is a long-term investment in their future workforce. If companies looking for AI-ready talent want to put their money where their mouth is, they'll recognize they cannot contort students into an ideal worker and must play an active role in training them according to their priorities.
Concluding Thoughts
The degree-to-job pipeline is changing, and the credential alone does not carry the same signal value as it did in years past. Accordingly, students' cost-benefit analysis of a college degree is shifting. If a student chooses to attend college, they must play an active role in shaping their path. Meanwhile, if companies wish to hire AI-ready talent, they must train new hires internally to become competent in their workflows rather than expecting them to show up workforce-ready on day one.
However, from a societal perspective, the approach of encouraging companies to train new workers must be viewed as one potential solution among many to improve employment opportunities. If the outcome of helping new grads become AI-ready only serves to boost companies' profits, then it will create a Hunger Games-like competition among job seekers seeking to attain the latest credential.
The fact that the degree alone is weakening as a credential is illustrative of broader labor market disruption in the age of AI. Increasingly, credentials are decoupled from opportunity, and many individuals who started a college degree hoping for employment are now left scrambling as a bleak picture unfolds.
While the suggestions I outlined in this article for companies seeking to hire AI-ready talent could play a small part in alleviating job seekers' employment struggles, it's ultimately the responsibility of policymakers to ensure that, no matter companies’ actions and incentives, individuals can cover their basic necessities as doors close in the labor market.
I've written about approaches such as UBI and UBE, and I’ve yet to write about policies that could encourage companies to hire young grads in meaningful numbers. In any case, society can't rely on any one of these approaches alone, and we must continue to develop policy solutions to ensure a livable future for individuals in the age of AI.
Works Cited:
Amond, Riley. “Underemployed College Graduates: Financial Tips and Career Insights.” CNBC, March 11, 2026. https://www.cnbc.com/select/underemployed-college-grads-finance-tips/.
Bhupathi, Kent O., and Melissa Carleton. “When the Degree Doesn’t Open Doors: The Employment Crisis Facing Young Graduates.” The Honest Economist, September 23, 2025. https://www.honesteconomist.com/column/recentgrademployment.
Carleton, Melissa. “Embrace AI or Fall Behind? Actions for Companies, Recent Graduates, and Governments in an Age of Job Scarcity.” The Honest Economist, October 9, 2025. https://www.honesteconomist.com/column/embraceaijobscarcity.
Carleton, Melissa. “Exploring Universal Basic Income in an AI-Driven Age: Economic Security or Power Dynamics?” The Honest Economist, January 8, 2026. https://www.honesteconomist.com/column/ubi-ai-power-dynamics.
Carleton, Melissa. “Universal Basic Income in an AI-Driven Age Part 2: Architecting a Fair Policy.” The Honest Economist, January 22, 2026. https://www.honesteconomist.com/column/ubi-ai-power-dynamics-pt2.
Carleton, Melissa. “Will Technological Change Make the Degree Irrelevant? It’s Up to Colleges to Decide.” The Honest Economist, October 23, 2025. https://www.honesteconomist.com/column/collegedegreerelevance.
Guevara, Elizabeth. “Goldman Sachs Warns College Graduates About Job Market Shifts.” Investopedia, March 15, 2026. https://www.investopedia.com/goldman-sachs-warns-college-graduates-about-job-market-shifts-11923413.
Kovalev, Anatoli, Narelle Stefanac, and Marian-Andrei Rizoiu. “Skill-Driven Certification Pathways: Measuring Industry Training Impact on Graduate Employability.” arXiv, submitted June 5, 2025. https://doi.org/10.48550/arXiv.2506.04588
Zimmerman, Haley. “More Workers Are Getting Job-Skill Certificates. They Often Don’t Pay Off.” Wall Street Journal, August 16, 2025.https://www.wsj.com/lifestyle/careers/more-workers-are-getting-job-skill-certificates-they-often-dont-pay-off-be49236f.