College grads in ‘AI-proof’ careers like psychology and education are seeing negative returns on their degrees
Recent research has revealed troubling financial outcomes for graduates with degrees in fields considered “AI-proof,” such as psychology and education. Despite the perception that these disciplines would offer stable job prospects in an era increasingly influenced by artificial intelligence (AI), many graduates are finding that their degrees yield negative returns.
The Economic Landscape for College Graduates
As the economy continues to evolve, a growing body of literature highlights the challenges faced by recent college graduates. Notably, a study by Harvard economists Lawrence Katz and Claudia Goldin, published in September 2025, found that while the college wage premium still exists, it has barely changed since 2000. This stagnation is attributed to a reduced demand for workers in certain fields, as noted in a subsequent paper by the San Francisco Federal Reserve.
Furthermore, the World Economic Forum reported that AI skills now command a 23% wage premium, compared to just 8% for a bachelor’s degree alone. This trend raises questions about the value of traditional degrees in a rapidly changing job market.
Negative Returns on Graduate Degrees
A recent report from the Postsecondary Education and Economic Research Center has shed light on the financial viability of various graduate degrees. The study indicates that some graduates, particularly those with degrees in psychology, are experiencing negative returns when factoring in the costs of their education. Key findings include:
- Psychology Graduate Degrees: -8% cost-adjusted return
- Clinical Psychology: -5% cost-adjusted return
- Social Work and Curriculum Instruction: Also show negative returns
In contrast, degrees in computer science yield a modest 6% return after adjusting for costs, highlighting a stark difference in financial outcomes across disciplines.
The Shift in Graduate Degree Pursuit
The percentage of Americans holding graduate degrees has increased significantly, rising from 31% in 1993 to 42% in 2022, according to the U.S. Census Bureau. However, as AI continues to disrupt traditional job markets, younger generations, particularly Gen Z, are reevaluating their career paths and the necessity of advanced degrees. Research from Anthropic suggests that AI could potentially perform a majority of tasks in white-collar fields, including engineering, law, and business.
Despite the threats posed by AI, many students still pursue graduate degrees, often seeking to pivot their careers rather than simply increase their earning potential. Overall, graduate degrees tend to increase earnings by an average of 17%, but the financial returns vary significantly by field.
Comparative Returns on Different Degrees
While some graduate degrees yield disappointing returns, others remain lucrative. For instance, law degree holders and MBA graduates see cost-adjusted returns of 41% and 13%, respectively. In stark contrast, medical degrees offer the highest returns, with a staggering 173% return despite the average cost of $228,959 to obtain the degree.
Interestingly, even fields like engineering, which are perceived as vulnerable to automation, show low returns. Graduates in electrical and mechanical engineering experience only 4% cost-adjusted returns, while computer engineering graduates see a mere 2% return. This suggests that even high-earning fields may not guarantee significant financial benefits from advanced degrees.
Understanding the Hidden Costs of Education
The increasing skepticism surrounding the value of higher education is fueled by various factors, including rising tuition costs and an unemployment rate for recent college graduates that has surpassed the overall unemployment rate for all workers. These trends prompt many students to question whether the investment in a graduate degree is worthwhile.
Researchers Altonji and Zhengren Zhu utilized administrative data from the Texas Education Research Center to develop causal estimates for 121 specific advanced degrees. This approach goes beyond simple salary comparisons by considering the potential earnings graduates could have achieved without pursuing their degrees.
Conclusion
As the job market continues to evolve in response to technological advancements, graduates must carefully evaluate the financial implications of their educational choices. While some fields may offer promising returns, others, particularly those considered “AI-proof,” may not provide the expected financial benefits. As students navigate their career paths, it is crucial to weigh the costs of education against potential earnings and job security in an increasingly automated world.
Note: The insights presented in this article are based on recent research and trends in the job market as of October 2023. Prospective students should conduct thorough research and consider their personal circumstances before making educational decisions.
