The latest jobs report came in stronger than expected this morning. The economy added 172,000 jobs in May and the unemployment rate held steady at 4.3%. Nominal wage growth continued to decelerate, further exacerbating affordability as prices rise.
#EconSky #NumbersDay @epi.org

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— Elise Gould (@elisegould.bsky.social) 7:46 AM · Jun 5, 2026

Job growth was strongest in leisure and hospitality, state and local governments, and health care. Losses continued in financial activities in May.

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— Elise Gould (@elisegould.bsky.social) 7:58 AM · Jun 5, 2026

Manufacturing employment rose by 7,000 in May, slowly clawing back the large losses last year.

Since January 2025 when Trump took office, the manufacturing sector has lost 68,000 jobs.

#EconSky

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— Elise Gould (@elisegould.bsky.social) 8:00 AM · Jun 5, 2026

While there’s been little change this year, federal employment has shrunk an alarming 333k jobs since Jan 2025. The vital services federal employees provide cannot be done without these essential workers.
#NumbersDay #EconSky

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— Elise Gould (@elisegould.bsky.social) 8:08 AM · Jun 5, 2026

Nominal wage growth continued to slow in May, now 3.4% over the year. While we don’t get the May inflation data until next week, it’s very likely, given recent trends, that real wages will continue to fall and workers and their families will find it increasingly difficult to make ends meet.
#EconSky

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— Elise Gould (@elisegould.bsky.social) 8:14 AM · Jun 5, 2026

Key takeaways:

• So far this year, at least 13 states have introduced bills weakening child labor protections, and four have enacted them.
• Meanwhile, only three states have introduced bills to strengthen standards in 2026, compared with 15 in 2025.
• Industry-backed attacks on child labor standards have followed four troubling trends: 1) lowering minimum wages for teen workers; 2) weaponizing “youth apprenticeships”; 3) eliminating youth permits; and 4) weakening safeguards for teen child care workers.
• The Trump administration has undermined federal enforcement of child labor standards, even amid rising violations.
• Oregon enshrined current federal child labor standards into state law, offering a replicable model for states to hold the line against potential federal rollbacks.

Many state lawmakers took encouraging steps in 2023 and 2024 to strengthen their child labor standards—in response to high-profile reporting of widespread child labor violations across the U.S. and simultaneous efforts to weaken state child labor standards in the wake of COVID-19. But trends in 2026 suggest that this momentum may be waning despite continued increases in child labor violations. Meanwhile, opponents of strong child labor standards have continued to erode state standards and—in effect—chip away at the basis for federal standards, which have also come under threat.

In fiscal year 2025, more cases of federal child labor violations were uncovered than during any other year since the Great Recession, and hazardous work violations ticked up again after declining in the year prior (see Figure A). The rate of young worker deaths nearly doubled between 2020 and 2024, and at least one minor was killed on the job in the past year. At the same time, enforcement of federal child labor standards appears to have diminished under the Trump administration, which has proposed weakening existing standards. Since Trump was inaugurated in January 2025, the U.S. Department of Labor’s Wage and Hour Division (WHD) has published news releases about only three child labor enforcement actions. In the last year of the Biden administration, WHD published news releases about 26 cases.

Figure A

Amid this growing child labor crisis, a few states are taking necessary action to shore up or strengthen standards, but in far too many states industry-backed attacks are continuing to succeed in rolling back child labor laws.

Oregon enshrined current federal standards into state law, a model other states can emulate

The 1938 Fair Labor Standards Act (FLSA) sets guidelines for the hours and nonhazardous jobs for which employers can hire minors. It sets a floor above which states can adopt and enforce their own stronger standards, but where state standards are weaker, federal law applies. Oregon, the only state to pass a bill strengthening child labor standards so far this year, enacted a law that enshrines into state law FLSA work hours for minors as of January 2026. Prior to the change, Oregon law followed federal hours guidelines for 14- and 15-year-olds,1 but had prevented the adoption of any state guidelines more restrictive than those in federal law (FLSA). The new law locks in current standards and guards against potential future erosion of federal standards, stipulating that Oregon’s minor work hours rules must be no less restrictive than FLSA standards as of January 1, 2026, and giving the state freedom to implement its own higher standards for minor work hours if needed in the future. Other states can propose legislation that enshrines federal child labor standards into state law and can go further by establishing standards that improve upon the existing federal floor.

Three other states proposed bills to strengthen existing standards

In 2026, Maryland, New Jersey, and New York lawmakers also made progress on bills to strengthen state child labor standards, but none have been enacted as of this publication. A 2025 New York bill mandating that minor workers receive information on their workplace rights in order to receive work authorization passed the Senate in March; a New Jersey bill proposes establishing minimum penalties and increasing penalties for certain child labor violations; and a Maryland bill establishing civil penalties and preventing the executive branch from seeking waivers from the FLSA passed the House but was not taken up by the Senate. The Maryland bill’s provision prohibiting FLSA waivers was likely a response to a proposal in Project 2025 that would allow states to opt out of certain FLSA provisions, which would erode workers’ right to federal minimum wage and overtime protections. Next year, lawmakers should recommit to advancing stronger state standards, especially given the distinct possibility that federal standards will come under threat.

Over a dozen state legislatures attempted to roll back child labor standards this year

So far in 2026, at least 13 states have introduced bills that weaken child labor protections, and four have enacted them (see Table 1). In contrast, only three states have introduced bills to strengthen child labor protections in 2026, and only one has enacted such legislation.2 For comparison, 15 states introduced bills to strengthen child labor standards in 2025.

Table 1

Proposals to erode existing standards this year included: weakening protections from hazardous work; implementing or expanding minimum wage exemptions for minors; extending the number of hours employers can schedule minors to work; eliminating the state’s youth employment documentation system; and lowering minimum age requirements for workers in child care centers (see Table 1). Four particularly troubling patterns have emerged in legislation attempting to weaken child labor standards across multiple states:

1. Attempts to lower the minimum wage for teen workers;
2. Attempts to use state legislation on “youth apprenticeship” or “work-based learning” programs as a vehicle for weakening state child labor standards;
3. Elimination of youth work permits or other systems that ensure the documentation of minor employment; and
4. Attempts to lower or remove safety standards and staffing ratios for teen workers in child care facilities.

Lawmakers continued to propose excluding teen workers from voter-approved state minimum wage increases

As in previous years, state lawmakers continued to advance proposals that would subject minor workers to lower minimum wages than adults, particularly in states where successful ballot measures recently increased the state minimum wage. Florida, Missouri, and Nebraska voters approved ballot measures in recent years that increased the state minimum wage to $15 an hour (Florida’s minimum wage will increase from $14 to $15 in September). Legislators in the same three states are now attempting to exclude minor workers from these higher minimum wages.

Florida lawmakers reintroduced a bill to allow minors in work-based learning programs to “opt out” of receiving the constitutionally-mandated state minimum wage; Missouri lawmakers proposed paying minors nearly $3 less than the state’s new $15 minimum wage; and Nebraska lawmakers successfully enacted a bill that increased the state’s temporary youth training wage but also implemented a permanent subminimum wage for 14- and 15-year-olds. Such proposals undermine the stated goals of lawmakers to boost youth employment, address the “labor shortage,” and allow teens to earn for their futures. Youth subminimum wages do not benefit young people and erode the wage floor, depressing wages for all workers—teens and adults alike.

States continued a troubling trend of using unregulated state “youth apprenticeship” programs to roll back child labor protections

As shown in Table 1, three states proposed bills to weaken hazardous work protections for minors enrolled in work-based learning programs, marking a continued trend of attempts to erode standards that ensure early career training programs provide valuable experiences and skills without unnecessarily exposing young people to hazards known to pose a high risk of illness, injury, or fatality.

In Pennsylvania, lawmakers proposed exempting minors enrolled in work-based learning programs from state child labor standards, except where such standards reflect federal law. In Virginia, lawmakers introduced legislation that would allow employers to set the standards for appropriate work in hazardous occupations, undermining existing state laws that require work-based learning programs to be accredited by the U.S. Department of Labor or state Board of Education. However, education advocates managed to neutralize the bill’s harms by removing that provision, limiting the scope of work-based learning programs to particular industries, and adding language requiring such programs to comply with federal laws prohibiting employers from exposing teens to hazardous work.

In West Virginia, lawmakers used their recently created “youth apprenticeship program” to further erode state child labor standards for all minor workers, exacerbating troubling conflicts between state and federal child labor law created by earlier state legislation. In 2024, West Virginia lawmakers established a new “youth apprenticeship program” (YAP) that appears to permit YAP-enrolled minors to be employed in any of the 17 hazardous occupations prohibited by federal law, even though federal law provides limited exemptions for apprentices and student learners for only seven of the 17 hazardous occupation orders. This year, lawmakers expanded the program by removing the requirement that hazardous work assigned to youth apprentices be “occasional and incidental” to their training. This guardrail, which originates in federal law, is meant to protect youth apprentices from being treated as adult workers in hazardous jobs and to ensure that they are assigned hazardous work very rarely and only when it is necessary to further their training.

As part of the same legislation, West Virginia lawmakers also removed from state code the list of hazardous occupations prohibited for minors under state law. As a result, working minors not covered by the FLSA will no longer have protection from being employed in the deadliest jobs, and if federal protections are unenforced or eroded as Trump’s Project 2025 agenda has threatened, all West Virginia minors working in these jobs would lack protection. Many states have their own list of state hazardous occupation orders, which may differ slightly from the federal list. Where state and federal standards differ, the more protective standard prevails. Removing the state’s list will both endanger young workers and create confusion for employers who may not realize they must still follow federal law in areas where state law has been eroded, leading to increased reputational risk and legal liability for the state’s businesses.

Several states have weakened restrictions on hazardous work while eliminating the state’s ability to identify and investigate child labor violations

The West Virginia playbook for rolling back state child labor laws represents a troubling pattern for lawmakers and advocates to continue to monitor and resist. In 2024, the state created a new work-based learning program that did not conform to federal law, then eliminated youth work permits (and replaced them with weaker age certificates, which have now also come under threat), and a year later further weakened the state’s hazardous work protections using their new work-based learning program as a vehicle.

In just the past three years, two other states—Indiana and Iowa—have both eliminated their systems for documenting youth employment while also weakening prohibitions on hazardous work for minors. In 2023, Iowa lawmakers eliminated youth work permits, weakened hazardous work protections for youth enrolled in “work-based learning” programs, and added new provisions allowing state agencies to “waive” restrictions on hazardous work that violated federal law, among a host of other changes.

And this year, Indiana lawmakers eliminated the state’s “youth employment system” for documenting minor employment after implementing the system to replace eliminated youth work permits in 2020. As a result, state agencies will have no record of teen employment—a change the legislature’s own fiscal analysts acknowledged will impede enforcement of child labor laws. Indiana’s 2026 rollback comes on the heels of numerous changes enacted in 2024 that extended work hours for minors, eliminated night work restrictions, weakened protections for hazardous work, and—though this provision was amended out of the final bill—proposed giving employers complete civil immunity for workplace fatalities of minors enrolled in work-based learning programs.

Recent research shows that youth work permits play an important role in preventing child labor violations by enhancing awareness of child labor standards, creating legal accountability, and aiding in enforcement. In 2024, Wisconsin lawmakers passed legislation eliminating work permits for minors under 16, but the governor vetoed the legislation and stated in his veto message that he objected to eliminating a process that protects youth from exploitation. This year, Wisconsin’s Department of Workforce Development uncovered more than 1,600 child labor violations by a single Burger King franchisee—the largest in the state’s history—including 593 work permit violations. Recent research has shown that states with work permit mandates have fewer child labor violations. Employers violating work permit rules are also often violating work hours and hazardous work protections.

Continued efforts to weaken protections for teen child care workers are part of a larger deregulatory agenda in the care industry

This year, for the third time since 2022, Iowa lawmakers proposed legislation to weaken standards related to teen supervision of children in child care facilities. In 2022, Iowa enacted a bill that lowered the minimum age for child care workers and increased the number of children facilities could place under the care of a single staff person. In 2024, lawmakers proposed allowing a 16-year-old to be charged with the care of four infants, seven toddlers, or 10 three-year-olds without direct supervision, but the bill failed. The bill was supported by the billionaire-founded right-wing dark money group Americans for Prosperity, which also lobbied in support of a 2023 Kansas bill to allow minors as young as 14 to care for young children and allow 16-year-olds to provide child care with no adult supervision.

In 2025, Iowa enacted additional changes through the administrative rulemaking process, allowing teenagers as young as 16 to care for children of any age in limited circumstances. And this year, lawmakers proposed allowing 15-year-olds to care for children without supervision. The 2026 Iowa bill received significant support from lobbyists representing The Family Leader and Family Leader Foundation, Iowa’s state affiliate of the Family Research Council, an anti-LGBTQ and anti-abortion hate group.

Michigan also issued new administrative rules effective April 2026 that increased child-to-staff ratios and allow 16-year-olds to care for numerous young children without supervision—in both group and family child care homes.

The push to lower the minimum age for child care providers and increase child-to-staff ratios is part of a larger industry agenda to deregulate the care economy and avoid reckoning with its true costs. This agenda—which has also involved reducing the education and experience requirements necessary for provider licensing and even using state power to block stronger local standards—has strained providers, degraded the quality of care, and led to injuries and even deaths of young children in recent years. Placing the burden of responsibility of caring for young children on teenagers who are still themselves children harms everyone while sidestepping the real issues facing our child care system: insufficient public investment to make child care affordable and to pay providers adequately.

In an era of federal retrenchment and continued state rollbacks amid rising violations, more state lawmakers should seek to strengthen standards

Though the news media has largely moved on and federal enforcement attention appears to have waned, child labor violations remain a persistent issue and may be getting worse. Fiscal year 2025 saw more child labor cases generally and more minors employed in violation of hazardous occupation orders than any year in recent memory. While some states continued advancing legislation to strengthen child labor standards in 2026, and Oregon succeeded in enacting legislation to guard against federal rollbacks, far more states focused their efforts on weakening existing standards.

Given the very real risk that aspects of FLSA child labor protections could be eliminated (or will go unenforced), all states should at a minimum lock in existing FLSA standards and ensure state capacity to enforce them. Beyond this, states have critical opportunities and responsibilities to modernize child labor standards beyond the minimal, outdated FLSA floor to ensure that minors who must work or choose to work can access safe work experiences that don’t harm their health or education.

1. Maximum of 3 hours per day, 18 hours per week when school is in session; 8 hours per day, 40 hours per week when school is not in session. See: https://www.dol.gov/agencies/whd/state/child-labor

2. We exclude legislation related to child influencers. At least five states have introduced bills to increased protections for children featured in video content in 2026 (AZ, MD, MO, NJ, TN), and two states (NJ, TN) have enacted such legislation.

Key takeaways:

• Misclassification of workers as independent contractors is a pervasive and widespread problem. AAPI workers are overrepresented in three of the 11 commonly misclassified occupations: manicurists and pedicurists, home health aides, and personal care aides. Vietnamese, Bangladeshi, Filipino, Samoan, and other Pacific Islander workers are overrepresented within these occupations.
• Groups with lower median hourly wages also have larger shares of their working populations in the 11 commonly misclassified occupations.
• Federal protections against misclassification are limited and currently under attack by the Trump administration. The state and local landscape for curbing misclassification is varied, which leaves some workers less protected than others.

In March, EPI published updated research highlighting the cost to workers of being misclassified as an independent contractor for 11 commonly misclassified occupations. Asian American and Pacific Islander (AAPI) workers were overrepresented in three of those occupations—manicurists and pedicurists, home health aides, and personal care aides—relative to their share of the overall workforce.

Most federal, state, and local labor laws apply only to employees and not to independent contractors, so misclassification strips workers of key protections such as minimum wage laws or qualifying for employer-provided health insurance and retirement benefits. Additionally, both misclassified workers and social insurance funds lose out on income: the report conservatively estimates that for the three jobs in which AAPI workers are overrepresented, misclassification costs workers at least $7,000 annually and costs social insurance programs $600 to $800 per worker each year.

With the understanding that the umbrella term “AAPI” encompasses an immensely diverse population both in ethnic origin but also in economic outcomes, this piece goes beyond the narrow view that all AAPI workers are high-wage earners. Below, we provide more detail on which groups of AAPI workers are most likely to be employed in lower-wage commonly misclassified occupations.

Disaggregated data shed light on particular AAPI communities that may be vulnerable to misclassification

Across all occupations, AAPI workers comprise approximately 8% of the total workforce. For three of the 11 occupations highlighted in the report—manicurists and pedicurists, home health aides, and personal care aides—AAPI workers make up 67%, 13%, and 10% of employment, respectively, according to Current Population Survey (CPS) data.

Table 1 provides a detailed breakdown of the composition of the AAPI workforce for the three occupations in which AAPI workers are overrepresented. Here, we use the American Community Survey (ACS) as it offers detailed race definitions which the CPS does not offer due to sample size restrictions.

Asian Indian and Chinese populations combined make up over 40% of the working-age AAPI population, thus their relatively large shares of the AAPI workforce in these occupations are not surprising. However, several groups are disproportionately represented across these occupations compared with their share of the overall AAPI workforce.

For example, Bangladeshi workers make up 5.1% of AAPI workers employed as home health aides while only constituting 1.1% of the total AAPI workforce. Chinese workers represent almost half (47.7%) of AAPI home health aides while representing just over one-fifth of the overall AAPI workforce (20.9%). AAPI employment among manicurists and pedicurists is largely held by those of Vietnamese origin (71.4%).

Finally, a majority of AAPI personal care aides are either Filipino (32.8%) or Chinese (20.8%). Filipino workers, however, are overrepresented by twice their share of the overall workforce. While Samoans and other Pacific Islanders comprised a much smaller share of personal care aide employment, they are also overrepresented in this occupation by more than twice their share of the overall workforce.

Table 1

Figure A provides a more comprehensive picture of the share of each detailed group employed across all 11 commonly misclassified occupations, revealing that smaller communities—often overlooked because of their size relative to the aggregate AAPI workforce—may be among the most vulnerable to misclassification. Workers belonging to seven of those groups are more likely than the average U.S. worker to be employed in one of those occupations. Almost 20% of Vietnamese workers are employed in one of those occupations, with over half concentrated as manicurists and pedicurists.

Samoan, Hawaiian, and other Pacific Islanders have the next highest shares working in the 11 occupations, making up 15% or more of their total working-age population. These groups also earn lower median hourly wages than the national median and the aggregate AAPI median hourly wage. Their disproportionate representation in commonly misclassified occupations further exposes these workers to wage suppression due to misclassification.

Misclassification enforcement varies by state—meaning different AAPI populations can be disproportionately impacted

Federal protections from misclassification are limited and are currently under attack by the Trump administration, which has proposed a rule to weaken standards to determine worker classification under the Fair Labor Standards Act, the Family and Medical Leave Act, and the Migrant and Seasonal Agricultural Protection Act. The proposed rule narrows the definition of who is a covered employee under these statutes, encouraging employer schemes to reclassify their employees as independent contractors to evade those obligations.

Broadly, the Trump administration has been actively dismantling long-standing federal worker protections, leaving states to bear the responsibility of ensuring workers are given rights and protections and that they can exercise them. For most states, labor and employment protections only apply to workers classified as employees, meaning workers misclassified as independent contractors are denied their legal rights and protections.

EPI’s 2026 misclassification report outlines state and federal policy recommendations that ensure proper enforcement mechanisms to curb misclassification. One of the recommendations includes implementing the ABC test. Unlike the six-part “economic reality” test or the “common law” test, the ABC test presumes that a worker is an employee unless they can demonstrate they are an independent contractor based on three criteria. Placing the onus on the employer to determine the employment status of a worker provides protections against misclassification and extends proper protections to workers. Many states have adopted the ABC test for unemployment insurance programs and, to a lesser extent, for wage and hour orders and other employment applications.

As shown in Figure B, The AAPI population is highly concentrated across a handful of states. Almost half of the prime-age working Asian population is concentrated in California, New York, and Texas, and a majority of the Pacific Islander population resides in California, Hawaii, and Washington. Overall, 21 states have significant numbers of AAPI residents, and some are home to large shares of specific AAPI communities. For example, the Hmong community in Minnesota and the Burmese community in Indiana are concentrated in states that have smaller total AAPI populations.

The current landscape for state policy protections against misclassification is quite varied. For example, among the states with the largest AAPI populations, California is the only state to adopt the ABC test for both unemployment insurance and employment law, although certain occupations are exempt from the test—including app-based drivers. California also institutes penalties for misclassifying a worker, which can include restitution payments and, if the misclassification was willful, a penalty between $5,000 to $25,000 per violation.

Texas, on the other hand, has significantly less state enforcement. Apart from using the common law test for its unemployment insurance program and providing a definition of an independent contractor for workers’ compensation, Texas mainly relies on federal law for classifying workers as employees. In the last 15 years, Texas lawmakers have introduced several bills that would create penalties for misclassifying workers in the construction industry, but all have stalled or failed.

Figure B

Comprehensive protections are needed to protect workers from misclassification

AAPI workers are facing multi-pronged attacks from the Trump administration through the degradation of federal protections for workers, immigration, and equity. Occupational segregation and other labor market disparities lead women, people of color, and immigrants to be disproportionately represented in occupations that are commonly misclassified. These factors—in addition to historical and current geopolitical relations that shape the flow of labor to the U.S., immigration and citizenship status, and English language proficiency—can contribute to the concentration of AAPI workers in these occupations. Disaggregated data further identify which specific AAPI communities are overrepresented, revealing that smaller, less economically secure groups are often most exposed to the costs of misclassification. Strong policies at the federal, state, and local levels are needed to combat misclassification and to ensure workers can exercise their rights.

Key takeaways:

• The vast majority (85%) of young college graduates work in occupations that have seen strong employment growth in recent years.

• Young college graduates, like college graduates in general, are more likely to work in AI-exposed occupations than the overall workforce—and considerably more likely than young noncollege workers.
• But both young college graduates and young noncollege workers have experienced rising unemployment over the last three years, suggesting AI is not likely to be driving labor market weakness.

In the first blog post of our Class of 2026 series, we showed that the strong labor market for young college graduates of the early 2020s had begun softening in recent years. A growing share of young college graduates are seeking employment, but because their employment rates have not kept up with this job search, their unemployment rate has risen faster than the overall rate. The second blog post in the series discussed the industries where young college graduates worked. We found that recent graduates work in growing industries, but are forced to enter a weakened labor market with less job turnover, deteriorating their ability to break in. Young college graduates work in the tech sector at a similar rate to college graduates, and there is no clear evidence that tech sector employment is significantly decreased despite warnings about the advancement of AI.

In this blog post, we delve deeper into the occupations where young college graduates are likely to work.1 We examine whether it has been relatively more difficult to secure employment in these fields as the labor market has weakened. We also scour the data for signs that exposure to AI-related occupations may disproportionately affect the prospects for young college graduates as they enter the labor market.

Most young college graduates work in occupations with strong growth

Over 60% of young college graduates work in professional and related occupations or management, business, and financial occupations. Figure A displays the share of employment in each occupation or occupation grouping for young college graduates ages 22 to 27, all college graduates, and young workers without a four-year college degree. Occupations in the figure appear in order of the share of young college graduates employed in each, from largest to smallest. Over half (62.8%) of young college graduates work in professional, management, business, and financial occupations. Workers of any age with a college degree are slightly more likely to work in those two occupations (64.5%), though more likely in management occupations than professional occupations. On the other hand, nearly half (48.3%) of young noncollege workers are in service occupations or farming, construction, installation, and production occupations.

Figure A

Figure B shows the change in employment in each occupation between 2019 and 2026 and between 2023 and 2026, arranged in the same order as Figure A for comparison. Since 2019, management, business, and financial occupations and transportation and material moving occupations experienced the most growth, followed by professional and related occupations.

The top four occupations for job growth since 2023 account for 85% of young college graduate employment. The occupations with employment losses over the last three years were more likely to employ young noncollege workers than college graduates. It doesn’t appear that the occupations where young college graduates tend to work have been hit particularly hard in the last couple of years.

Figure B

While there has been job growth among occupations that tend to be filled by young college graduates, some worry about an increase in labor market underutilization, i.e., when workers with a college degree wind up working in jobs that typically don’t require one. Using O*NET data2, the New York Federal Reserve tracks this type of labor market underutilization. While the share of recent college graduates working at a job that doesn’t require a college degree has ticked up slightly over the last three years, it remains lower than it was for workers who graduated in the aftermath of the Great Recession. Even as late as 2017, young college graduates were working at these noncollege jobs at higher rates than they are today.

While college-educated workers are in more AI-exposed occupations, this does not appear to be driving labor market weakness

Much has been written in the last few years about AI exposure and its impact on the labor market. Using data from ADP, a large payroll processing company, Brynjolfsson, Chandar, and Chen find that entry-level workers in AI-exposed occupations—particularly AI uses that automate, not augment their work—have experienced an employment decline larger than that of older workers in the same occupations and all workers in less exposed occupations, explaining some of their stagnant overall employment growth. Atkinson and Yamco also find that declines in AI-exposed occupations are tied to lack of hiring rather than layoffs, hitting harder for young people attempting to enter the labor market. The second blog post in our series noted an across-the-board slowdown in hiring—which hurts the job prospects of all young workers, not only those in the industries most affected by AI.

On the other hand, researchers at the Yale Budget Lab argue that there has only been a slight increase in the shift in the occupation mix of employment, which would be evidence of AI automating jobs. They find that high AI-exposed occupations—determined by the top quintile of AI exposure—have yet to show declining employment, so no “dissimilarity” between young and older college graduates in terms of occupation mix has materialized. Raderman also finds that there isn’t strong evidence that AI is responsible for weaker labor market outcomes for recent college graduates, using evidence from Tillerman on college majors paired with change in unemployment.

Given the variation in assessments, we wanted to take a look at the data ourselves. Gimbel, Kendall, and Kulsakdinun have done an admirable job of summarizing the literature that attempts to classify AI exposure and propose a weighted aggregate measure of AI exposure.3 We employ this measure to investigate whether young college graduates may be more likely to be at risk in AI-exposed occupations than other workers.

In Figure C, we display the AI exposure of occupations weighted by the share of the entire workforce in each occupation. Moving from the left to the right on the figure increases AI intensity. For instance, professional and office & administrative support occupations are more AI exposed (to the right), while production, transportation, and service occupations are less AI exposed (to the left). Overall, the mean AI exposure score is 0.23.4

Figure C

In Figure D, we show the distribution of select demographic groups by occupation and AI exposure. As with earlier analysis, we compare young college graduates with all college graduates and young noncollege workers, in separate panels in the figure.

According to the aggregate measure, college graduates do have higher AI exposure in the labor market than the overall workforce. It is clear there is more mass in the direction of higher exposure (to the right) and their mean exposure is 1.07, higher than that of workers writ large. But the AI exposure of young college graduates isn’t any higher than that of college graduates in general. Mean AI exposure among young college graduates is 1.00.

Figure D

What is striking is that the AI exposure among young college graduates (1.00) is considerably higher than that of young noncollege workers (-0.61). If AI was driving labor market outcomes, we’d expect young college graduates to fare worse in today’s economy, e.g., see larger declines in employment or faster increases in unemployment. But, when we compare unemployment rates as we did in the first blog post of this series, both groups experienced similar increases in unemployment over the last two to three years. Trends in employment rates were also consistent across these groups.

Since the weakening labor market is hitting both young college and noncollege workers alike, it’s hard to argue that AI is uniquely causing job losses for new labor market entrants graduating from college now or in recent years. These findings are consistent with the literature, as there is currently no consensus about the effects of working in AI-exposed occupations on employment thus far.

1. Throughout this brief, we define young college graduates as people between the ages of 22 and 27 with only a four-year college degree. Unlike similar analyses of young workers, we do not exclude young college graduates who are currently enrolled in school, but the results here are robust either way. Unless otherwise noted, data for 2026 represent a 12-month average from April 2025 through March 2026 for the most up to date and reliable estimates, which removes seasonality and increases sample sizes.

2. O*NET or the Occupational Information Network provides the largest up-to-date database of information about workers sorted into detailed occupations. Information provided is about skills, abilities, education, training, and more.

3. We use an updated summary AI exposure PCA score (principal component analysis weighted standardized z-score) provided by the authors, May 13, 2026.

4. The PCA score scale is centered at 0, the unweighted mean across occupations.

Key takeaways

• The depressed overall hires rate is a key driver of new labor market weakness for young college graduates, as it makes it harder for them to break into the labor market. This is true across industries, not just in those that disproportionately employ young college graduates—suggesting the culprit is not a structural change in the economy like AI but a labor market in which employers are hiring less and workers are holding onto the jobs they have.
• The information sector—posited to be more AI-exposed—has experienced recent job losses but employs only 2.3% of young college graduates.
• High-tech industries, which employ about 1 in 10 college workers, expanded at a historically rapid pace in the early 2020s but have shown signs of softening over the last three years.

The early 2020s labor market for young college graduates was strong. But, as we showed in this series’ first blog post, the Class of 2026 is graduating college into a labor market that has notably weakened in the past two years. A growing share of young college graduates are looking for jobs, but their employment rates have not kept pace—meaning unemployment is rising faster for young graduates than for the overall workforce. While their outcomes remain better than those of their noncollege counterparts, the uptick in unemployment has been a rising concern.

In this blog post, we delve deeper into the industries where young college graduates are likely to work,1 examining whether it has been relatively more difficult to secure employment in these fields as the labor market has weakened. Our analysis first examines employment changes, then turns to labor market flows, including hires and separations rates. We also scour the data for signs of contraction in the tech sector that may disproportionately affect the prospects for young college graduates as they enter the labor market.

In the third blog post in the series, we will examine the occupations where young college graduates work with particular attention to occupations that may have grown or shrunk, as well as to those most exposed to AI.

Young college graduates work in industries with strong growth in this business cycle

Over half of young college graduates work in private education and health services, professional and business services, or public-sector jobs. Figure A displays the share of employment in each industrial sector or sector grouping for young college graduates ages 22 to 27, all college graduates, and young workers without a four-year college degree. Industries in the figure appear in order of the share of young college graduates they employ, from largest to smallest.

The types of jobs where young college graduates work look similar to those of college graduates generally. Young workers without a college degree (i.e., noncollege) are far more likely to work in trade, transportation, and utilities; mining, construction, and manufacturing; or leisure and hospitality. All groups of workers are least likely to work in the information sector, closely watched for signs of AI-induced displacement.

Figure A

Figure B shows the change in employment in each sector between 2019 and 2026 and between 2023 and 2026, arranged in the same order as Figure A for comparison. The two fastest growing sectors since the last business cycle peak occurred in the two largest sectors for young college graduates: private education and health services and professional and business services.

Since the rollout of ChatGPT, many have looked at industries and occupations likely to be exposed to AI to see whether this has led to weaker job growth. Among the most closely watched of these industries is the information sector, which has seen an 8.5% employment decline since 2023.2 While these losses are notable—and especially relevant to understanding AI’s fingerprints on the labor market for young college-educated workers—it cannot be overemphasized just how small this sector is in the overall economy. Less than 2% of overall employment is in the information sector, including only 2.3% of young college graduates. Further, the sector saw a rapid employment expansion between 2019 and 2023—the employment loss between 2019 and today is just 2.0%.

Figure B

High-tech sectors have relatively more college graduates but haven’t experienced large AI-induced employment losses

In recent years, the Census Bureau has created an experimental data series on high-tech industries to better understand business dynamics. These include both manufacturing and service sector components of high tech.3 We translate their NAICS classification for high-tech industries into Census Industry Classifications used by the Current Population Survey (CPS) to determine the likelihood of young college graduates working in these sectors.

In the 2026 economy, about 5.6% of workers were employed in what the Census considers high-tech industries. Just about 1 in 10 (9.9%) of the college-educated workforce works in the tech industry. Young college graduates are similarly represented: 10.3% work in tech.

Overall, the Current Establishment Survey tells us that tech industry employment tracked changes in overall private employment in the prior business cycle (between 2007 and 2019) but expanded sharply in the early 2020s and has softened a bit in the last three years. Since 2023, the tech sector has fallen by 0.7%. While overall employment using CPS does show modest growth, neither shows large swings that suggest a large impact for young college graduates.4

Weak hires may be the biggest culprit to labor market weakness for young college graduates

The Job Openings and Labor Turnover Survey (JOLTS) can shed light on the question of whether entry-level workers—with or without college degrees—are facing a harder labor market to break into. While JOLTS doesn’t include demographic characteristics, it presents jobs openings as well as rates of hiring, layoffs, quits, and other separations. Today’s economy has substantially less churn than during the recovery from the pandemic, when millions of workers reentered the labor market after mass layoffs—many quit soon after as they searched for, and generally found, better opportunities.

Figure C shows the hires and separation rates. The lighter colors represent the monthly seasonally adjusted data for each series while the darker colors represent a 12-month moving average that provides a better overall picture of recent trends, smoothing out some data volatility. Over the last five years, the hires rate has steadily fallen and now sits at levels last seen in 2013 and 2014, when the labor market was still struggling to recover from the Great Recession.

The total separations rate includes quits, layoffs and discharges, and other separations.5 As with the hires rate, the separations rate has been declining over the last few years and now sits about where it was in 2014. Much of this is due to reductions in quits. Quits are higher when workers feel confident that they will find better job opportunities. Right now, workers are sitting tight, more so than any point in the past 10 years. Taken together, there is simply less churn in the labor market. But reduced churn is not inherently bad. If the frantic labor market of the early 2020s led to many workers and employers finding satisfactory matches, it could make sense that the following years would see less churn than normal. But for young workers looking to enter the job market, a reduction in hiring can make it harder to find a job.

Figure C

Table 1 breaks down the change in the hires and separations rate over the last three years, again using 12-month moving averages to smooth some volatility in the data. The industries are listed in order of the share of young college graduates they employ, similarly to Figure A. Overall, the hires rate fell 0.8 percentage points and the separations rate fell 0.6 percentage points between 2023 and 2026. The industries where young college graduates are more likely to work saw smaller reductions in both hires and quits than the overall. Industries where young workers without a college degree are more often found—over a quarter are in trade, transportation, and utilities—saw greater losses. Finally, leisure and hospitality, where young noncollege are more than twice as likely to work as young college graduates, saw the largest declines in hiring.

It does not appear that the industries where young college graduates tend to work are experiencing more weakness than other industries. Job gains are just as strong, if not stronger, and hiring hasn’t fallen as far in other industries. In short, there does not seem to be any profound structural change in the economy affecting the industry composition of employment—AI or anything else—that would easily explain the softening of the labor market for young college graduates in recent years. What it does appear to be is a harder labor market for young workers to break into when employers are less likely to hire and workers are more likely to sit tight in the job they have.

1. Throughout this blog post, we define young college graduates as people between the ages of 22 and 27 with only a four-year college degree. Unlike similar analyses of young workers, we do not exclude young college graduates that are currently enrolled in school, but the results here are robust either way. Unless otherwise noted, data for 2026 represent a 12-month average from April 2025 through March 2026 for the most up to date and reliable estimates, which removes seasonality and increases sample sizes.

2. ChatGPT was first introduced in November 2022 but took several months for more widespread usage.

3. High tech industries: Computer and Peripheral Equipment Manufacturing, Communications Equipment Manufacturing, Semiconductor and Other Electronic Component Manufacturing, Navigational, Measuring, Electromedical, and Control Instruments Manufacturing, Aerospace Product and Parts Manufacturing, Software Publishers, Data Processing, Hosting, and Related Services, Other Information Services, Architectural, Engineering, and Related Services, Computer Systems Design and Related Services, and Scientific Research and Development Services.

4.  It’s not unusual for the CPS and CES to display small differences in employment levels or trends considering nontrivial differences in their methodologies. 

5. Other separations include separations due to retirement, death, disability, and transfers to other locations of the same firm.

Key takeaways:

• Affordability is not just about prices; it’s the outcome of a race between income growth and price inflation. When income growth is slower than price inflation, affordability worsens. When income growth is faster, affordability improves.
• Focusing just on prices is bad for understanding how the economy works and how it has performed in the recent past, and it leads to an overly restrictive policy menu for improving families’ affordability.
• Policy can more reliably address income growth for typical families. This growth has been stunted for decades by the rise of inequality. Closing this gap by ensuring more equitable distribution of future growth is the strongest tool we have for improving affordability.

Affordability has been the policy buzzword of recent years. Much of the affordability discourse—both among policymakers and the public—has focused near-exclusively on prices as the big affordability problem. But affordability is not a problem of high prices, instead it’s the outcome of a race between incomes and prices. And the reason typical families have faced an affordability crunch in recent decades is not because prices have grown exceptionally fast, it’s because incomes for the vast majority have grown too slowly. This income growth has been suppressed mostly by rising inequality that has put a growing wedge between overall economic growth and the income growth of typical families.

Getting the drivers of affordability right is important—it’s not just quibbling. If you only examine price growth and try to infer what has happened to affordability over periods of economic history, you’ll usually get the story wrong. And if policymakers only look at how to change the trajectory of prices while ignoring what they can do to change the trajectory of incomes, they will be far less effective in providing useful relief to U.S. families. There are far more ways to use policy to raise incomes in a targeted and effective way than there are to suppress price growth.

Below, we provide some more background on why analyses of affordability need to include incomes, why policymakers have much more scope to raise incomes in a useful way as opposed to pushing down prices, and why focusing just on prices can obscure whether affordability has improved or worsened.

Why do prices dominate today’s affordability debates?

In modern capitalist economies, prices rise essentially every year (though at quite different rates), but so do incomes. Determining what has happened to families’ ability to afford a decent and secure life requires looking at measures that take into account both sides of the affordability equation, such as real (inflation-adjusted) income growth. Nobody really disputes this. After all, Americans could buy a new car for $600 in the 1930s, but nobody thinks society was generally richer back then.

The narrow focus on prices in assessing one’s own economic struggles likely stems from several factors.

First, inflation was very fast in the early 2020s. Americans hadn’t experienced inflation rates that high in decades, and they didn’t like them, so prices remain front of mind for many.

Second, it is true that price changes can dominate what happens to real incomes over very short time periods (say a year or less). This recognition is why we can be so sure that the oil price shock inflicted by the U.S. bombing of Iran is going to be so damaging to U.S. families. The rise in oil prices so far this year has likely baked in at least a 1.5% increase in inflation over the next 6–12 months. In 2025, real wage growth for the large majority of workers was slower than 1.5% (which was the outcome of roughly 4% nominal wage growth minus 2.5% inflation). Given this, a sharp and unexpected 1.5% jump in prices will likely erase any prospective real wage gains for workers in 2026.

Finally, it has been noted that many Americans see wage gains as something they accomplished themselves through hard work, while prices are out of their immediate control. Inflation is hence seen as damage done to them and something they need relief from. But this is mostly wrong—policy choices impact wage growth at least as much as inflation, and the most effective policy relief for living standards will come through measures that raise wages, not restrain prices.

Policy can target incomes more effectively and precisely than prices

One person’s income is another person’s cost, which means prices are a bundle of different stakeholders’ incomes. The bill you pay at the grocery store must cover payments the store makes to its shareholders, the salary of the CEO and managers, the wages of cashiers, and the cost of buying food from producers. We don’t want all these incomes to be forced down. Given extreme levels of inequality in the U.S., we would likely be fine with lower CEO pay and payments to shareholders, but we would want wages of cashiers and many in the food production supply chain to rise. Efforts to simply clamp down on this price will have uncertain effects on incomes.

In the jargon of economists, focusing on prices is sector-based policy but to genuinely improve affordability we need factor-based policies, where factors of production like capital, rank-and-file workers, and corporate management can be specifically targeted by policies that aim to raise or restrain their incomes.

Fortunately, there are many good policy options for targeted affordability policy specifically toward low- and middle-income families. Incomes for these families—and for anybody without dynastic wealth—are dominated by wages and public benefits. We talk about each of these in turn below.

Boosting public benefits is affordability policy

Public benefits are entirely under policymakers’ control. If policymakers really cared about the affordability of groceries or health care or energy, they could boost benefits for food stamps, Medicaid, and the low-income heating energy assistance program. These programs currently deliver needed assistance to tens of millions of families to make life more affordable—and they do this with vanishingly small administrative costs, meaning they are highly efficient. Yet all of these programs are slated for steep cuts in the coming decade due to the Republican tax and spending megabill passed in 2025. This bill will inflict large damage to the most vulnerable families’ ability to afford decent and secure lives.

Further, Congress and the Trump administration chose to not extend the Biden administration’s more-generous subsidies for people to buy health insurance through the marketplace exchanges of the Affordable Care Act. The failure to extend these subsidies—even after a full federal government shutdown engineered by congressional Democrats aimed at prioritizing this issue—means that average out-of-pocket costs will double for those buying insurance in the exchanges.

Besides just reversing these cuts, making the U.S. welfare state more robust could also greatly boost the affordability of a decent life. Things like making health coverage more universal with lower out-of-pocket costs, reforming unemployment insurance to make it more protective, and providing all families with children a generous universal child allowance could dramatically improve affordability.

Policy can boost affordability through higher wages as well

The link between policy changes and wage growth is slightly less direct than for public benefits, but it remains very strong. Capitalist labor markets are inherently tilted toward employers and against workers. The only periods of history that have seen strong and equal rates of wage growth across the workforce have been periods where policy supported institutions that boosted workers’ leverage with employers.

The 30 years after World War II saw the creation of policies and institutions that successfully spread the gains from rising productivity equitably among workers up and down the wage distribution, with low- and middle-wage workers seeing growth rates as fast as high-wage workers. This equitable distribution of wage growth was a crucial way that income growth more broadly was kept equitable in this period.

Since 1979, however, these institutions have been steadily attacked and weakened with no new institutions being stood up to take their place in ensuring an equitable distribution of economic growth. The result has been that wages and incomes of typical families have lagged far behind average income and wage growth (or productivity). The wedge between income growth experienced by the vast majority of families and average growth is simply income being generated in the economy that is not helping typical families’ affordability struggles. Instead, it is income being funneled reliably away to the top.

There’s no reason that the institutions that equalized wage growth cannot be built back up and modernized.

The federal minimum wage is the most obvious policy institution for raising wages at the low end of the labor market. Raising the federal minimum wage from its current shamefully low $7.25 would directly boost affordability for tens of millions of workers. In the middle of the wage distribution, unions have proven to be the institution that has historically counteracted employer power and given typical workers increased leverage. However, unions are in a far weaker position today relative to their high points because of intentional policy choices—specifically because policymakers failed to act to curb employers’ growing hostility (and often their illegal activities) toward union organizing. If stronger policy boosted union density, unions would raise wages for both members and non-members alike.

Low- and middle-wage workers also benefit enormously from a determined effort to keep unemployment low for extended periods of time. In recent decades, policymakers have tolerated excess unemployment to keep inflation in check, but this is far too costly a strategy to keep potential inflation in check. Besides locking out millions of willing workers from job opportunities, long periods of excess unemployment were periods when real (inflation-adjusted) wage growth became literally stagnant.

Policymakers often seem skeptical of the effectiveness of these wage-boosting policies, arguing that the effects are too indirect and will take too long to provide benefits to workers. It’s true that efforts to boost unionization and sustain full employment will take some time to push up wages. But they will do this reliably. Further, many policies advanced in the name of reducing prices would also take a long time to come to fruition. For example, calls to tighten antitrust restrictions against corporate mergers and to break up established monopolies often have lots of merit. However, they are not policies that happen instantly and have purely predictable effects.

Focusing too hard on prices can obscure when affordability is actually improving

Finally, one key reason to broaden the affordability debate beyond prices is simply to make sure the public and policymakers can correctly identify periods of improvement or degradation of affordability. As an example of how focusing only on prices can lead to an incorrect diagnosis of affordability trends, take the example of two five-year stretches in recent economic history, both measured from a business cycle peak and going five years forward from there: In the years between 2007 and 2012, annual inflation averaged 1.8% and peaked at 5.5%, while between 2019 and 2024, inflation averaged 4.2% and peaked at 9%. Based on price growth alone, one would expect affordability to have eroded more rapidly in that second period, and indeed the popular narrative is that the early 2020s inflation was particularly destructive for affordability.

But between 2007 and 2012, the nation’s unemployment rate averaged 8.3%, while it averaged less than 5% between 2019 and 2024. After 2007, it took 93 months to re-attain the pre-recession unemployment rate, while it took just 29 months after the 2019 business cycle peak. In short, the labor market was far stronger in the second period.

And when it comes to real (inflation-adjusted) wage growth, the second period—largely because of its lower unemployment—saw far better outcomes than the first. In the 2019–2024 period, inflation-adjusted wages for low-wage workers (those at the 10th percentile) and the median worker rose by a cumulative 15.3% and 5.8%, respectively. In short, contrary to most conventional wisdom, affordability improved in this time. Between 2007 and 2012, real wages outright fell for both low-wage and median workers. Even with very slow inflation, affordability was demonstrably worse in that earlier period.

Figure A

More recently, inflation averaged slightly lower in 2025 (2.5%) than 2024 (2.9%). Yet for many workers—and particularly low-wage workers—2025 saw weaker (or even negative) real wage growth. This is largely due to some slight cooling in the labor market as unemployment rose from 4.0% to 4.4% over the course of 2025. Hence, even as inflation decelerated, the cooling labor market led to an even faster deceleration in nominal wages, which meant that affordability worsened for many workers.

Figure B

Reducing inequality is the key to improving affordability

Because many policymakers believe that affordability concerns are a new problem caused by inflation of recent years, they are now on a frenzied search for new and creative solutions to this price problem. But because the real affordability problem for U.S. families did not emerge in the past few years (remember, affordability was improving in the five years before 2025) and because the genuine long-run problem of affordability was about the inequality of income and wage growth, not excess inflation, most of these new and creative solutions just won’t hit the mark.

It’s understandable why many policymakers seem frustrated with being reminded of the long-diagnosed problem of inequality and the proven remedies—such as sustained full employment, higher wage standards like minimum wages, protecting workers’ fundamental rights to organize unions and bargain collectively, and a more robust welfare state.

Some, of course, just don’t believe in some of these solutions, while many who do would argue that these proven remedies are politically unrealistic in the current moment. But because the real affordability problem is an inequality problem that requires those at the top of the income and wealth scales having to accept less growth going forward (less than the stratospheric gains they’ve gotten used to, it should be said), any genuine solution is going to seem impossible in today’s political system that is dominated by the wealthiest families and corporations. Any policy—whether old and well-tested or new and creative—that actually aims to redistribute income, wealth, and power away from where it sits today will face a wall of opposition that must be politically overcome one way or the other. There’s no “one weird trick” where you can develop a policy creative and neat enough that it will somehow fool the rich and powerful about what its end result will be. And if the end result of the new and creative policy does not threaten the prerogatives of the rich, it’s not a real solution.

Today’s affordability concerns are indeed rooted in objective facts about the material circumstances of middle- and working-class families in the United States. Precisely because of this, they deserve more serious analysis and policy responses than they have been getting. This means focusing more on incomes than prices, and it means being clear-eyed that it has been the upward redistribution of income to the top—abetted by policy decisions—that is the drag on typical families’ affordability. Until solutions address that, they’re mostly just noise.

Our decisions about whom and how to tax are decisions about which community needs we have the capacity to address and at what scale. Progressive taxes like personal, investment, and corporate income taxes generate more revenue from those who have the greatest ability to pay, and for whom the cost of losing the next dollar is small, relative to the last dollar of a family struggling to make rent and afford groceries. On the other hand, regressive revenue strategies like non-strategic tariffs, fees and fines, and an overreliance on sales taxes, especially when combined with cuts to social programs, heighten the sense that the system is unfair. Where progressive revenue strategies can bind a community together in mutual support and expand capacity to meet needs through good governance, regressive strategies erode people’s trust in the public sector.

H.R. 1 presents a vision of public finance that is unsustainable and erodes trust in government

Much of the federal tax code is in fact progressively structured, but for decades conservatives have weakened and attacked that progressivity. H.R. 1 (which the White House has referred to as the “One Big Beautiful Bill Act” or “OBBBA”) is the latest Republican-led effort toward breaking down trust in the public sector and social contract. H.R. 1 provides a suite of tax breaks to households across the income distribution; however, the wealthiest households and corporations see a far bigger tax cut from the package than the typical household does. In service to these tax breaks, the bill introduces devastating cuts to Medicaid, SNAP, and critical government agencies designed to help workers and their families thrive. Despite their size and the pain they will cause, these drastic cuts in the federal government’s capacity to serve and support working families are not enough to cover the costs of the corporate tax breaks; the Tax Policy Center estimates that H.R. 1 could increase the federal deficit by between $3.7 trillion and $5.1 trillion by 2034.

But unlike the federal government, states and localities cannot run budget deficits; their budgets must be balanced yearly. When major federal cuts happen, states and localities that rely on federal dollars to maintain critical services are forced to curtail and eliminate services, dive into emergency savings where they exist, or else shift to revenue generation strategies that often fall disproportionately on Black, brown, and poor households. The combination of directly hampering public services working people rely on while shifting more of the burden of raising revenue toward Black, brown, and poor workers and their families weakens worker power and exacerbates racial disparities.

H.R. 1 combines a shift toward regressive revenue strategies with massive tax breaks to corporations and the wealthiest households, in service to the Trump administration’s overarching goal: reasserting white, wealthy, and corporate privilege through tax cuts, deregulation, and the defunding of public institutions.

Regressive revenue strategies: Taking from the poor to give the rich even more breaks

The Trump administration has floated using tariffs as a replacement (either in full or part) for the federal income tax. This is not a new Republican strategy: Tariffs are a kind of consumption tax (on imported goods, along with the intermediate products businesses need to create goods and provide services domestically), and Republican-led state governments tend to rely more on consumption taxes1 (like sales taxes) and less on income taxes to increase revenue. Because poorer households spend a larger share of their income purchasing goods and services than the rich do, consumption taxes are inherently more regressive. The current federal income tax is progressively structured, in spite of the ways conservatives have attempted to weaken that progressivity over time. While tariffs can be a sensible part of a larger industrial policy strategy, governments place too large a burden on low- and moderate-income households when they try to use consumption taxes as a primary source of revenue. 

States and localities may turn to fines and fees to raise revenues in the absence of adequate federal support. These penalties are a poor substitute for progressive taxes. Fines and fees historically have only been able to cover a small fraction of state and local budget costs. And this is baked into the design: If the point of a fine or fee is to deter behavior, the best-case scenario (ending the behavior) would result in no revenue.

Even so, fines and fees cause significant economic pain for working-class families in the Black communities that are most affected by them. On an ethical level, a modern idiom applies: “If the penalty for a crime is a fine, that crime only exists for the poor.” The criminal justice system can trap poor folks in a cruel cycle of penalization for being unable to pay traffic tickets, court fees, and even their own surveillance through ankle monitors. Fines and fees increase the economic burden on those with the least ability to pay, all for a low return, making them a poor substitute for broad, progressive taxes.

Faux-progressive revenue strategies are ineffective and distract workers, their families, and policymakers from the need for real change

Ineffective tax gimmicks like temporary deductions on overtime and tipped income distract from the need for real reform around worker pay and scheduling. The point of requiring businesses to pay time-and-a-half for overtime is to discourage pushing workers to work beyond what we have collectively decided is a full and reasonable period of labor. Tipping is an outdated practice with racist roots, designed to shift the cost of maintaining a workforce onto consumers, rather than having employers properly compensate employees. Instead of cynically gesturing toward affordability through encouraging bad business practices, we should empower workers to fight for better wages and consistent scheduling.

Conservatives may also try to balance budgets by allowing progressive tax expenditures to expire (e.g., the recent expiration of the ACA premium tax credits or the expiration of the expanded child tax credits passed as pandemic relief). Temporary tax breaks themselves are not the most effective means of addressing structural economic issues; if health care or health insurance is persistently inaccessible to wide swaths of the population, we should seek to remedy that by making access universal—or, at the very least, making the credits that allowed greater access in the first place permanent. Allowing tax breaks implemented to address structural inequities to expire without an alternative solution to the problem being addressed is negligence. There are ways to balance budgets that do not involve reversing hard-won progress toward equity.

Progressive ways to generate revenue: Worker-centered tax policies can reduce inequality and expand the tax base

There are better ways of raising revenue that will support workers and their families, rebuild public trust in government, and get us the public goods and services we want and need. Since most Americans earn their living through selling their labor, it makes sense to keep some progressive tax on income to ensure people remain invested in the social contract. But with so much wealth and income concentrated amongst a few individuals, a necessary step is shifting more of the tax burden toward extremely high earners, wealth, and investment income. This will generate more revenue to improve public services and infrastructure, while tamping down on inequality. Adding tax brackets for the highest earners, adopting a legitimate tax on wealth holdings, and taxing the income made from investments at a rate closer to that of income from wages and salaries progressively raise revenues without increasing the burden on most U.S. households.

Proper enforcement of the current tax code would go a long way toward improving both our ability to raise funds and the public’s trust in public finance. The tax code is rife with opportunities for wealthy individuals and corporations to evade paying their fair share of taxes, allowing them to skirt holding up their end of the social contract. The IRS is also critically underfunded and recovering from recent staff reductions from the Trump administration. With enough resources to enforce existing tax law effectively, the IRS could go after the largest tax evaders and see returns that matter, as opposed to disproportionately targeting Black households without the funds to instigate a drawn-out legal battle over an audit.

Table 1

We need a tax code that supports states and localities and promotes full economic participation, not temporary tax gimmicks and handouts to the wealthiest

Taxpayers (literally) cannot afford to accept the conservative propaganda that all taxation is a burden on households. Taxes are one way of binding a democratic community together and allowing us to share in the costs of creating collective prosperity and community. Especially at the state and local levels, tax revenues are essential to providing the services people need to thrive. When federal funding gets pulled back and states and localities turn to regressive revenue strategies, it is working-class families who pay the price.

If we are going to rebuild a sense of trust in the social contract, we need to structure the tax code such that it becomes more progressive, tapping into a greater portion of the massive amounts of wealth and income that have pooled at the top. We can use that revenue to fund programs and new infrastructure that allow more people to fully participate in the economy:

• improved funding for public schooling, increasing teacher pay and quality of education
• a fully funded federal food assistance program, and/or adequate funding to states to support their own cash-assistance programs more comprehensive than Temporary Assistance for Needy Families (TANF)
• expanded access to and adequacy of Medicaid, or Medicare for All

Each of these initiatives could improve affordability and remove the need for state and local governments to pursue revenue regressive strategies that do more harm than good (like fines and fees). We won’t solve every structural inequality and eliminate all disparities through reforming the tax code; but building the resources and will to collect taxes in a progressive way are steps toward a fairer economy and a government that earns the public’s trust.

1. Consumption taxes have some potential uses. Carbon taxes, for example, tax the consumption of goods whose production intensively uses greenhouse gas-emitting inputs; if consumers look to avoid these goods by switching to others whose production involves fewer greenhouse gas emissions, we achieve an important social good.

Strengthening collective bargaining rights is one of the most powerful policy levers states have available to confront primary economic challenges facing all workers today: an affordability crisis driven by the long-term suppression of workers’ pay, growing income inequality, and persistent racial and gender labor market disparities. It’s widely recognized that in today’s wildly unequal economy, millions of workers wish they had a union contract but face daunting obstacles to exercising their legal rights to get one. Moreover, many workers have never been protected by federal labor law at all due to Jim Crow-era exclusions.  

For the second year in a row, Colorado and Virginia state legislators have passed landmark legislation to remove barriers to unionization:  

• In Colorado, legislators have passed the Worker Protection Act to repeal an 83-year-old state policy that has limited Colorado workers’ freedom to form unions by requiring they undergo a state-mandated “second election” before they can secure full collective bargaining rights.  

• In Virginia, lawmakers have passed collective bargaining legislation to ensure full union rights for more than 500,000 state and local government employees and home care workers—all of whom have historically been denied coverage under federal labor law. The legislation would replace Virginia’s longstanding ban on public employee collective bargaining that has resulted in one of the largest public-sector pay gaps in the nation. 

Both pieces of legislation would correct historical wrongs—restoring rights that Colorado and Virginia workers have been denied since the 1940s, when past state lawmakers adopted anti-union policies amid a wave of white supremacist, big business backlash to multiracial union organizing. Yet both pieces of legislation were vetoed by their states’ respective governors in 2025 and are now once again awaiting governors’ signatures in 2026. 

In Colorado, Governor Polis has already indicated intent to once again veto the Worker Protection Act, but it’s not too late for Polis to seize his second chance to sign the bill.  

In Virginia, Governor Glenn Youngkin vetoed the collective bargaining legislation in 2025 and was ineligible to run for reelection because of term limits. This year, when the legislation was first sent to newly elected Virginia Governor Spanberger, she proposed extensive, damaging amendments to weaken the bill instead of signing it. The General Assembly has since rejected those amendments, and now Spanberger has her own “second chance” to sign this transformative legislation into law. 

Meanwhile, scores of anti-worker actions from the Trump administration are continuing to accelerate a decades-long trend of weakening workers’ rights, suppressing wages, and eroding bargaining power. This year, state lawmakers have handed both Governor Polis and Governor Spanberger historic opportunities to rebalance unequal power in their states’ economies and remove major obstacles Coloradans and Virginians face to exercising their rights to unionize and collectively bargain. And the choices Polis and Spanberger make in the next few weeks will shape economic outcomes in their states for years to come.

Today’s jobs report came in stronger than expected as payrolls increased by 115,000 in April. As a result, average monthly growth the last three months was 48,000 jobs. The unemployment rate held steady as both labor force participation and the employment level dropped slightly.
#NumbersDay #EconSKy

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— Elise Gould (@elisegould.bsky.social) May 8, 2026 at 7:37 AM

Overall job gains were 115k in April. Job gains were strongest in health care. transportation and warehousing, and retail trade. Losses continue in information, financial activities, and the federal government.
#NumbersDay #EconSky

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— Elise Gould (@elisegould.bsky.social) May 8, 2026 at 7:50 AM

The federal workforce continues to suffer down another 9,000 jobs in April. Federal employment has shrunk an alarming 345k jobs since Jan 2025. The vital services federal employees provide cannot be done without these essential workers.

Note: Federal employees on furlough are counted as employed.

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— Elise Gould (@elisegould.bsky.social) May 8, 2026 at 7:56 AM

After finally seeing some reversal of grave losses in recent months, manufacturing employment ticked down again in April. Since January 2025 when Trump took office, the manufacturing sector has lost 77,000 jobs.

#EconSky #NumbersDay

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— Elise Gould (@elisegould.bsky.social) May 8, 2026 at 7:59 AM

Nominal wage growth continued to slow in April. Over the last three months, wages have growth only 2.8% (annualized). The one-month change was even slower (1.9%).

As inflation rises, real wages fall as workers and their families find it increasingly difficult to make ends meet.
#EconSky #NumbersDay

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— Elise Gould (@elisegould.bsky.social) May 8, 2026 at 8:12 AM

Overall unemployment masks important differences by race and ethnicity. The Black unemployment rate ticked up slightly to 7.3% in April. Even given volatility due to smaller sample sizes, it’s clear that the Black unemployment rate remains elevated, particularly much higher than any other group.

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— Elise Gould (@elisegould.bsky.social) May 8, 2026 at 8:33 AM

With a depressed hires rate, I’ve been concerned about young people having opportunities to break into the labor market. The unemployment rate of young workers—16-24 years old—ticked up again in April, once again hitting 9.5%
#EconSky #NumbersDay

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— Elise Gould (@elisegould.bsky.social) May 8, 2026 at 8:37 AM

Key takeaways:

• The unemployment rates for young college graduates and young noncollege workers have risen slightly faster than the overall unemployment rate.
• But the rise in young college graduate unemployment in particular was mostly due to higher labor force participation: The employment-to-population ratio for young college graduates has held steady since 2024.
• Certain demographic groups, such as Black and Hispanic workers, face higher unemployment and lower hourly wages, even for young people with limited work experience.
• In the long run, the college degree is losing its edge: Unemployment for young college graduates has risen in historical terms, and the college wage premium has been flat or falling in recent years.

Over the last couple of years, the overall labor market has slowly weakened—with many arguing that the weakening is most pronounced for young college graduates (whom we define as young workers ages 22–27 with only a college degree).1 The evidence is actually pretty mixed—by some measures the young college graduate labor market is notably weaker, but their outcomes are largely no worse than those of noncollege young people or the labor market writ large.

In this first blog post of our series on young college graduates, we examine the labor market the college graduates of the Class of 2026 are entering. We look at unemployment rates and employment-to-population (EPOP) ratios for young workers with and without a college degree and examine wages for young college graduates by demographic characteristics. We also explore longer-term trends in unemployment driven by rising educational attainment, as well as changes in the college wage premium—the pay advantage college graduates earn over their high school graduate peers. In the next post, we will analyze trends in the industries and occupations young college graduates tend to work in, and take a closer look at the tech sector and any fingerprints of AI on labor market outcomes.

Unemployment on the rise for young college graduates—but mostly because of higher labor force participation

Over the last couple of years, the labor market has shown some signs of weakening, though some often reported measures are overstating it. For example, payroll employment growth has slowed significantly, but this is largely driven by much slower population growth over the past year and a half as net immigration has collapsed. The unemployment rate has slowly increased, though the share of the prime-age population—those 25 to 54 years old—with a job has remained high. Of most concern is the hires rate—the number of hires as a share of total employment—which has been steadily falling over the last three years. The hires rate is now at the same levels seen in 2013 and 2014, a period during the prolonged recovery from the Great Recession that saw unemployment rates 3.0 percentage points higher than they are today. Focusing just on unemployment rates, the softening of the overall labor market appears to be hitting young college graduates more acutely.

Figure A shows the overall unemployment rate, as well as the unemployment rate for young college graduates and young workers without a four-year college degree. Since 2023, the overall unemployment rate has risen from 3.6% to 4.3%, a slow and measured increase of 0.7 percentage points. The unemployment rate for young college graduates has increased from a low of 4.0% in July 2023 to its recent high of 5.3% in March 2026, a faster increase of 1.3 percentage points. Young workers without a college degree also experienced a rise in unemployment, though their rise began a little later than the other groups. Their unemployment rate has risen by 1.2 percentage points since March 2024, up from 5.9% to 7.1% by March 2026.

Figure A

Some have pointed to this disproportionate rise in young college graduates’ unemployment rates as evidence that AI is beginning to substitute for the white-collar jobs young graduates typically enter. But this conclusion is premature for several reasons. First, while the rise in the unemployment rate in the most recent period is faster for college graduates than for all workers, the same is true for other young workers without a college degree (see Figure A). This suggests that there isn’t anything particularly damaging to young college graduates happening today, such as AI specifically destroying their labor market prospects.

Further, the increase in the unemployment rate for young college graduates over the last two years appears to be driven by an increase in labor force participation rather than a declining probability of having a job. The EPOP for young college grads has held steady over the last two years as the unemployment rate rose. Nearly all (98%) of the increase in the unemployment rate between 2024 and 2026 for young college graduates was driven by the increase in the labor force—meaning more young workers are entering the labor market in search of opportunities as opposed to giving up and leaving the labor force or never entering it at all. This would actually fit a historic pattern in which labor force participation rates tend to respond with a surprisingly long lag to labor market developments. The historically strong labor markets of the early 2020s likely are still pushing up the labor force participation rates of young college graduates today.

When we look at EPOPs since 2019, shown in Figure B, we see that young workers, college and noncollege alike, fall in line with the overall trend. Not surprisingly, given the industries and occupations hit the hardest, young noncollege workers fared the worst in the pandemic recession, but now are faring similarly to their college-educated counterparts. Prime-age EPOPs have remained the most resilient through this business cycle.

Figure B

Data from the Job Openings and Labor Turnover Survey provide useful insights into job openings, hires, quits, layoffs, and other separations, but they are not broken down by demographic, limiting our ability to analyze young workers. However, the depressed hires rate suggests that it is more difficult for new entrants to get a foothold in the labor market. The quits rate is down, signaling a reduction in the overall churn in the labor market as workers and employers sit tight through this period of economic uncertainty—likely related to chaotic policy decisions and implementation around tariffs, deportations, and the conflict with Iran. If the layoffs rate ticks up now, the unemployment rate is likely to spike quickly and could spell even more trouble for young people who tend to experience larger swings in unemployment with the business cycle.

Finally, there is no evidence that young college graduates are sheltering in school—i.e., going on to graduate school—to weather out the weakened labor market. In fact, enrollment rates among young college graduates have been falling slightly over the last couple of years, from 19.1% in 2024 and 18.8% in 2025 to 18.5% in 2026. Even though opportunities in the labor market are weaker, it’s perhaps not surprising that enrollment rates are on the decline. The Trump administration’s attacks on higher education have reduced available funding at colleges and the ending of student loan forgiveness and caps on borrowing make it increasingly difficult for students to make those educational investments.

Wages remain unequal across demographic groups

Real (inflation-adjusted) median wages of young college graduates rose slightly over the last year, up just 0.4% since 2025, consistent with the slowdown in wage growth for workers overall. Since 2019, young college graduate wages have grown 7.4% after adjusting for inflation.

Despite this positive wage growth, racial and gender wage gaps remain large even among young college graduates who are just starting their careers. Figure C shows that women are paid $4.18 less per hour than their male counterparts. At 85.9% of men’s pay, a young woman working full time with a college degree is paid $8,700 less over the year.

Young Asian American Pacific Islander (AAPI) college graduates are paid more than white, Hispanic, or Black workers. The demographic categories shown in Figure C are mutually exclusive: AAPI, white, and Black workers are non-Hispanic, while Hispanic workers can be of any race. Young white college graduates are paid $2.76 per hour less than their AAPI counterparts, while Black and Hispanic workers are paid $5.36 and $5.05 less, respectively. For a full-time worker, this translates into more than $10,000 in lower earnings over the year for Black and Hispanic workers. Not only are wages lower for these historically disadvantaged groups, but the unemployment rates of young Black college grads in particular are also higher. Therefore, their ability to secure employment at all—at any wage—is diminished.

Figure C

Young college grads are competing against a wider labor force that is more educated 

As educational attainment has risen across the broader workforce, the advantage that young college graduates once enjoyed relative to the rest of the labor force in terms of lower unemployment and higher wages has steadily declined.

The young college graduate unemployment rate recently surpassed the overall unemployment rate, meaning a greater share of young college graduates are now out of work than workers writ large. The erosion of the unemployment advantage for young college grads, however, isn’t a sudden shift; as shown in Figure A, the trend has been building since 1979, when young college graduates had an unemployment rate of 4.0%, 1.9 percentage points below the national average. Over the following four decades, that advantage eroded. By February 2020, young college graduates had an unemployment rate of 3.8%, 0.2 percentage points above the overall rate, a slow but complete reversal of the historic edge. In recent years, the historic trend has continued—now the young college graduate unemployment rate is a full 1.0 percentage point above the overall. And the young college graduate unemployment rate is at historically high absolute levels today, currently sitting higher than it was during the worst of the 1990 and 2001 recessions.

The shift is not explained by young college graduates faring worse relative to their noncollege peers, as that gap has held relatively stable at around 2.0 percentage points. Instead, as the educational attainment of the overall workforce increased, young college graduates became less advantaged compared to the overall labor force. Further, as a greater share of young adults now attend college and are likely from a wider range of socioeconomic backgrounds, a college degree for somebody in their early 20s today is likely a less reliable marker of general economic privilege than it used to be.

Figure D displays educational attainment over time for young workers and all workers. From 1980 to 2026, the share of the workforce with a bachelor’s degree increased from 12.5% to 26.1%, more than doubling as a share of total employment. The overall level of college attainment for young adults rose from 18.0% in 1979 to 31.6% in 2026. If we include those with bachelor’s and/or an advanced degree in the overall workforce, the increase in educational attainment is even more stark, rising from 18.4% to 41.9%.

Figure D

The democratization of college degrees carries some clear upsides for productivity and the overall health of the U.S. economy. A more diverse set of people have accessed higher education and benefited from the advantages of being a degree holder in recent decades. This rise in college attainment has obviously not been costless, as many of these degrees could only be obtained by taking on large amounts of student debt, which may well provide some constraints on labor market opportunities and options for young adults.

Young college graduates used to be more male, white, and likely to come from higher-income families—all characteristics rewarded (fairly or not) in labor markets. This growing diversity of college graduates may well mean that young grads are less likely to exit (or not enter) the labor force when job prospects are bad. In prior decades, it is possible that young college graduates were more likely to have resources to fall back on during periods of unemployment, and they clearly had less student loan debt. Now, with fewer fallback options and greater debt levels, the cost of being jobless may weigh more heavily on this group, leading people to continue actively searching for work instead of staying out of the labor force even when jobs are scarce, driving the unemployment rate higher.

The long-term rise in educational attainment may also have helped squeeze the wage advantage college graduates hold over those with just a high school degree. Some of the same reasons discussed above—the college-educated population becoming more economically diverse and more workers attaining advanced degrees—may also have eroded the measured earnings edge that once came with just a bachelor’s degree.

A useful way to measure this is the college wage premium. The college wage premium is the percentage boost in wages associated with holding a college degree, after controlling for demographic factors like race, gender, age, and geography. As Figure E shows, this premium peaked around 2015 and has declined slowly since. Today, the overall college wage premium stands at 55.2%, roughly where it was in the late 1990s. For younger workers ages 22–27, the premium is slightly lower, but follows the same pattern, also peaking around 2015 before flattening or trending downward.

Figure E

The labor market is weakening and young workers’ prospects seem worse-off than they did just a couple of years ago. But young college graduates are facing a weakened labor market only slightly worse than that experienced by other workers. Their unemployment rate has risen faster, though similarly to noncollege young workers, while their employment-to-population ratio has remained generally strong. A depressed hires rate may make it even harder for these young workers to get a foothold in the labor market. Much of these short-term trends of higher and rising unemployment are the continuation of a decades-long trend of worsening outcomes as the overall population increases their educational attainment.

1. Throughout this brief, we define young college graduates as people between the ages of 22 and 27 with only a college degree. Unlike similar analyses of young workers, We do not exclude young college graduates that are currently enrolled in school, but the results here are robust either way. Unless otherwise noted, data for 2026 represent a 12-month average from April 2025 through March 2026 for the most up to date and reliable estimates, which removes seasonality and increases sample sizes. Analysis for smaller demographic groups uses a 36-month average to improve reliability.