Once upon a time, a university degree essentially guaranteed you a decent entry-level job.

Your first job out of uni offered a predictable path up the career ladder.

The graduates of 2025 face an uncertain future since, in many jobs, the first few rungs of the career ladder are disappearing.  

According to job platform Indeed, graduate vacancies in Britain fell by about 33 per cent between 2024 and 2025. This isn’t a simple reflection of a general slowdown of the UK economy, as the unemployment rate among university graduates is higher than the overall jobless rate.

The business world is changing in the age of AI and young university graduates will have to adjust quickly.

The same story plays out across Australian businesses too. 

Why are fewer graduate jobs advertised? Three forces are colliding at once: Economic uncertainty, investment in AI, and simple demographics. 

First, businesses prefer to expand and invest when they predict a positive future. Current economic forecasts are riddled with uncertainties.

Nobody is sure where tariffs will land, in which direction interest rates will move, how wars and geopolitics will develop. With so many uncertainties in the air businesses pressed “pause”. They kept operations going but didn’t make major changes.

The “pause” in graduate intakes that began during Covid has quietly been stretched into 2025. 

Second, every major business is jumping on the AI bandwagon. Understandably so, as many junior tasks (the grunt work of law, accounting, consulting or banking) are exactly the kinds of things that AI can do just fine.

Why would a big business hire 20 graduates when a handful grads equipped with AI tools can create the same amount of output? 

Third, we push over half of our high school graduates into the university system each year. With so many young people going to university, more graduates are competing for the limited pool of grad jobs.  

The result is a “diamond-shaped” workforce in big professional service firms: A small group of leaders, a big cohort of workers in the middle, and few young grads at the bottom. Which begs the question of where tomorrow’s middle managers will come from?  

Law is a telling case study. Senior partners claim that most of what junior lawyers once did can be automated (either now or very soon). Today the average lawyer in many firms is in their mid-50s.

Where will a law firm that stops hiring graduates today get more senior lawyers from in the future? Companies want the short-term efficiency of automation, but they still need the long-term pipeline of human talent. 

A firm that doesn’t hire enough graduates limits its internal talent pool. This can lead to “overpromoting” existing staff, which results in a less competent leadership cohort. That works for a while, but over time you end up with too many people in roles they’re not quite ready for.

I described in previous columns that demographically we continue to run out of workers. This persistent general skills shortage means businesses can’t simply tap into the general labour pool to hire mid-career professionals in the 2030s and 2040s when they will need them. 

We’ve seen similar mistakes before. In mediaeval Europe, apprenticeships were essential pipelines. Families even paid masters to take on their children.

Strip away entry-level roles now, and we may have to reinvent this model. I’m not saying the feudal system will celebrate a comeback, but we must rethink early career years in the professional service sector. 

The class of 2025 is rightly asking what they should do? Why rack up tens of thousands of dollars in HELP (formally HECS) debt if there’s no clear career path at the end?

The answer isn’t simple. A degree from a good university still opens doors. But universities more broadly are under pressure: They churn out graduates who often lack the practical skills, prompting savvy, and adaptability the market now demands.

Back in the day, university degrees not only were cheaper to attain but they were also rarer – a bachelor’s degree indicated that you belong to the top few per cent of the intellectual elite. Now a bachelor’s degree will set you back a lot more money while only indicating that you belong to the top half of the intellectual cohort. 

The big professional service employers (banks, consultancies etc.) stopped obsessing about university degrees. Don’t bother with a master’s degree or a PhD.

These employers want young and cheap workers and are increasingly confident in teaching their staff the NAB-way or the PWC-way in house.  

This isn’t just a problem for the graduates of today. It’s an all-of-society problem. If we hollow out the bottom of the workforce pyramid, the whole structure weakens.

Today’s 22-year-olds are tomorrow’s middle managers, executives, and mentors. If they can’t get a foot in the door, we’ll all feel the shortage in a decade’s time. 

Yes, AI is changing the nature of work. But let’s not kid ourselves: The workplace has always changed. The typewriter disappeared. So did the typing pool. But the key difference now is speed. The change is happening in years, not decades. 

Businesses face a stark choice. Save on graduate hires now and enjoy short-term efficiency but risk a hollowed-out workforce in a decade. Or invest in young talent today, building the human capital that AI alone can’t provide.

If we don’t rebuild the first rung of the ladder, there’ll be nothing left for anyone to climb. 

Simon Kuestenmacher is a co-founder of The Demographics Group. His columns, media commentary and public speaking focus on current socio-demographic trends and how these impact Australia. His podcast, Demographics Decoded, explores the world through the demographic lens. Follow Simon on Twitter (X), Facebook, or LinkedIn.