The Federal Reserve Bank of New York reported that 42 percent of recent college graduates were underemployed in the second quarter of 2026. Their unemployment rate remained elevated at about 5.6 percent.
Those numbers do not prove that employers are overlooking qualified people. They do raise a practical hiring question: Are organizations separating limited experience from limited potential, or are they using experience as a shortcut for evidence they have not collected?
This is not an argument for lowering standards. It is an argument for defining the right standards and evaluating them consistently.
What the 42 percent figure means, and what it does not
The New York Fed defines an underemployed college graduate as someone working in an occupation that typically does not require a bachelor's degree. The measure is useful, but it needs context.
It does not mean 42 percent of recent graduates are in bad jobs. It does not show whether each person wants a different position. It does not measure performance, motivation, or job satisfaction. It also does not prove that a degree should be required for more jobs.
The data show that a large share of recent graduates are not moving directly into work that typically requires the education they earned. Employers should examine whether their own screening practices can recognize capable early-career candidates who have not yet accumulated years of conventional experience.
Experience is evidence, but it is not the entire decision
Relevant experience matters. It can show that a candidate has performed similar tasks, worked in a comparable environment, or dealt with predictable job pressures. Some positions require experience because mistakes would create unacceptable safety, quality, regulatory, or financial risk.
The problem begins when an employer treats years of experience as proof of every requirement. Two candidates can have the same tenure and very different capability, judgment, motivation, learning speed, and behavioral fit. A recent graduate can also bring relevant evidence from internships, part-time work, military service, volunteer leadership, project work, or other settings that a résumé screen may undervalue.
A stronger process asks which requirements must be present on day one, which can be developed, and how each one will be evaluated.
Six places early-career screening goes wrong
Entry-level work requires several years
The requirement can exclude people before the employer decides whether those years are truly necessary for entry performance.
Polish is mistaken for capability
Unstructured interviews can reward practiced stories and familiarity with professional hiring conventions.
The job description is outdated
Employers screen against old duties even though technology, customers, workflows, and team expectations have changed.
Learning capacity is assumed
The process asks what the candidate knows now but never examines how the person reasons, learns, adapts, or handles unfamiliar work.
Interest in the work is ignored
A person may be able to perform the job without finding the work or environment naturally engaging over time.
One signal carries too much weight
A degree, assessment score, interview, referral, or work sample becomes the decision instead of one part of the evidence.
A better early-career hiring process
- Define successful performance before reviewing candidates.
Identify the outcomes, critical tasks, work conditions, decisions, relationships, and pressures that define the position. A current job analysis keeps the standard focused on the work instead of the résumé of the last person who held it.
- Separate essential qualifications from convenient proxies.
Confirm which credentials, licenses, knowledge, and experience are required at entry. Then identify what can reasonably be learned through onboarding, training, and supervised practice.
- Add whole-person job-fit evidence.
PXT Select evaluates thinking style, behavioral traits, and interests in the context of a position-specific Performance Model. It can help an employer examine fit that a résumé and degree do not fully show. It is not a technical-skills test and does not verify credentials or guarantee performance.
- Use a structured interview to verify the important gaps.
Ask comparable, job-related questions and use defined scoring standards. The U.S. Office of Personnel Management notes that structured interviews increase agreement among interviewers by limiting unnecessary discretion in evaluation.
- Include a realistic work sample when the role allows it.
A short, job-relevant exercise can show how a candidate organizes information, communicates, solves a problem, checks work, or learns a new procedure. Keep the exercise consistent and appropriate for the position.
- Measure early performance and improve the standard.
Track quality, productivity, retention, safety, customer results, learning milestones, and manager feedback at 30, 60, and 90 days. Use the evidence to improve onboarding and revisit the Performance Model, not to rationalize the original decision.
Match each hiring question with the right evidence
| Hiring question | Useful evidence | What it cannot settle alone |
|---|---|---|
| Can the person perform required tasks now? | Credentials, relevant experience, and work samples | Long-term motivation, adaptability, or full job fit |
| Can the person learn unfamiliar work? | Thinking-style evidence, learning history, and structured exercises | Whether training and supervision will be sufficient |
| How may the person approach the work? | Behavioral evidence and structured interview examples | Exactly how the person will behave in every situation |
| Is the work likely to hold the person's interest? | Interest patterns and a direct career discussion | Future retention or satisfaction |
| Should we hire this candidate? | The complete set of job-related evidence and human judgment | No single tool should make the decision |
What the business case can look like
Consider an employer hiring 12 early-career employees into roles paying $55,000. The employer estimates that recruiting, vacancy time, onboarding, lost productivity, and replacement work create $20,000 in internal cost whenever one new hire leaves or needs replacement during the first year.
Early-career hires
Estimated internal cost per replacement
Estimated exposure if three hires need replacement
If three of the 12 hires require replacement, the estimated exposure is $60,000. If a more disciplined process helps the employer avoid one of those outcomes, the estimated avoided cost is $20,000. That is an illustration, not a universal benchmark. The employer should use its own compensation, vacancy, training, productivity, and turnover data in the turnover cost calculator.
An assessment does not create that value by itself. The process creates value when the organization defines the job accurately, uses the right evidence consistently, verifies the results, and supports the person after hiring.
Keep the process responsible
The Equal Employment Opportunity Commission states that employment tests and selection procedures should be job-related, properly validated for their intended purpose, and reviewed for adverse impact. Employers should also provide reasonable accommodations when required and use comparable procedures for similarly situated candidates.
Hiring for potential does not mean guessing. It means replacing weak proxies with evidence tied to the actual job. It also means recognizing the limits of every source, including education, experience, interviews, work samples, references, and assessments.
This is general process guidance, not legal advice. Employers should consult qualified counsel about specific roles, locations, and selection procedures.
The decision
Employers do not need to choose between experienced candidates and recent graduates. They need a process that can evaluate both against the same defined requirements.
The 42 percent underemployment rate is not proof that employers are screening out potential. It is a reason to examine whether the process can see potential when it appears without lowering standards or relying on one score.