When Starbucks announced last month that it would be cutting over 1,000 corporate jobs, it underscored a troubling pattern for white-collar employees: in recent years, they have experienced sharper increases in unemployment compared to other groups, along with slower wage growth.
This development has reignited a debate among economists that has been ongoing for some time: Are these job losses only a temporary phase, or do they signal a deeper and more lasting shift?
For over two years, the overall unemployment rate remained below 4 percent, but since May, it has consistently exceeded that threshold.
Economists argue that the job market remains strong by historical standards, and much of its recent weakening can be attributed to the economic aftermath of the pandemic. During a period of rising demand, companies hired aggressively, only to later reduce their workforce when the Federal Reserve increased interest rates. Many businesses have since been restructuring under investor pressure to operate more efficiently. However, with rapid advancements in artificial intelligence and policy changes under President Trump, which have affected federal agencies that support many white-collar jobs, some question whether knowledge-based work is facing a long-term decline.
“We are witnessing a significant shift in how work is performed in the professional sector,” said Carl Tannenbaum, chief economist at Northern Trust. “I tell people: a wave is coming.”
One of the clearest examples of this transition is in the video game industry. The sector saw a hiring boom in 2020 as homebound consumers turned to gaming for entertainment. However, after a period of expansion, many companies began downsizing, leading to thousands of job cuts over the past two years.
The extent of these layoffs became evident at the 2024 Game Developers Choice Awards, where the event’s host referenced the industry’s record-breaking job losses. That same year, unionization efforts that initially focused on lower-paid quality assurance testers expanded to include higher-paid professionals like game designers, producers, and engineers.
At Bethesda Game Studios, owned by Microsoft and known for the Fallout series, workers decided to unionize partly in response to a wave of layoffs in 2023 and 2024, seeing a union as a way to protect themselves in an increasingly unstable job market. “Bethesda hadn’t seen layoffs in a very long time,” said Taylor Welling, a producer at the studio with a master’s degree in interactive entertainment. “That really scared a lot of people.” Microsoft declined to comment.
The financial sector has also been affected. Unemployment in finance and related industries, though still low, has risen by roughly 25 percent between 2022 and 2024 as higher interest rates slowed mortgage demand and companies sought to streamline operations. In an earnings call last summer, the CEO of Wells Fargo highlighted the company’s ongoing cost-cutting measures, which had led to 16 consecutive quarters of workforce reductions, including a nearly 50 percent decrease in home lending staff since 2023.
Last fall, Wells Fargo laid off about a quarter of its 45-member conduct management intake team, responsible for handling complaints of misconduct. Heather Rolfes, a lawyer who lost her job in the cuts, believes the company was looking to cut costs by reducing its U.S. workforce and that her team may have been targeted because of recent unionization efforts.
“I think they saw an opportunity to address two issues at once,” Rolfes said. Some of her former colleagues now worry about job security, particularly on Tuesdays after payday—the day when layoffs are typically announced. “We feel like at any moment, we could be let go,” said Eden Davis, another team member.
A Wells Fargo spokesperson stated that the job cuts were unrelated to union activity and were part of regular adjustments to staffing based on market conditions. He also pointed out that two managers from the same team were also laid off.
According to Atif Rafiq, a corporate strategist and former executive at McDonald’s and Amazon, many companies are now adopting Amazon’s model of cross-functional teams, which integrate workers from different departments like coding and marketing. While this approach enhances efficiency, it also exposes redundancies, leading to further job reductions.
When Starbucks announced its layoffs last month, CEO Brian Niccol emphasized a need to “eliminate layers and duplication” in order to build “smaller, more agile teams.” Nissan echoed similar reasoning when announcing management reductions this month.
Data from the Federal Reserve Bank of New York shows that unemployment among college graduates has risen by 30 percent since hitting a low in September 2022—climbing from 2 percent to 2.6 percent. In contrast, overall unemployment has increased by about 18 percent, from 3.4 percent to 4 percent.
An analysis by Julia Pollak, chief economist at ZipRecruiter, found that joblessness has risen most significantly among those with bachelor’s degrees or some college education but no degree, while remaining steady or declining among those with advanced degrees or without a high school diploma.
According to ADP Research, which monitors labor trends, hiring rates have slowed more for jobs requiring a college degree than for positions that do not.
Some economists believe these changes may be temporary and not necessarily cause for alarm. Harvard labor economist Lawrence Katz noted that the rise in unemployment among college-educated workers is only slightly higher than the overall increase and that joblessness for both groups remains historically low.
Professor Katz also suggested that slower wage growth for upper-middle-class employees could be partially explained by their willingness to accept lower salaries in exchange for remote work. Data from the Economic Policy Institute indicates that since 2019, wage growth has been slowest for those in the 70th and 80th income percentiles.
However, there are indications that the long-term value of a college degree may be shifting. The wage gap between those with and without college degrees expanded steadily from 1980 until around 15 years ago, at which point it leveled off—though it remains substantial.
This stagnation may be partly due to a growing pool of college graduates, making them less scarce in the job market. However, some experts argue that technological advancements have also reduced the demand for certain white-collar roles, such as bookkeeping, which once provided high salaries for college-educated workers.
Artificial intelligence could further accelerate this trend by automating tasks traditionally handled by professionals. A recent study found that software developers using AI-powered coding assistants improved their efficiency by over 25 percent, with the biggest productivity boosts observed among less experienced developers. This suggests that AI adoption could narrow the wage gap between junior and senior developers by diminishing the productivity advantage of more experienced workers.
Mert Demirer, an economist at MIT and co-author of the study, speculated that AI could eventually transform coding jobs, with human developers shifting into managerial roles overseeing AI assistants. If that happens, wages could rise as workers become more productive. Additionally, AI-driven cost reductions in software development might increase demand for coding jobs.
For now, however, many tech executives and investors view AI as an opportunity to cut labor costs. A software engineer at a major tech company, who spoke anonymously, noted that his team has been reduced by half over the past year, yet expectations for output remain the same, thanks to AI tools. Overall, unemployment in tech-related industries has surged by more than 50 percent since 2022, rising from 2.9 percent to 4.4 percent.
Another factor influencing white-collar employment is President Trump’s restructuring of the federal government. His administration’s budget cuts and hiring freezes have led to job losses, particularly in sectors that depend on federal funding, such as universities and nonprofit organizations. For example, Johns Hopkins University, which relies heavily on government research grants, recently announced plans to lay off 2,000 employees worldwide due to these funding reductions.
Professor Katz emphasized that a substantial portion of college-educated workers rely on government funding, either directly through public-sector jobs or indirectly through grant-supported institutions. “A significant reduction in federal spending on research, education, and science could have a major impact,” he warned.
“The current unemployment rate for college graduates doesn’t look particularly high,” he added. “But that may change within the next six months.”