The university degree premium is shrinking in the US and UK as labor-market demand weakens, with part of the fall attributed to white-collar exposure to generative AI. According to research cited by Dawn.com, the US college wage premium fell roughly eight percent between 2022 and 2026, while Pakistan faced a 12 percent drop in university enrollments as students question the economic return of higher education.
College Graduate Wage Premiums Drop Globally
- Declining Premium: US college graduate wage premiums have dropped back to mid-1990s levels, falling about eight percent since 2022 according to studies by José Azar, Mireia Giné, and Javier Sanz-Espín.
- Enrollment Contraction: Pakistan’s university enrollment fell from a peak of 2.23 million down to approximately 1.96 million in 2024-2025, blamed on inflation, rising fees, reduced government spending, and doubts about what a degree now returns.
- Structural Shifts: Research attributes about 28 percent of the fall to the exposure of white-collar occupations to generative AI, although the link is not proven to be causal, accelerating the push toward skills-based technical and vocational training models.
The Disappearing Graduate Premium Across the US and UK Labor Markets
Universities were originally established as centers of higher learning, places to pursue knowledge rather than wages. Over decades, that mission shifted. By the mid-20th century, the university degree had become the passport to a professional career. Today’s teenagers and their parents view it differently, pursuing it for its economic value, while employers treat it as a signal of advanced skills. Both assumptions are now in doubt.
Claudia Goldin and Lawrence Katz demonstrated in their work on the “race between education and technology” that increased education does not automatically match skill demands. While the information revolution fueled a four-decade boom in knowledge jobs, that phase is ending. Research by José Azar, Mireia Giné, and Javier Sanz-Espín indicates that the US wage premium for college graduates fell steadily between 2022 and 2026, dropping about eight percent to mid-1990s levels.
In the United Kingdom, similar patterns have emerged. The FT’s John Burn-Murdoch reports a sharp fall even among STEM graduates and in London’s knowledge economy, despite a slowing share of young people entering universities. Supply has leveled off in both nations, which would ordinarily drive the premium upward. Instead, weaker demand—with about 28 percent of the fall attributed to generative AI’s exposure of white-collar occupations—is altering the equation.
Enrollment Pressures and Institutional Strain in Pakistan
Pakistan’s higher education system reflects these strains under distinct local pressures. The country currently hosts 278 recognized universities and degree-awarding institutions, with 163 in the public sector accommodating roughly 85 percent of active students. However, the Higher Education Commission has permitted rapid growth among thinly resourced private institutions, which enrol thousands of students for revenue.
University enrolment fell to about 1.96 million in 2024-2025 from a peak of 2.23 million—a drop of roughly 260,000 students in three years. Even after eligibility criteria were relaxed, 743 out of 22,300 medical and dental seats remained vacant in the 2025-2026 academic cycle. The fall has been blamed on inflation, climbing tuition fees, reduced government spending, and doubts about what a degree now returns.
| Metric | Previous Peak | Current Level | Net Change |
|---|---|---|---|
| Pakistan University Enrolment | 2.23 Million | 1.96 Million (2024-25) | about 12pc drop (-260,000 students) |
| US College Wage Premium | 2022 Baseline | 2026 Level | about eight per cent total drop |
| Medical/Dental Vacant Seats (Pakistan) | Standard Capacity | 743 Vacant (2025-26) | 743 of 22,300 unfilled |
Policymakers Face the Necessity of Building Credible Alternatives
As academic credentials lose their guaranteed return, policymakers face the necessity of building credible alternatives. Pakistan’s technical and vocational education and training (TVET) sector remains hampered by outdated syllabuses, poorly equipped workshops, and instructors with minimal industry exposure. Social stigma surrounding manual trades further depresses participation rates.
Institutional fragmentation exacerbates these challenges. Oversight is divided between the federal National Vocational and Technical Training Commission (NAVTTC) and provincial bodies like TEVTA, producing inconsistent policies. To establish scale and rigor, NAVTTC must evolve into a market-driven facilitator taking its cue from international vocational success stories.
International precedents offer structural roadmaps. Germany and Switzerland train young people inside firms to standards set with industry, giving apprenticeships the same esteem as a degree. While the Swiss vocational model is highly regarded and flexible to market demands, Germany’s dual model divides student hours between practical enterprise experience and classroom instruction. Singapore’s Institute of Technical Education demonstrates how state leadership and funding tied to employment outcomes can elevate technical education.
Restoring the True Purpose of Higher Education
Building binding, legally structured partnerships with international TVET leaders can systematically transform the training ecosystem. To upgrade instruction standards, introduce dual apprenticeship frameworks modelled after Germany, and build digital training facilities alongside Singapore’s ITE Education Services, NAVTTC might seek a partnership with the Swiss Federal University for Vocational Education and Training.
A university degree will retain utility for those who can afford it and use it effectively. Yet an economy cannot build its future on a credential whose price continues climbing while its market value declines. Shifting practical skills training into the formal education system will free universities from producing mass job certificates, allowing institutions to return to their founding purpose: nurturing scholarship, philosophy, innovation, and independent thought.
Disclaimer: The information provided in this article is for educational and informational purposes only and does not constitute financial advice.
