When Starbucks announced last month that it was laying off more than 1000 corporate employees, it highlighted a disturbing trend for white-collar workers: over the past few years, they have seen a steeper rise in unemployment than other groups, and slower wage growth.

It also added fuel to a debate that has preoccupied economists for much of that time: are the recent job losses merely a temporary development? Or do they signal something more ominous and irreversible?

Knowledge workers – those in jobs that require university degrees – are starting to feel the heat as unemployment rises.Credit: Peter Rae

After sitting below 4 per cent for more than two years, the overall US unemployment rate has topped that threshold since May.

Economists say the job market remains strong by historical standards and that much of the recent weakening appears connected to the economic impact of the pandemic.

Companies hired aggressively amid surging demand, then shifted to lay-offs once the Federal Reserve began raising interest rates. Many of these companies have sought to make their operations leaner under pressure from investors.

But amid rapid advances in artificial intelligence and US President Donald Trump’s targeting of federal agencies, which disproportionately support white-collar jobs, some wonder if a permanent decline for knowledge work has begun.

The wages gap between those with a college degree and those without grew steadily beginning in 1980 but flattened during the past 15 years.

“We’re seeing a meaningful transition in the way work is done in the white-collar world,” said Carl Tannenbaum, the chief economist of Northern Trust. “I tell people a wave is coming.”

To date, few industries epitomise the shift of the last few years better than the making of video games, which experienced a boom in 2020 as couch-bound Americans sought out new forms of home entertainment. The industry hired aggressively before reversing course and embarking on a period of lay-offs. Thousands of video game workers lost jobs in the last two years.

The scale of the job loss was such that the host of the Game Developers Choice Awards, the industry’s annual awards show, complained about “record lay-offs” during her opening monologue in 2024.........

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