“When people talk about Gen Z and the problems they’re facing with workforce readiness, I think people are primarily thinking about college-grad Gen Z,” Josh Millet, founder and CEO of pre-employment testing company Criteria, tells Fortune. “That part of the American Dream is hitting a rough patch for sure.”

Only 8% of hiring professionals think that Gen Z is prepared for the workplace, according to a new report from Criteria which surveyed more than 350 managers across small and large enterprises. But they’re not the only ones doubtful that new graduates are ready to launch their white-collar careers—even the young talent are skeptical of their own readiness. Less than a quarter, 24%, of Gen Z say their generation is prepared to begin working. Millet says that it may be tempting to pin the issue on AI. While there are issues surrounding the advanced tech sweeping entry-level roles, the young digital natives are better prepared than most to adapt skill-wise. The real culprit of this workplace readiness issue is the eroding value of U.S. college degrees. 

“To hear Gen Z say the same thing is a collective loss of confidence in [the] college degree. I think that’s the continuation of a trend that is really pronounced,” Millet continues. “I feel like it’s really only a crisis in the U.S. and it’s because the relative value of the college degree is just plummeting.”

While office employees are feeling the pinch—with Anthropic CEO Dario Amodei even predicting that 50% of all white-collar roles will be wiped out in the next five years—frontline workers are buoyed in the jobs armageddon. That’s because they chase careers that don’t require college diplomas, which can be more immune to newfound labor market challenges. 

“AI is probably not helping…If you think about college grads and the lack of employment opportunities in that generation, yes, they’re trying to enter industries where hiring rates are just very muted right now,” Millet explains. “But I can tell you that in the U.S., Gen Z who are going into frontline roles are not experiencing these challenges.”

A ‘crisis of confidence’ in college degrees and push towards skill-based hiring

Gen Z have been second-guessing their choice to go to college for years. As tuition soars to unaffordable highs, student debt sinks generations of graduates, and the skills landscape changes rapidly, they’re worried that their degrees which once promised six-figure success will be made redundant. We’re already seeing that with software engineers and consultants.

“It’s a perfect storm,” Millet says. “You’re having [employers] drop degree requirements at the same time you have an oversupply of college grads, a crisis of confidence in what the degree actually means in terms of workforce readiness, and that’s being internalized by the people with the degrees.”

The plummeting value of college degrees is even more pronounced when it comes to what industries are actually looking to grow. Less than half of all hiring professionals expect to hire more in 2026, according to the Criteria report, but it varies depending on sector. About 68% of hiring managers at staffing/recruiting businesses, 59% at health companies, 57% at manufacturing firms, and 50% at transportation and logistics agencies plan to hire more next year. Meanwhile, industries like technology, finance, and non-profit are anticipating to hire less than the average employer. 

Sectors like healthcare, manufacturing, and transportation are facing staffing shortages—and many can be filled by talent without expensive college degrees. Millet also says that employers across the board, regardless of industry, are leaning in on skills-based hiring. Some employers like Google, Microsoft, and EY have all offered high-level jobs to applicants without degrees, focusing on work experience and special credentialing. Since hiring managers are receiving thousands of applicants for a single role, with even unemployed mid-career professionals vying for the same spot, Gen Z graduates who faced smaller internship cycles are up against fierce competition.