No shit, Sherlock! Yes, your graduate students are unhappy. And you're just now figuring this out? You need to go read ALL of the posts over at 100 Reasons NOT to Go to Graduate School, then go read From Grad School to Happiness and the other post-academic blogs I've linked to in my blogroll, and then you need to come back over here and read my blog from the beginning to the present (though I do give you permission to skip some of the fluffy cat posts).
One of the many things wrong with graduate school is that too many professors view their graduate students through the lens of their own experiences as graduate students and subsequent paths to professorhood. While this may give you a warmfuzzy feeling of nostalgia, it doesn't make for having honest relationships with your graduate students today and can actually be harmful to them. in terms of preparing for both academic careers and nonacademic alternatives, if you base your guidance to them on the way things worked for you 30 years ago.
Case in point: A professor I had in graduate school used to frequently mention to us graduate students how ze had spent several years working in advertising before deciding to go to graduate school and pursue becoming a professor. Ze was fond of telling us how easy it was, as a newly graduated B.A. in English, to get hired as a copywriter for an ad agency, how ze came up with successful campaigns (one slogan is still being used by the client -- you'd recognize it!) , and how much money ze was making.
Ze gave all of this up because ze felt ze wanted to do something more meaningful with hir life than think up clever ways to dupe people into buying shit they didn't need. Humph. Noble aspirations, right? How many of my post-academic friends wouldn't kill for a job like this professor gave up? Luckily for hir, ze went to graduate school, "suffered" through the poverty of 6 years as a TA and adjunct cushioned by savings from the advertising job, and got hired in the early 80s onto the tenure track while still ABD.
This professor was smart and talented, but the times were different, too -- not just the academic job market but the nonacademic job market. Because today you can major in things like ... advertising (!) ... it's much harder to get hired for the kind of job ze had with a B.A. in mere English. And much, much harder if you compound your job search with the whole "overqualified/underqualified" shit us post-academics are dealing with.
So, in other words, telling graduate students they always have "other options" without encouraging them to prepare themselves for those options is disingenuous. It's you old professor types taking the narrative you've spun upon your own lives to explain the circumstances of your successful careers and comfortable lives and imposing it on the lives and careers of your graduate students. It's irresponsible to do so. Stop it!
Yes, your graduate students are responsible for making the decision to postpone money-making career objectives for the "life of the mind," but they also look up to you with somewhat rose-colored lenses, respect you, and seek to emulate you. A few years into the Ph.D. program, when their reality starts to bump up against the rosier narratives you represent, yes, they tend to get goddamned unhappy -- not to mention stressed about how they've fucked up their futures, frustrated by their increasingly limited options, depressed by their poverty, and generally messed up by the mindfuck that is graduate school.
And I'm telling you this as someone who basically, in a lot of ways, liked academe and wished I could have found a way to stay. You owe it to yourself to understand WHY your graduate students are so unhappy, and, if you care about the mentorship aspect of your job as a professor, you owe it to your students to help them figure out sustainable ways to cope with the realities of what academe has today become.