Recent college graduates can expect to earn 10 percent less than they did as long ago as 2000. In fact, one of the longest-lasting legacies of the great recession may be its negative impact on the lifetime careers of young graduates. The current high unemployment rate will leave many of them a step behind throughout their careers. A study conducted by Yale School of Management economist Lisa Kahn determined that workers who graduated from college during the recession of the early 1980s were still in worse shape financially than workers who graduated in better times after approximately 2006. When young college graduates do get a job, it frequently won’t pay well. According to Census Bureau statistics, the median annual earnings of a worker 25 to 34 years old with a bachelor’s degree was $40,875 last year, a significant decline from the $45,200 reported in 2000, adjusting for inflation.
Despite the dismal salary news, there is good news in that fact that hiring for 2011 graduates is up 10 percent when compared with last year. Meanwhile, unemployment rates among those with a degree is less than half the national average. It’s those with just a high school education whose unemployment rates are above the national average.
The typical wage for recent college graduates has fallen by nearly $1 per hour over the last 10 years, according to the Economic Policy Institute (EPI). Despite the lack of growth in entry-level wages, a college degree remains a worthy investment. According to the EPI’s Heidi Shierholz, “After gains in the 1980s and particularly in the 1990s, hourly wages for young college-educated men in 2000 were $22.75, but that dropped by almost a full dollar to $21.77 by 2010. For young college-educated women, hourly wages fell from $19.38 to $18.43 over the same period. Now, with unemployment expected to remain above 8 percent well into 2014, it will likely be many years before young college graduates — or any workers — see substantial wage growth.”
There is some upbeat news for the class of 2011. Students who will graduated this year received job offers with starting salaries averaging $50,034 annually, a 3.5 percent increase over last year, according to a survey from the National Association of Colleges and Employers (NACE). Employers said they plan to increase hiring of college graduates by 13.5 percent compared with 2010. Business majors were the best positioned, with the average starting salary rising nearly two percent to $48,089. Accounting majors received salary offers of $49,022, up 2.2 percent, while finance majors were offered an average of $50,535, an increase of 1.9 percent. Starting salaries for business administration/management graduates fell slightly to $44,171, down 2.3 percent. Engineering graduates — typically one of the highest-paying fields — didn’t see a big change, with the average starting salary down 0.3 percent but still impressive at $59,435.
Certain engineering majors saw noteworthy increases, with electrical engineering majors receiving an average salary offer of $61,690 — up 4.4 percent over 2010. Mechanical engineering salaries rose 3.8 percent to $60,598, although it didn’t pay as well to graduate with a degree in civil engineering, with starting salaries in that field slipping 7.1 percent to $48,885. While the association’s survey didn’t break out starting salaries for individual liberal arts majors, offers were up an impressive 9.5 percent to $35,633. That compares to a steep decline of 11 percent last year.
The financial crisis is forcing Americans to re-think what they want out of a college education. “Students and families are becoming more savvy consumers about how they get their degrees, where they go to school and how they pay for it. I think that is long overdue,” said Edie Irons, the Institute for College Access and Success’s communications director. “It used to be that a college degree seemed like a ticket to ride, but there are no guarantees anymore that once you get that degree, you’re going to get a great job and do really well financially. There’s been research that has shown students graduating in a recession earn lower incomes throughout their lifetimes than those graduating in a boom,” Irons said. “It is a real concern, and we think graduates need good information about how to manage their debt.”
According to Brandon Lagana, director of admissions at Northern Illinois University, students are being more fluid in their approach to college. Some chose a more affordable university, others start at a two-year institution then finish at a four-year school, and some wait a few years before starting any schooling. “We’re certainly seeing students using more options to a degree than they ever did before,” he said.
Read my recent Huffington Post article about college education and debt here.