College Grads’ Starting Salaries Down 10%

When our son graduated from college back in 1999, he had a basket full of extremely attractive job offers. In fact, the real problem was deciding which city he wanted to live in. The offers were mainly the same as far as money and perks went. Of course, this was at the height of the dot-com bubble and our son was a combo computer-electrical engineer, so the good times were rolling. It was an exciting time for college grads. What a difference a decade or so makes.

The statistics today aren’t nearly so cheery. As a story in Consumerist.com com states, “To the graduating class of 2012: All that money you or your parents have spent or borrowed to pay your tuition for the past few years? It’s not getting the same return on investment it did a decade ago.” That’s quite unfortunate because of the quadruple whammy of recession’s effect on job availability, a decade’s worth of inflation since the dot-com bubble, skyrocketing college costs, and the downturn in starting salaries. When you add up the cumulative effect of these four factors, you get a rather grim prospectus.

Once again, we’re reminded of that phrase “Return on Investment (ROI),” which also has to include the raging storm of student loan debt, which, nationally, exceeds the total of both credit card and auto loan debt, perhaps eventually eclipsing mortgage debt, too, some day. It’s not a pleasant prospect.

Let’s take a look at some numbers about starting salaries, courtesy of Consumerist. com and the Wall Street Journal.

Recent College Graduates Making 8-11% Less Than They Did 10 Years Ago

To the graduating class of 2012: All that money you or your parents have spent or borrowed to pay your tuition for the past few years? It’s not getting the same return on investment it did a decade ago.

According to the folks at the Economic Policy Institute, the average inflation-adjusted wage for male college graduates aged 23 to 29 was $21.68/hour. That’s an 11% over decline over the last ten years. And while wages for females in the same age and education group are only down 7.6% during that same time period, women still make significantly less on average ($18.80/hour).

As for those people who choose to go straight from high school into the workforce, the average wage for males aged 19-25 dropped 10% to $11.68/hour. Females in this age and education group saw a similar drop of 9.2% to $9.92/hour.

Overall, average hourly wages have increased over the last decade, but that stat could be misleading, as a large number of low-income workers are now out of a job and thus not figured into the average wage.

And, points out the Wall Street Journal, while employers tend to not cut pay of long-time employees, they make up for the lack of pay cuts by offering less cash to new hires.

The Journal notes:

Young Adults See Their Pay Decline

Young people entering the job market are taking the brunt of the downward pressure on wages caused by high unemployment, according to a new analysis of pay trends.

In data compiled for a coming report, the Economic Policy Institute, a center-left think tank in Washington, found that the average inflation-adjusted hourly wage for male college graduates aged 23 to 29 dropped 11% over the past decade to $21.68 in 2011. For female college graduates of the same age, the average wage is down 7.6% to $18.80. …

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The comments follwing each of these articles are certainly worth reading, for a sampling of thought from both current new hires and parents. Also, check the corresponding thread on the College Confidential discussion forum for more insights. By all means, feel free to add your own.

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