Recession Hits Harder at College Grads Without an Advanced Degree

I’m sure many of you read the NYT article about the 26-year-old college grad with almost $100,000 in student loans. The article was fascinating and horrifying, but it didn’t mention a key factor–since the girl in the article graduated in 2005, the real wages of college grads without an advanced degree have fallen substantially.

Take a look at this chart.

I’ve plotted median usual weekly earnings of fulltime workers, adjusted for inflation, and indexed to 2001Q1 =1. The dark blue line shows the weekly wages of workers with an advanced degree, while the lighter line shows weekly wages of workers with a bachelor’s degree only.

The real wages for college grads with a bachelor’s have been in a downswing since 2004. That offers at least a partial explanation of her problems…she got caught by a weakening labor market for bachelor’s degrees.

To put it another way–college grads who are clothed with the protection of an advanced degree have on average managed to hold their own during the financial crisis, and even gain ground. Since mid-2007, their usual weekly wages are up by 3.7% in real terms, putting them at their highest level for the past ten years.

‘Naked’ college grads–that is, those without advanced degrees–have not fared nearly so well during the recession. Their real weekly earnings are down 0.7% since mid-2007, and they are well below their 2004 level.

Is this simply supply and demand, a function of which industries were hit, or is there something else going on

About Michael Mandel 127 Articles

Michael Mandel was BusinessWeek's chief economist from 1989-2009, where he helped direct the magazine's coverage of the domestic and global economies.

Since joining BusinessWeek in 1989, he has received multiple awards for his work, including being honored as one of the 100 top U.S. business journalists of the 20th century for his coverage of the New Economy. In 2006 Mandel was named "Best Economic Journalist" by the World Leadership Forum.

Mandel is the author of several books, including Rational Exuberance, The Coming Internet Depression, and The High Risk Society.

Mandel holds a Ph.D. in economics from Harvard University.

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