Economic Snapshot | Wages, Incomes, and Wealth

Wages of young college graduates have failed to grow over the last decade

As we enter college graduation season, attention often turns to the labor market prospects for the young men and women preparing to enter the workforce. We can get a sense of the earnings this new crop of graduates might expect by looking at the wages of young (age 21-24) college graduates. In 2012, young college graduates had an average hourly wage of $16.60 per hour, which translates into an annual income of roughly $34,500 for a full-time, full-year worker. Average hourly wages for young female graduates remain substantially less (12.2 percent) than those of young male graduates.

The wages of young college graduates have fared poorly during the Great Recession and its aftermath. Between 2007 and 2012, the wages of young college graduates dropped 7.6 percent (9.4 percent for men and 6.6 percent for women).  As the figure shows, however, the wages of young graduates fared poorly even before the Great Recession began; they saw no growth over the entire period of general wage stagnation that began during the business cycle of 2000–2007. Between 2000 and 2012, the wages of young college graduates decreased 8.5 percent (6.1 percent for men and 10.9 percent for women). These drops translate into substantial amounts of money; for full-time, full-year workers, the hourly wage declines from 2000 to 2012 represent a roughly $3,200 decline.

The wage declines since 2000 stand in sharp contrast to the strong wage growth for these groups from 1995 to 2000. During that period of low unemployment and overall strong wage growth, wages rose 19.1 percent for young college graduates. The stark difference between these two economic periods illustrates how the outcomes of young graduates vary considerably depending on whether the overall economy is experiencing low unemployment and strong wage growth or high unemployment and wage stagnation. Young graduates who enter the labor market during periods of strength (e.g., 1995–2000) face much stronger wage prospects than young graduates who enter the labor market during periods of weakness (e.g., 2001 to the present).

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