Earnings Disparity Grows Between Young Workers With and Without Degrees

February 11, 2014

The median annual earnings of today’s young workers are similar to what earlier generations made at the same age. But underneath those figures, the disparity between young workers with and without bachelor’s degrees has grown.

That’s one main finding in a report released on Tuesday by the Pew Research Center. The report, "The Rising Cost of Not Going to College," uses data from the U.S. Census Bureau along with a new survey to capture the employment outcomes of young workers over the generations.

The report compares today’s young workers, the millennials, to Generation X, early and late baby boomers, and the so-called Silent Generation. It uses census data from 2013 for the millennials and looks at only those ages 25 to 32, to eliminate younger millennials who would probably still be in college.

The sample year, 2013, was four years into the recovery from the recession, so the researchers chose data years for the other generations that were also four years into an economic recovery. That’s not to say the broader economy was the same in each of those years, said Richard Fry, a senior economist at the research center and one of the report’s co-authors. But the method provided a way to choose the data years to compare.

The overall median earnings of millennials, $35,000, are similar to what Generation X and the baby boomers earned as young adults, according to the report, and only a bit more than the $30,982, in inflation-adjusted dollars, that the Silent Generation brought home in the mid-1960s.

Degrees of Difference

But the picture looks different when workers are categorized by educational attainment. The proportion of young workers with college degrees has risen. Today’s young workers with bachelor’s degrees or higher earn at least a little more than their counterparts in any of the earlier generations did at the same age. Young workers with only high-school degrees, however, make less than they did in any generation save Generation X.

The larger share of young workers who hold graduate degrees now, compared with earlier generations, might be one reason that college graduates’ earnings have continued to climb. The data the report is based on can’t answer that question, Mr. Fry said, because respondents’ highest earned degrees were not tracked until the 1990s.

Still, based on his analysis of other data sources, Mr. Fry said, the same pattern would hold even if only workers whose highest degrees were bachelor’s were considered.

And despite the horror stories of young graduates' moving back in with mom and dad, the proportion of 25- to 32-year-olds with bachelor’s or higher who live with their parents is the same, 12 percent, as it was for Generation X.

Over all, more young adults are living with their parents, but that pattern is driven by those with less education. The finding is "consistent with the idea that, at least on average, college-educated young adults have more ability to live independently," Mr. Fry said. Their median earnings are higher, and they face a lower unemployment rate.

The picture for today’s young college graduates isn’t entirely rosy. Unemployment rates are higher for college-educated young workers now than they were for earlier generations, although they still fare much better than those without college degrees.

In the survey, 86 percent of college-educated millennials who were employed said their jobs were either a career or a steppingstone to one. Only 57 percent of employed young workers with high-school degrees or less identified their jobs that way. There has been much discussion of whether college graduates are working in jobs suited to their level of education, Mr. Fry said. That finding provides one answer.

Choosing a Major

Over all, 69 percent of surveyed college graduates said their majors were at least somewhat related to their current work, and 29 percent said they should have studied something different to prepare for their ideal job.

A larger share of science and engineering majors said their work was closely related to their major, compared with those who had studied business or the liberal arts, social sciences, or education. Just under a quarter of science and engineering majors said they should have chosen a different major for their ideal job, while 33 percent of liberal-arts, social-science, and education majors did.

But majors aren’t everything. Looking back on what they might have done in college to be better prepared for the jobs they wanted, 65 percent of millennials with at least bachelor’s degrees said they would have been better prepared if they had gained more work experience. Forty percent said they would have been better prepared if they had studied harder, 43 percent if they had begun looking for work sooner, and 36 percent if they had switched majors.

Those findings aren’t surprising, said Phil Gardner, director of the Collegiate Employment Research Institute at Michigan State University. "The best news in that is that it isn’t the major," he said. The findings, he said, show that there are things that students in any major can do to prepare for the work force.

The report is based in part on a survey of a nationally representative sample of 2,002 adults age 18 or older who were reached by phone in October 2013.