Saturday, October 2, 2010

A financial payoff for college degrees is no longer to be expected

Mandel on Innovation and Growth:

The 2009 income figures came out today, and I immediately gravitated to my favorite barometer for the state of the economy: The earnings of young college grads–that is, mean earnings for full-time workers, ages 25-34, with a bachelor’s only.

I consider these workers to directly reflect the health of the U.S. economy. If young college grads are doing well, that means there is a demand for high-skilled labor, and there’s an incentive for young people to get an education. But if young college grads are doing poorly, wow…that economy is not on a sustainable path.

Take a look at the chart above, which plots tuition and fees at 4-year colleges, public and private nfp, against the earnings of young college grads, male and female. The results show that college costs have kept rising, while the real earnings of young college grads have gone down since 2000. In particular, since the recession started in 2006, real tuitions and fees have skyrocketed, while real earnings have plummeted.

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