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Worse Than Stagnant: Wages Fall for Recent College Grads

Wages, which have been stagnant for much of the American labor market for years, slid for young, educated workers.

The fallout the recession generated on the entry-level labor market is one hangover college students can’t shake after the graduation party.

Wages, which have been stagnant for much of the American labor market for years, actually slid for young, educated workers. According to new research from the left-leaning Economic Policy Institute, young adults between the ages of 21 and 24 who graduated college in 2000 and entered the workforce rather than grad school earned an average of $18.41 an hour. Today, that figure is $17.94, a 2.5 percent drop, even as the relative burden of student loan debt young adults carry upon graduation has mushroomed.

“Much of it has to do with the Great Recession and the aftermath and the weak economy,” said Elise Gould, senior economist at the Economic Policy Institute and one of the study’s authors. “We haven’t pulled ourselves out of that.”

Young women have it worse than men; the report finds that while female college grads earn an average of $16.56 an hour, their male counterparts make just over $3 an hour more, a roughly 19 percent difference. Gould said it’s impossible, based on the data in the study, to tell how much of this is a result of gender differences between the choices of colleges and majors made by male versus female students.

Ariane Hegewisch, a study director who oversees equal pay work at the Institute for Women’s Policy Research, suspects this is only part of the reason behind the discrepancy. “Unfortunately, it’s not surprising,” she said. “Even if you control for field of study and type of university… you still have a gap.” Female job candidates are less likely to negotiate a starting salary, and may encounter resistance when they do.

Education policy experts and economists still defend the value of a college education, although the lifetime wage premium for people with postsecondary degrees is being chipped away by this slide in wages combined with burgeoning student debt loads.

“That amount of payoff appears to be getting smaller,” said Maura Dundon, senior policy counsel at the Center for Responsible Lending. “Real wages are falling, and if you’re taking on more debt and have debt service after you graduate, then the boost in income from your college education is reduced.”

Experts suggest that this combination of lower pay and higher debt could haunt this generation all the way into their retirement years by causing them to delay saving for retirement.

According to The Institute for College Access and Success, about seven in 10 students graduated with student loans in 2013, owing an average of $28,400. A graduate earning the EPI’s estimated average hourly rate who managed to find full-time work for a year would earn around $37,300.

“The problem is that savings compound,” Dundon pointed out. Saving $200 a month in one’s 20s contributes a lot more to a worker’s nest egg than putting in that same amount a decade or more later. “It’s absolutely concerning,” she said.