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The Continuing Decline in College Wages

Posted by: Michael Mandel on September 01

I did some calculations based on the new income statistics released by the Census Bureau, and it turns out that the real earnings of workers with only a bachelor’s degree fell in 2004 for the fourth straight year.


Four years of falling earnings for the college-educated. That hasn’t happened since the 1970s, and the days of Richard Freeman and his book, The Over-Educated American.

Here’s another depressing chart. This one is the change in real earnings for workers aged 25-64, from 2000 to 2004, by education.


The only people doing well have advanced degrees. The world has changed. Just college is no longer enough.

I’m basically an optimist, but this can’t be a good thing. I’d be interested to hear what others think.

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Reader Comments


September 1, 2005 12:28 PM

It is just a natural progression of the knowledge economy. Technology destroys jobs at the bottom of the ladder, while more jobs are created at the top of the skill ladder.

This trend will continue. As a result, more and more people will pursue advanced degrees. That isn't a big deal. For example, if a Bachelor's degree is 4 years, what is the big deal in spending one more year to get a Master's? It is just 1 year more.


September 1, 2005 01:31 PM

Here's one thing I wondered when looking at the first graph: how much of the climb from the mid-90s until 2000 is due to dramatically rising salaries for computer science/programming jobs that didn't require an advanced degree? In stories I've seen about the falling populations for computer science degrees at school, only a few seem to mention that they are talking about a decrease from the days when that degree was pretty close to a ticket into high-paying tech consulting, programming, software development, etc.

Would there have been enough people in the tech sector, or would the salaries of those people who were, be enough to pull the whole trend upwards farther than we should have "expected"? I say this as a person who was once quite well payed to do a job in which I had little actual qualification, at a company rife with people entirely underprepared and overpaid. Which is why the company no longer exists.


September 1, 2005 02:23 PM

Pay is one thing, employment another. I would like to say more education is the solution but I am extremely skeptical there would be sufficient opportunities for all those with less education to prosper with more. The more significant implication is that the value of college has declined and high school will become a better choice for many. Considering how many of the college educated work in jobs that don't need one, I would say this is assured.


September 1, 2005 05:28 PM

Ian--I don't think, by itself, that the expansion of the tech sector was enough push up those average college wage in the 1990s. It certainly played a part, though.

KG and Lord--certainly more people will get advanced degrees, but graduate schools are not set up to handle more than a relatively small fraction of undergraduates. The college-only people are the real middle class of this economy.

Leslie Friedrich

September 1, 2005 07:52 PM

First of all, you obviously didn't go to a liberal arts college during the seventies. The reason you go to college is not to earn more money. It's to get to ask questions, make mistakes and decide what you're vocation in life might be. It's to be able to ask why and to have the time to do so without the pressures of earning a living.
This summer I had the pleasure of teaching summer school German (102 and 202) as an adjunct faculty member at a state university in the south. The students in 102 complained to the department head because they were required to speak in class. They only wanted to know what would be on the written test. Most students were in their mid-to-late twenties. My best student was a PhD candidate in Bioengineering from the Middle East, who was auditing the class. The 202 students were much better, but all wanted to be told what would be on the test. If these students are typical of what our American state universities are producing, no wonder a degree doesn't mean much any more. They didn't want to take the class if they thought they would get a bad grade. Guess what, the department head changed one student's grade from a C to an A so he could get into Divinity School. HMMMMM. I had to appeal the grade and will keep you posted. By the way, as an adjunct faculty member with an M.A., I earned $3000 for 5 weeks, 5 hours per day. All the German faculty members were in Europe for the summer.

David Winski

September 1, 2005 10:28 PM

I suspect that a large portion of this is due to a change in the composition of college students - as a student in engineering, I'm watching the starting salary keep climbing - but if lots of people who are going to college are the reluctant students who don't actually learn anything while they're here, the averages would fall. Do you have more detailed data, broken out by profession or degree?


September 2, 2005 11:13 AM

More years of education means more years of lost full-time income, and more debt. So, students who go to grad school end up in a deeper economic hole by the time they graduate. Also, students who only have a college degree have a tougher time paying off their debt when they can't find good jobs. This trend cannot be good for individual citizens, or the country as a whole.


September 2, 2005 12:35 PM

Is the starting salary of engineers really climbing? Faster than inflation?


September 2, 2005 05:11 PM

This Census report on income & the value of a degree should come as no surprise. We as a society need to re-think the way we administer our whole educational system. I did not go to college directly after high school, but did obtain a B.A. degree on my own (complely financed out of my own pocket), taking night classes. Four years after graduation, I am no better off than I was without a degree, and what job offers I have got

would pay considerably less than what I am earning as a truck driver (I majored in marketing, which is a profession in turmoil at the present). I also have seen that amoung my own circle of friends, the ones who dropped out of high school & employed in the construction trades, are making much more than I. Encouraging people to continue their education while working has become a joke, also. Most night school & online degree programs geared toward the non-traditional students offer few academic choices beyond some type of business degree. I wouldn't have made the degree choice that I did if there were other reasonable alternatives, but those alternatives required me to go to to school in the day, which I was not able to because I had to support myself. So, for my efforts, I am out $30,000 for what it cost to complete college. It was a really great social experience, but it didn't take me to the promised land as much as it was promised. I'll be thinking about it for a long time, especially when I drive off in my 28 year old car with 380,000 miles.

P.S.- Fo those who haven't seen the Census income report, here's the URL-


September 3, 2005 11:49 AM

The reason you can't find a good job in marketing is because nearly everyone who conciders business school wants a degree in marketing. I don't know anyone who wants an acounting degree. Look how easy it is to find one of those jobs and how well accountants get paid. Colleges should do a better job at educating students about job markets before they chose majors. You were dooped. So was I. I have a management degree. I do have to say one person at my school tried to stop me but he was an acounting professor so I just asumed he was partial to his own field. He also wasn't a good sales person.

Craig Kuhlman

September 5, 2005 08:30 AM

As a long-time BW subscriber, I appreciated the article and respect your views and previous writings both in BW and books you've written. When I see Mandel I usually take notice, and read further.

I hold bachelor's degrees in economics/finance, and theology, and an MBA with an emphasis in finance/marketing, all received while working full-time and financed by employers (I've been in banking since graduating HS in '79). As I reflect back during the boom period you mentioned I'm grateful I had the vision to continue while some friends chose a more "fun and carefree lifestyle" consuming their evenings with things non-academic. Because of that investment we're able to maintain a comfortable standard of living while my wife homeschool's our three children.

But, things have definitely changed. Gone is the optimism of continuing rising wages, as has been the case over the past 24 years. Your article only confirmed what I've felt intuitively for a few years (even with an advanced degree). I serve as an adjunct faculty for a couple small universities and have brought this issue up recently (in light of the recent Fortune article on outsourcing/China/US competitiveness). My students (non-traditional working adults...which have become more the tradition in the past decade IMO) have felt the same impact. It seems that there has been a continuing trend to destablize the middle-class for sometime. I've told them that Drucker indicated in the 90's that we're going through a restructuring in the economy not unlike the shift from agriculture to industry, etc., that won't settle until the 20 teens. He's stated that those entering their careers now can expect to change careers (not just jobs, but careers) at least 6-8 times during their working years. My advice is to make sure they build a transition fund to last 3-6 mos. in addition to their resume.

I recently finished reading Kiyosaki's Rich Dad Poor Dad, in which he says that the old rules of getting a good education, secure job, etc., no longer work. The economy favors the investor, not the worker, and says we need to be about acquiring assets that kick off cash flow vis., liabilities (larger homes, cars, etc.) as a means to financial freedom. Good advice for those starting out, and for those of us, not just starting out. I've begun to pass that on to my two boys ages 13, and 11, as a means to securing their future. I think it's only going to get tougher in the times ahead.

Finally, given Richard Florida's views on the Creative Economy, those positioned for creative work (BAs and above) will have the greatest likelihood of succeeding the economic times ahead. Despite the falling relative incomes, I still feel that lacking a strategic education is much more expensive than gaining one.

For those who can leverage their employment with tuition reimbursement, that certainly helps defray the expense (a first generation grad in our family, I couldn't have afforded my education without it). Secondly, pursuing graduate school is still vital, IMO. Attempting to keep fixed expenses down (targeting 50% of income) so as not to fall into the Two-Income Trap (Warren/Tyagi) and acquiring income-producing assets with the difference is about the best formula I've found to survive what we're heading into. I admit, those are not easy initiatives, but longer-term and strategic in nature. However, the alternatives of doing nothing in this economy I fear will be far more painful.

Good luck to all as they chart their course through uncertain waters.


Melissa English

September 6, 2005 07:20 PM

1 out of 3 graduates end up in a job that doesn't require a college degree (US Bureau of Labor Statistics). After graduating from college in 2000 and seeing peer upon peer underemployed in retail or the food service industry, I wrote a book CAUTION: Valedictorian Turned Waiter. Many of my fellow graduates failed to see dividends from their bachelor degrees. Although relentlessly pushed by high school counselors, teachers, and parents alike, a college degree is not enough to guarantee success in the real world. As this article emphasizes, college is not a be-all-and-end all: It is a means to an end. The focus, at the high school level, needs to be turned towards careers. With focus on careers, college becomes an educated decision yielding a favorable return on investment.

Stan Smith

September 8, 2005 02:30 PM

I have been a finance professor at several major universities for the last 26 years. As I talk to my older colleagues around the country most of us agree that the quality of what we are providing has declined and is declining. A major factor has been that many universities have increased the number of large classes that students take. These classes are basically on-site "correspondence classes." The reason for characterizing them that way is that the classes are in huge classes or video streaming over the internet. The examinations are computer-scored forms. For example, a student with a finance degree may have never given an individual presentation on any finance topic. Many finance graduates have never seen a real financial statement.

When I try to explain what is happening financially at universities I use the hamburger restaurant example. Each year the university administration tells the dean we want 7% more hamburgers (degrees) and here is 3% less meat (faculty resources). Eventually the hamburger patty gets smaller or the quality of the meat declines. In either case, you have a lower quality product.

Another example is related to what I believe is the mismanagement of universities in allocating their faculty resources away from teaching to research. Research has value but at many colleges of business the teaching component for the faculty member is less than 50% of his or her assignment and evaluaton. A faculty member at another state university summed it up well this summer. He told me his school hired a business professor for over $300,000 to teach four students during the year. As he put it, "The public and taxpayers would shoot us if they ever knew what we were doing at our universities."

As people continue to look at the relatively declining value of a college degree they need to address this issue of the smaller patty on the bun. It appears employers are also asking, "Where is the beef?"


September 8, 2005 07:00 PM

I can testify that in 2000 I was grossly overpaid. Thanks to the tech wreck, I am now making a more realistic salary: only 61.7% of what I was making in 2000. I don't mean to sound grateful for the pay cut, but salaries in the software industry were very inflated in the late 90s. It wasn't sustainable.

Question: How much impact could the falling salaries in one industry have on these numbers?


September 13, 2005 09:17 AM

Its about who you know, rather than what your piece of paper says.


September 16, 2005 10:16 PM

The graduate degree has usurped the bachelors degree as the degree of choice to ensure yourself stability and higher wages.
I attended my undergraduate schooling during the recent US recession - '99-'03. There was a drastic change in graduate's wages as the years went along, especially in my field. I double-majored in Computer Science & Economics. I recall having friends during my first year who I *tutored* being hired straight out of college for $75k in technical professions.
Towards the end of those 4 years, the outlook changed. The tech bubble burst, the rest of the economy also sank, and all of those like myself looking for a good wage, (or at least a job in many cases) straight out of school began to worry. The supply of college-educated workers looking for jobs was increasing as the bachelor degree became the norm in American education. (Many students were attending not because they yearned to learn or to prepare for their career, but rather because of familial/societal pressures) The demand, however, shrank because of the economic downturn as well as employers' realizations that many college-educated employees are underqualified. Many graduates I knew were forced to take positions not requiring of a degree at all at, obviously, a lower wage than they had hoped.
Looking upon myself, though I was near the top of my class at a fine institution, I felt that I was underqualified (I was right). Many of my friends felt the same way and realized that a graduate degree is sadly becoming a necessity for a well-paying job straight out of college. Granted, I highly enjoyed and learned a GREAT deal from my Masters experience. The quality of actual education is much greater than a bachelor can offer, and I believe a great deal of that is the fact that a previous poster had brought up. Some professors get paid large sums of money mostly to conduct research and end up teaching a very small number of graduate students who are lucky enough to get that individual's attention.
Once a bachelor's degree signified that someone was willing to invest an inordinate amount of effort into their career. Now, the graduate degree takes that spot. And not only because of effort, also because of financial obligations. Though many programs (especially PhDs) grant full scholarships and decent stipends, many 2-year Masters programs are another $30,000+ loan to a student who isn't guaranteed employment upon graduation.
If you have a friend, family member, or child that is serious about their education and isn't thinking about a graduate degree, do them the favor and discuss this idea in detail with them. It may just change their entire life.

Frank Ruscica

September 20, 2005 03:25 PM

The takeaway insight is that Peter Drucker is probably right to think that customized education and career services will be the world's biggest gross industry within thirty years.

Lots of details re: my biz plan for a CECS startup are available at


Frank Ruscica


September 21, 2005 12:30 PM

Something that has not been discussed yet is college-educated professionals working for bosses that do not value a college degree, or organizations that do not promote education.

In one job I had, my boss, who was a PhD surprisingly, told me my job did not require a college degree. After spending 4 years getting a B.S. degree I was upset. For any subsequent interview and job I've held, I've put high precedence on getting into organizations that value education. Educated workers will generally be paid higher, and if the company offers some kind of tuition reimbursement, that's all the merrier to keep getting advanced degrees.

The one combination that still has no competitor is an advanced degree combined with 5+ years experience.

A Learner Who Learns for Learning's Sake

September 29, 2005 12:13 PM

It seems that so many people here are missing the entire point of a broad, liberal-arts college education...EXPOSURE to new ideas, meeting different people, witnessing and learning about different cultures and eras, and listening to intelligent specialists (Professors) who have spent decades amassing knowledge and understanding in their heads and on paper; and to a frightening extent, those without a broad 4-year college education usually end up missing out on these wonderful, life-enriching things.

Exposure to new ideas is especially critical here -- I mean how many straight-up high-school grads have read at least a few of the great works of literature, learned the basics of astronomy, or film, or learned German/French/Spanish fairly well, or learned the basics of philosophy, or studied the major world religions? THIS is what college is all about...and I realize that this is Business Week and you all are concerned with profits and cash but come on, no one has even mentioned the ability of even a basic 4-year college education at even the most standard state-university to open a person's mind to the incredible World of Ideas. In the first 2-3 years, of course, these students are forced to take broad survey courses encompassing the basics of any given field of study and then they move on to specialize in their major -- but even in the last 2-3 years there is still MUCH interdisciplinary work involved in many "non-practical" majors, and this is good, and should be encouraged as much as possible. (and of course grad-school is always there to specialize even further if one so wishes and has the time/money/motivation)

It's just good and mentally-healthy for people to care about learning and the vast scope of human knowledge for at least a few (somewhat) carefree years instead of just trudging through high-school (while hating every minute of it) and then going straight to a gray-cubicle (i.e. WORK) for a solid 45-50 years...I mean WOW, talk about depressing. If anything, general knowledge and understanding boosts morale among the populace and encourages one to discover more and more as one grows older, while dull years spent piddling time away in a booth in the same bland-routine absolutely crushes and destroys it.

The purpose of a 4-year college should be focused on a broad education with the exception of the highly technical fields (and even then MORE schooling, grad-school, would be most appropriate) -- in my opinion there should almost be totally different colleges/universities set up nationwide for those going in to practical fields (engineering, computer science, accounting, medicine, hard physics, hard sciences, etc.) and those going in to more theoretical fields (literature, philosophy, humanities, music, history, art, soft sciences, etc.)

It's somewhat unfair that college students today are basically told: WELL NOW, you shouldn't pursue that degree in creative writing like you want to because if you major in accounting or marketing you will make a cool $55,000 dollars a year straight out of college; while the best you can expect with a BA in English/creative writing is roughly half of that starting out. It's just not fair to those who have to choose between their true interests and love of knowledge versus practicality and the rather fickle nature of the American economy.

Anyhow, I hope that I have shed some light on this fascinatingly complex subject! Take it easy everyone -- READ A BOOK!

Adam (a Literature and Film double major!)


September 29, 2005 12:52 PM

As these statistics from the BLS show, education still pays:

The benefit of having just a Bachelor's degree is declining, but the unemployment nate and for Doctoral and Professional level degree holders is still very low.

Scott Bixler

January 12, 2006 02:29 PM

Referring to Stan Smith's article above on finance graduates and teaching finance, I earned my Bachelor of Science in Business with an emphasis in finance from the University of Missouri-St. Louis last May and found myself giving numerous presentations for stock purchase proposals based on case studies as we managed a real portfolio in Student Investment Trust while I served as treasurer for the club. I can't imagine not ever have given a presentation with financial analysis, economic environment, financial statements, and forecasting in an insightful manner while taking the leadership initiative to be one of the first to present in front of the class usually, volunteer 100's of hours out of class to the Student Investment Trust in developing their budget proposal, filing expense reports, and leading us (finance majors) to tour financial markets in Chicago to contribute value to my school and it's finance program which is one of the very best programs in the country according to Princeton Review. Because of the required several thousand hours of financial analysis and statement preparation, stock screening, complex quantitative tasks, and study; no finance major graduates from UM-St. Louis without having extensive experience in financial statements, economic forecasting, budget proposal preparation, and presentations. Our professors are very high paid professionals in or near retirement; there to share their business and investing experience with students for which I gain vast amounts of valuable business and investing insights. Despite coming from one of the best finance schools and excelling at the top of the class, while taking leadership initiatives, an appropriate job such as financial analyst, broker, procurement analyst, or business manager is next to impossible to obtain after graduation as entry into the professional finance career is restricted to experienced professionals only in today’s market. Since graduation last May, I only had one very low paying temporary job in A/R and customer service for 2 months as no companies were seeking entry-level financial professionals. Instead of continuing to financially struggle in an exhaustive career entry search, unrightfully so, I am going to truck driving school in 3 weeks, then drive OTR one year, earn a professional level pay($35,000/year to start) with the ambition to possible begin leasing trucks and manage a small fleet hopefully in 2 years from now. This is one of the only practical finance related careers available to young adults today. Schools are failing to educate their finance students on career entry after college, while we students thought that the financial markets or a company would hire us and train us to manage money, portfolios, and budgets. We were wrong, we have to get out and do blue collar work just as high school grads, then hopefully put ourselves in a financial investing position in the industry we enter, be it truck driving or education. Bottom line; schools are failing to act as a liaison to the corporate world and educate finance majors on entering this career in a practical manner rather than showing us the glamour of Wall Street and large corporate matters with promises of being hired as an executive trainee of one of many sorts possible in a nice office for high pay provided we pay our dues for which I did more than the minimum amount to satisfy the BSBA in Finance requirements due to my exceptional interest to be a highly successful business professional. Not happening for most of today’s young graduates due to over regulation such as the experience companies are requiring as well as a perfect 850 FICO credit score. We must work like blue collar workers several years after graduation for low pay and avoid producing a family as to have extra money to save and invest for building a financial position to become an investor or other financial management professional. Lucky for me, the cost of raising a family will not be in my picture, so I should have that much more financial advantage to build a professional career through inventing it myself rather than expecting a company to hire me on as a high paid finance professional. Finance students need to be taught career entry practicum that upon graduation, regardless of achievement in school, they must willing to do blue collar work for many more years until they build a financial position such as a nest egg or portfolio. Thank you for reading my long article and my concern for educating finance majors on strategies of entering a profitable finance/business career.


January 13, 2006 03:12 PM

Scott - Good writeup and you have just learned how hard it really is to get a good job straight out of college. Best of luck with OTR and your future trucking firm.

I read great stories about software consultants working with clients, traveling around the world, and the one thing they all have in common in a MBA or Masters degree. In some states (FL) it is common to get a Masters with 1 additional year onto a bachelors degree. If Missouri offered that, I'd be working on my second masters instead of my first. I have lots of good experience and could work circles around many MBA-types but since I don't have the paper, the employers don't want to talk. That's okay though, I will have the paper and probably be happy they don't want to talk to people without....

Career services on campus weren't any help at all in securing a job. The employers only wanted to talk to students with a 3.5 GPA or better. I did get a couple interviews through them but they were both with dead-end firms that offered little growth.

I also agree that too many people are steered into 'hot' fields. I was steered into the computing field by not only my parents, but also well-meaning professors when I really wanted management and marketing. Am I sorry? Not really, but it does sting sometimes that most firms needing IT help are located in large cities when I'm from a small town and wish for the small town lifestyle. Accounting and economics would have both been a better fit for me.

The Bachelors degree is being watered down. Every small school around here offers them. Community colleges with marginal curriculum are now offering B.S. I've taken a few classes at two local communitiy colleges here; it's nothing more than a glorified high school that is suddenly qualified to issue bachelors of science degrees.


February 6, 2006 05:58 AM


George Fisher

April 19, 2006 06:22 PM

The question is not whether the next generation should get a college education versus not getting a college education. We are becoming a knowledge based country (& world) where people with college educations will statistically always have a higher income than those that do not have a college education. The fact that earnings are declining for those of us that have a Bachelor's Degree is due to globalization which is slowly lowering the standard of living here in the United States. It won't be long before people with higher degrees will also see there incomes drop. With the fall of communism and Asian markets opening up many companies are not only moving manufacturing operations overseas but are also moving knowledge based jobs as well. There are tons of degreed people in those areas of the world that will work for a fraction of the cost of a U.S. based degreed individual. This effectively results in outsourcing knowledge based jobs to other countries while lowering our standard of living via lower incomes. I have a Bachelor's Degree in Engineering and a Master's Degree in Business and have worked in the automotive industry for the past 20 years. I've personally witnessed the downsizing of U.S. based operations while I was actively involved in expanding Eastern European operations and engineering facilities. I exited the auto industry 2 years ago and started my own business. I feel my educational background gives me the opportunity to due whatever I want and that's what the young people of today need to understand, education = opportunity. There will always be examples of people without a degree making more money than a person with a degree. But I will always argue that the person with the degree is exposed to more opportunities than the person without a degree.


August 24, 2006 05:14 AM

I see that most people are ignoring the basic principles of economics.

If you increase supply, the price drops.

Government assistance, more government schools and increased social emphases on education has resulted in more and more and more Undergrads every year.

There's nothing instrinsic about that peice of paper. If you increase the supply of it and then make it easier to increase the supply of it with market distortions (financial aid), then the price is going to naturally fall.

Thank you for your interest. This blog is no longer active.



Michael Mandel, BW's award-winning chief economist, provides his unique perspective on the hot economic issues of the day. From globalization to the future of work to the ups and downs of the financial markets, Mandel-named 2006 economic journalist of the year by the World Leadership Forum-offers cutting edge analysis and commentary.

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