Recession scars young people’s earnings for many years


11/20/2010 1:15 PM

05/16/2014 5:23 PM

The unkindest cut

College graduates in a recession, hired at fire sale prices, may suffer economic scarring for the rest of their work lives.

Each time the jobless rate ratchets up one percentage point, graduates can get hit with an average initial wage loss of 6 percent to 7 percent, estimates Lisa Kahn at the Yale School of Management.

At the current jobless rate, “it’s a fair estimate that the recession has reduced the average starting pay of recent grads by 10 to 20 percent,” says economist Paul Oyer at the Stanford Graduate School of Business.

Kahn also found that “even 15 years after college graduation, the wage loss is 2.5 percent and is still statistically significant” for those who entered the job market during high unemployment.

A recession roadblock

A Greenberg Quinlan Rosner Research study in 2008 found that 20 percent of 18- to 29-year-olds had left or delayed college because of family economic situations.

The education premium

Each level of education beyond high school tends to promise greater lifetime earnings. Historically, the education premium means someone is more employable and less likely to suffer long-term joblessness. Average expected lifetime earnings:

High school dropout:

$1 million

High school graduate:

$1.2 million

Some college, no degree:

$1.5 million

Associate degree:

$1.6 million

Bachelor’s degree:

$2.1 million

Master’s degree:

$2.5 million

Doctoral degree:

$3.4 million

Professional degree:

$4.4 million Source: U.S. Census report


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