Recession scars young people’s earnings for many years
03/03/2011 1:24 PM
05/16/2014 5:23 PM
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