Are College Graduates Better Off Today Than in the Past?

Picture of Cambridge

"Cambridge Backs at Dawn" (Alex Brown)

Time may only move in one direction – but just like a faster than light neutrino, let’s ignore physics for a bit!  Inspired by this comment from an anonymous author, we will take you to the years 1976 and 1989 and look at life through the eyes of a recent college graduate.


For our income data we visited our trusty stalwart of a data dump, IPUMS-CPS.  Our universe is 24-30 year old graduates not currently in college, just like our study of truck drivers.  We then computed the income quartiles and the average for our population with greater than 0 hours worked per week.  So, to reproduce our data, throw out anyone with usual hours worked equal to zero…

Data Explosion

Excuse us – this article contains a generous amount of data.  First up, let’s look at how our population fared in the income department!

We used two deflators – the CPI-E (this one includes fuel and food, to be fair) and the PCECPI.  We know people have lots of problems with the CPI in general, but the truth is it is more likely to be overstated over a long period due to quality changes in goods (think along the lines of a 80″ 1080p LCD today vs. a 13″ Analog Black and White Tube TV in 1976).  The PCECPI is based on the Personal Consumption component of the Gross Domestic Product, thus is harder to fake.  If you’re still not convinced, please check out the car and house data – which are much harder to lie about.

Income Data for Recent College Grads - 2011, 1989, 1976

Income Data for Recent College Grads - 2011, 1989, 1976

And now, the median home price and a home payment based on the 30 year mortgage rate on January 1st of 1976, 1989, and 2011.  For more information about why we are calculating home price affordability this way… click that link.  Median home prices from the Census Bureau, and 30 Year mortgage rates from the St. Louis Fed.  ‘Median Home Multiple’ is the median home price over the salary for each group listed.  Front End Debt to Income on a 30 year mortgage is the 12 month mortgage payment versus the income listed (lower is better for both, but front end debt to income is likely more important.  See our home affordability calculator.)

Median Home and Mortgage Cost, 30 Year (2011, 1989, 1976)

Median Home and 30 Year Mortgage Cost (2011, 1989, 1976)

And finally, let’s compare a “$25,000 New Car” today to the equivalent car in the past.  This is using just the new car component of the CPI transportation index.

$25,000 2011 New Car versus 1976 and 1989

$25,000 2011 New Car in 1976,1989


Income data from IPUMS-CPS.  Miriam King, Steven Ruggles, J. Trent Alexander, Sarah Flood, Katie Genadek, Matthew B. Schroeder, Brandon Trampe, and Rebecca Vick. Integrated Public Use Microdata Series, Current Population Survey: Version 3.0. [Machine-readable database]. Minneapolis: University of Minnesota, 2010.
CPI and PCE data from the CPS survey, compiled by the St. Louis Fed (same for the CPI new car index and 30 year mortgage rates).  Median home price from the Census Bureau.

There’s No Better Time Than The Present…

So, for our recent graduates in the 24-30 year old crowd… by all measures there is unequivocally no better time to be in the workforce than the present!  Today’s $25,000 car is cheaper as a percentage of salary, and so is the home payment on a 30 year mortgage.  By both of our deflators, CPI-E and PCECPI, income is higher adjusted for inflation.

There are a few wild cards that can throw some doubt into the results:

  • What if college degrees are harder to get today?  Despite upwards of 40% of matriculating students never finishing college, a higher percentage of the population has degrees today.
  • What if jobs are harder to get today?  While it is true that unemployment is higher, unemployment for the college credentialed is less than the general population. It was a clever trick tossing out those with 0 hours worked, but it doesn’t affect the results that much.
  • What about student loans? As I pointed out in Matt Allen’s article on financing a degree, in 2008 65.6% of 4-year Bachelor Degree receiving students graduated with some student debt, and the average amount was $23,186.
  • What if you still don’t like CPI? Using inflation to change the salaries is one thing, but consumption is harder to fake. Here’s another look at consumption for the median American from 1980 to 2009 (thanks to the University of Chicago’s Bruce Meyer and Notre Dame’s James Sullivan).
  • What if you pick a less lucrative major? That’s why I showed you the 25th, 50th, and 75th percentile, along with the average.  For a discussion on which degree to pick click that link!

Let us know in the comments if you can think of more!

So, are you convinced?  Is the United States still a land of opportunity, even if the advancement seems to come at a snail’s pace?  What should we tell politicians who are enamored with previous decades like the ’50s?  And, how does this affect our previous question Is College Worth It?


  1. says

    Very nice analysis! I can’t really think of many arguments to refute what you’re saying (and I typically have no problems starting an argument) other than to say that I still feel like college graduates may not be as well off as you’re saying if they aren’t saving and spending their money responsibly (I don’t think there’s anything that accounts for that here, is there?)

    The numbers and prices say that students SHOULD be better off, but are they really? I guess some of that is subjective and difficult to answer.

    • says

      Yeah, my biggest issue is probably my point about student loans. Savings is a tougher one to say something about, but the overall savings rate has come down a bunch since 1976 or 1989. It’s hard to say what the behavior of college grads was, however.

      If something is going to blow up my article, it’s the student loans. You might come out making more money even with inflation but it doesn’t help if you’ve got 6 figure loans…

  2. says

    I’m still going to go with no, despite your data, for two reasons. So many graduates (and non-graduates!) have taken out huge student loans that they’ve got to repay, which cuts down on other things they could have done with that money. Also, I suspect there are a lot more jobs now that “require” college degrees that didn’t in the 70s, and so more people are going to college just to get the same types of jobs they could have gotten without a degree in the past.

    • says

      On your first point – certainly a possibility. CPI says prices jhave basically doubled since 1989, but I wasn’t able to find data on student loans before 1993, so it is sort of worthless. I couldn’t tell you what student debt looked like before then, but here’s data on what student loans outstanding have looked like since then (it’s ugly).

      On the second point – I would discount that effect. If the middle class is driven to get degrees it might be the opposite… jobs are only able to offer to college degree holders because there are more, as a percentage of the adult population. In fact, the 25-29 year old group is approaching 30% with bachelor degrees, which is near an all time high.

      Thanks for the thoughtful comment!

  3. says

    Another analytical post that I enjoyed. Good stuff here.

    I’ll have to mull this over a bit. My initial thought on the question, absent any looks at this analysis, would have been that college grads in prior years were better off than today. A college degree seems like simply an entry ticket today (often with big loans attached to it), while in the past there were plenty of people who could write their ticket to management with a college degree. Heck, many people had really solid middle class lives with no college classes whatsoever.

    Like I said, I’ll have to take another look at this analysis….

    • says

      Ahh, the ‘gateway to the middle class’. There are still a few career paths where you don’t need a degree, generally the trades… but unfortunately I don’t know how many people are even aware it’s an option. Too many low paying Majors abound, heh.

      Looking forward to what you come up with! If you want to spin it into a post let me know and I can toss some data your way…

  4. says

    I think one big advantage college grads have now vs in the past is the Internet and the amount of resources online.  Finding a job will always be competitive and even when in strong economic times and that’s a good thing for businesses who want to hire strong candidates. -Sydney

    • says

      Certainly we’ve got a whole lot more information at our fingertips than we did in generations past – the biggest problem now is knowing how to sort through it, haha.

  5. says

    Based on your analysis it appears that today’s college graduates are better off, but at what cost?  The aggregate graduation rate for those attempting a 4 year degree is barely 50% according the the U.S. Department of Education.  Those that dropout are saddled with debt that most will never repay.  Millions and millions of taxpayer subsidized financial aid is spent annually to subsidize these degrees and the would be degrees of the nearly 50% that never finish their degrees.  The true cost of a degree is much higher due to these costs being subsidized by society.

    • says

      Do you have any figures for the 1976 or 1989 graduating classes? I didn’t dig too hard into that aspect of the analysis since I was going for the ‘what era is a graduate better off in’ aspect… but you know I’m down to explore!

  6. Andy Hough says

    I agree that college graduates are better off today and think that the population in general is better off as well. That could be another post.

    • says

      Oh for sure… I do think we’re a lot better off. I’m just on a college kick lately, heh. How would you like me to cover that?

  7. Darwin Money says

    For those WITH jobs, sure, much better off than in prior years.  But so many kids are graduating to a bleak job market. 

    • says

      Amen – I hear you. I heard a figure that ‘recent grads’ had somehting like a 9% unemployment rate. I could crunch it myself, but the CPS numbers are from March so the data’s already stale…

      Overall, the unemployment rate for college grads is lower than for the general population – but after reading your analysis of the various majors, I know some degrees have better prospects than others.

  8. DMR says

    As the anonymous poster who requested this post, I want to express my appreciation for this post.

    The falling cost of a new car relative to income definitely shows part of the reason America has become a largely car centric society and I can agree that is wealth.
    Income relative to CPI has also clearly gone up.
    I think however the housing numbers do not show an increase in wealth, but rather an increase in the expense of living. The bottom 25% are clearly worse off due to the majority of houses being more expensive. With the advent of the mc mansions, fewer one and two bedroom houses are going in leading to higher prices for smaller houses. If however this is only due to choice not availability then this would be a sign of wealth.
    You could say the same thing about unemployment among college grads. There is no way to track how many of them went into their chosen field as opposed to flipping burgers to pay for the non-bankruptable debt. Certainly no way to see how many got into their chosen field back then.
    The other question statistics can’t pose is do companies still train within and hire up from within rather than stealing talent.

    I appreciate the analysis. I guess I need to start living weird like the people back then with no cell phone internet or computer so I can start saving for my house which will cost 8 times my starting income. (just joking)

    Seriously this is the first real look I’ve seen without comparing it to the recession of the 80’s I really appreciate the honesty and data. I feel more fortunate despite working a seasonal job than before to know I’m just a temporary anomaly. Eventually I’ll find what I need to do to get into my chosen career.


    • says

      And I owe you a thank you for the good idea! It was pretty instructive putting it all together.

      Yeah the house price one was interesting – the cost of the payment has come way down at the same time as the prices have gone way up. That’s good from a “people can afford houses” perspective, but probably not from a “people can afford houses without a mortgage” perspective. I wonder if there is something more to the shift – has financial creativity blown a permanent housing bubble?

      I wanted to share this piece on the cost of electronics from the Sears Wish Book… from 1964.