We so often hear how hard it is for young people today to get started out in their professional careers. With the high cost of living today, many young folks are still dependent on their parents well into their 20s. Parents of Gen We and younger Millennials remember the difficulty of the 70s and 80s recessions the Energy Crisis, and double-digit inflation. We had it just as tough … right?
As the parent of two grown children in their 20s, both with undergraduate degrees, I wanted to see if their plight was indeed any worse than mine. So I researched the employment opportunities and the relationship between salaries and cost of living in both time periods to get a true perspective … void of the emotional drama.
This year, the National Center for Education Statistics (NCES) projects 1,882,000 students at the bachelors degree level will graduate as the Class of 2017. The nearly 2 million who graduated this year is double the amount in 1981, when I graduated from college when there were 929,000 graduating. But today, the almost 2 million bachelor degrees are seeking jobs in a marketplace with an unemployment rate of only about 4.4%. In 1981, my classmates were going into a job market with an unemployment rate of 14.8% according to the U.S. Department of Labor.
So while there is significantly more young graduates today entering the workforce increasing the competition for career-building positions, there is clearly more job openings due the comparatively low unemployment rate. So I think it is safe to say that the Boomers had it a bit tougher here and win this category.
STANDARD OF LIVING
But when it comes standard of living, we have to look at not only cost of living, but how it compares to annual salaries. There is no question that things are more expensive today, but in relation to how much you earn may not be as obvious.
Consumer Price Index today is at 244.922 meaning that it is 2.4 times costlier to buy goods today than in 1982 (the base year of the CPI). This would suggest that for every $100 in goods and services I purchased in 1982, it would cost my daughter $245.
A study released in May of this year by the Hay Group division of the executive search firm Korn Ferry reports that average starting pay for new college grads has never been higher than it is right now. The average starting salary for a 2017 college grad is $49,785, the study indicates. That's up 3% from last year. Back in 1981, according to National Association of Colleges and Employers, the average starting salary for an undergraduate was $20,906. (I went into advertising, so it was quite a bit less.)
Therefore, the average salaries for the Gen We graduates starting out are exactly 2.4 times higher than what we earned in 1981. Which is identical to the inflation of the Consumer Price Index meaning there is essentially no difference in standard of living today vs. the Boomers heyday of 1981. So, when it comes to food, clothes, transportation et all, it is literally a wash. This is a big fat tie. No winner. Both losers.
A ROOF OVER YOUR HEAD
The CPI does not however account for housing costs and at least in Southern California ignoring that is like saying the Golden State Warriors are equal to the Lakers if you don’t include Curry, Durant and Thompson. Housing costs are usually cited as the primary reason young adults today are struggling and still living at home in their mid-20s. Rent today is indeed outrageous, let alone the price of entry level homes. According to the OC Register, average rent in Orange County in 2017 hit $1,800 which is about $500 a month higher than the national average of $1,304.
Since I have not been able to find this kind of actual data from 1981, I can only give you antidotal information. My first apartment in the Torrance/Redondo Beach area in 1983 was $275 a month for a one-bedroom. Others I knew were paying as low as $225 in other parts of Southern California. So if we say the average was $250 a month… today rent at $1,800 would be 7.5 times higher! This is a significant challenge for any young adult that Boomers did not have to endure.
GETTING THERE IN THE FIRST PLACE
All of this discussion about your financial comfort right after college is moot if you don’t consider the cost of college itself. This is where it gets crazy. According to the College Board, the average cost of tuition and fees for the 2016–2017 school year was $33,480 at private colleges, $9,650 for state residents at public colleges, and $24,930 for out-of-state residents attending public universities.
According to the U.S. Bureau of Labor Statistics, prices for college tuition and fees were 10 times higher in 2017 than in 1981. College tuition experienced an average inflation rate of 6.68% per year between 1981 and 2017. This rate of change indicates significant inflation. In other words, college tuition costing $2,250/year (what I paid as an out-of-state student at Arizona State) in 1981 would cost $23,097.90 in 2017 (which is just a hair higher than what my son paid at ASU in 2014.)
California State Universities in 1981 charged just $98 a semester for in-state students for a full-load. Yes, for a full schedule of classes at Cal State Northridge, my cousin paid less than $200 a year. (One semester, he actually went to the registrar’s office and paid his full tuition in quarters!) Today that same schedule of classes would cost 30 times higher as Cal State campus tuition is now $5,742 per year. University of California campuses charged $225 per quarter or less than $700 a year back in 1981. Today UCs are 20 times more expensive at $13,672 a year for in-state student tuition each academic year.
With that outrageous inflation in the cost of education, graduates today have unprecedented student debt. According to FedLoan Servicing, the average Class of 2016 graduate has $37,172 in student loan debt. That means in addition to paying 7.5 times more for rent, todays recent grads can add another $351 in monthly student loan payments (for borrower aged 20 to 30 years old). Today’s young adults are burdened in a way that Boomers were not.
So, I admit it. Yes, my kids have a tougher challenge today than I had some 30 years ago. But at least I know I had it much harder than my father did …