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Younger workers earn $10K less than in 2005

September 21, 2012: 11:20 AM ET

Young workers with a college degree might earn less, but they're still better off than those with only high school diplomas.

FORTUNE – Fall has arrived. Across U.S. college campuses, thousands of students are deciding on majors that will hopefully prep them for the job they've dreamed of. But they're probably also pretty discouraged, having heard that so many graduates before them are spending their days as baristas earning a measly wage.

Indeed, it's tougher out there for America's young people. For the sixth year in a row, real earnings declined for 25 to 34-year-olds with a bachelor's degree working full-time, according to Progressive Policy Institute's look at the latest U.S. Census data. In 2011, they earned $10,000 less than they did in 2005, falling from an inflation-adjusted $64,500 to $54,500.

What's most perplexing isn't what happened last year or even the year before. Fortune asked the Washington, DC-based think tank how the slide in earnings of young college grads compares to most other full-timers. Economist Diana Carew crunched the numbers and found that in 2009, earnings for young graduates fell below all other workers 18 years old or older, regardless of education, for the first time. Young college-educated workers saw their earnings rise in 2004 amid the height of the U.S. housing market boom, while wages and salaries for all other full-timers continued to stagnate. As the market started showing signs of cooling in 2005, young graduates saw earnings immediately plunge from their $64,500 peak to $56,500 by 2009.

The financial turmoil of the Great Recession has almost certainly left a mark on young people. In the years following the downturn, the drop in earnings accelerated to where they are today.

It's uncertain what drove the 2009 turnover, Carew says. More broadly, the decline since 2005 reflects what she's coined "The Great Squeeze," where college grads take lower-skilled jobs – jobs like dental assistants, bus drivers and hairstylists that don't call for a bachelor's degree. This comes as middle-class jobs (think teachers, sales agents and financial analysts) continue to shrink.

But despite this bad news, the college-educated population is still generally better off with that bachelor's degree than not – even if many have been forced to move back in with mom and dad. As Fortune highlighted last year, college grads earn much more over a lifetime than those with only a high school diploma. A college education is worth it, even with the soaring costs of tuition.

The problems that college grads face should bring attention to the plight of those who aren't as lucky to go to college. As graduates are forced to take jobs that don't demand a bachelor's degree, what happens to the millions of struggling young adults with only a high school diploma?

They can't (and shouldn't) be ignored.

As The New York Times highlighted this week, political strategists see this group as "one of the most potentially powerful but often overlook voting blocs" during this presidential election in battleground states from Florida to Colorado. Across the U.S., the roughly 18 million young adults who don't have college degrees or aren't pursuing one reflect more than 40% of eligible voters 18 to 29 years old.

And as the Obama and Romney campaigns try to tweak their messages to this group -- a group that's tough to get to the polls -- it will be interesting to watch what plans they might come up with to make their futures brighter.

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About This Author
Nin-Hai Tseng
Nin-Hai Tseng
Writer, Fortune

Nin-Hai Tseng covers economics and finance. Before joining Fortune, Tseng was a reporter at The Orlando Sentinel and a public affairs associate at GE. She holds an MPA from Columbia University and a BS in Journalism from the University of Florida. She lives in New York City.

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