The most recent statistics on household income, net worth, and unemployment, sorted by education level, are really interesting. Following our discussion about the splits that have emerged along geographic fault lines in the electoral body, I thought it would be important to highlight the economic differences and how enormous the income inequality is for the median high school drop-out compared to the median college graduate.
Unemployment By Education Level
During the depths of the Great Recession, the unemployment rate around the peak of the collapse in 2009 was different depending upon your education level:
- Unemployment rate for those without a high school diploma: 17.5%
- Unemployment rate for high school graduates: 9.1%
- Unemployment rate for college graduates: 4.5%
Household Income By Education Level
Now, follow that up with the income data the Federal Reserve published from the following year, which took into account the horrors of the Great Recession:
- Median income for those without a high school diploma: $23,000
- Median income for high school graduates: $36,600
- Median income for college graduates: $73,800
Net Worth By Education Level
How about net worth?
- Median net worth for those without a high school diploma: $16,100
- Median net worth for high school graduates: $56,700
- Median net worth for college graduates: $195,200
That Doesn’t Mean You Should Break The Bank With Student Loans
Where some young people get in trouble is they see these statistics and then immediately think that a college degree is a magic piece of paper. By itself, it’s not. You have to major in something that society is willing to pay you for if you want a higher income, and you cannot take on too much student loan debt or otherwise compounding will work in reverse and you will find yourself drowning under the interest payments.
[mainbodyad]There is a reason that people rank the best paying college degrees and the worst paying college degrees. That doesn’t mean you should only pick from the best paying college degree list – if you want to be a painter, be a painter – only that those particular degrees can support a higher level of student loan debt. You shouldn’t go $25,000 in debt if you are getting a degree in art history, social work, or elementary education. On the other hand, if you were a petroleum engineer, you could probably borrow $50,000 and be fine. It is basic mathematics.
Likewise, exceptions exist. I have known some people with very impressive education credentials but have absolutely no common sense whatsoever. On the other hand, I have known some people who dropped out of high school and are brilliant. It is a Guasean distribution. The presence of those outliers does not negate the overall correlation. It isn’t an accident that roughly 90 out of every 100 of the top 1% of wealth in the United States are college graduates.
What Can We Takeaway from the Data?
The moral of the story: Get an education. Don’t overpay for it. Stay out of debt. Amass capital to throw off passive income so you are protected if you ever lose your job.