Labor shortages over the past few years have led to higher wages for workers. Unfortunately, inflation has more than offset those gains. As a result, college-educated workers in 2023 have less buying power than their 2020 counterparts.
Student Connections looked at U.S. Bureau of Labor Statistics data for two groups of adults ages 25 and up. The first was comprised of workers with at least a bachelor’s degree. The second held either an associate degree or had some college. Both groups saw their wages grow, but not at an equal rate.
For those with at least a bachelor’s degree, median weekly earnings rose 6.9% between the first quarter of 2021 and the first quarter of 2022. Over the next year it grew another 6.3%. By April 2023, their median weekly earnings stood at $1,621.
In contrast, earnings for workers with either an associate degree or some college grew just 2.9% from 2021 to 2022. Their wages grew an additional 6.1% over the next year. In April 2023, the group’s median weekly earnings were $985.
While income grew moderately, cost of living exploded. Inflation is often measured using the 12-month percentage change of the Consumer Price Index (CPI). That figure began to climb in Spring of 2021. It didn’t peak until June 2022 when it hit 9.1%. For context, the CPI topped out at 5.6% during the great recession of 2008. Inflation slowed to 4.9% by April 2023, but that was still higher than almost any point in the last 20 years.
The result is that college-educated workers in 2023 are effectively making less than they did in 2020. Those with at least a bachelor’s degree saw their annual purchasing power shrink by about $988. Those with either an associate degree or some college experience lost even more ground. They have around $2,340 less purchasing power compared to their 2020 peers.
Reduced purchasing power isn’t the only problem facing student loan borrowers in 2023. Interest rate hikes, an underwhelming job market, and a confusing information space are also contributing to fragile budgets and uncertainty. The rate of consumer debt delinquency among borrowers is already rising, and that’s before student loan payments have restarted.
The stage has been set for mass student loan delinquency. What can you do to prepare yourself? Read Student Connections’ report “Repayment is Coming: The State of Student Loan Borrowers in 2023.” It details the causes of the impending repayment crisis and a plan for your school to help your former students. Get the full report today to prepare for repayment.