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A couple of days ago I had the opportunity to listen to Kevin Hallock, Professor of Economics at Cornell University talk about international differences in pay. It was a great presentation, but today I want to share with you some interesting statistics he presented on U.S. income distribution.

Credit:  Kevin Hallock, Professor of Economics at Cornell University

Credit: Kevin Hallock, Professor of Economics at Cornell University

As a comp guy I see different cuts of wages all the time, but rarely presented quite like this. I have to admit – it was a little jarring to see most people in the U.S. earn so little money.

To get another cut of wage data, let’s look at personal income by educational attainment:Source: US Census Bureau, 2006; income statistics for the year 2005

Source: US Census Bureau, 2006; income statistics for the year 2005

The above US Census data is old (2005), so let’s look at another cut of the data below. We’ll assume 3% annual merit increases over 8 years to generate some rough 2013 data. I don’t know if the 3% annual number is a valid data point (these numbers look a bit high to me so perhaps not), but it’s consistent 1. Pro tip – A simple way to calculate this in excel is =FV(0.03,8,0,-20321) where 0.03 is the merit increase percentage, 8 is the number of years, 0 is the number of additional payments, and -20321 is salary (you need to make it a negative number).with what we’ve seen in the market the last couple of years. 1

Wages By Education FV

First – the most interesting fact (to me): Going to college has a high 2. I’ve talked about this before.correlation with higher earnings. For all the talk about college grad underemployment, for those able to get a job the ROIC is pretty high. 2 Yet only 30% of the population has a college degree.

At the HR masters program where I went to school, the average private sector salary out of school was around $70,577 (range $48,200-$93,000), the average age at graduation was 25, and 65% of the students in the population had less than one year of work experience.

Credit - 2011/12 LER Placement Report<http://www.ler.illinois.edu/career/images/placement_report_11_12.pdf

Credit – 2011/12 LER Placement Report

Takeaways:

1. All things considered, going to college is probably a good idea (a masters degree is even better assuming you select the right degree/school)

2. If you are a college graduate, there is a good chance that even in today’s economic environment you’re doing a lot better than the average person, financially speaking.

As always, please share your thoughts below.

Best,

Rory

If you have questions about something you’ve read here (or simply want to connect) you can reach me at any of the following addresses: 

SomethingDifferentHR@gmail.com OR rorytrotter86@gmail.com

@RoryCTrotterJr

http://www.linkedin.com/in/roryctrotterjr

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