You’re Probably Better Off Than You Think – Fifty Percent of Americans Earn $35,000 a Year or Less

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

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 consistent1. 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.

First – the most interesting fact (to me): Going to college has a high2. 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

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.

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Categories: Compensation