NACE Journal, August 2016

The overall economy, corporate scandals, new legal requirements, the dot-com bubble and burst—a variety of factors have affected the rise and fall of starting salaries for new college graduates over the past half century. Overall, in real terms, bachelor’s degree level salaries have risen 5.9 percent since 1960.

NACE (then the College Placement Council, or CPC) began reporting salary data for new college graduates in 1960 through its Salary Survey report.

The report has grown significantly over its 56 years, expanding from just 11 majors to more than 150 at the bachelor’s degree level. Reflecting societal norms and expectations, rather than the reality (women accounted for nearly one-third of the civilian labor force in 1970), the report included salaries only for men until 1974. In its early days, too, the report was heavily weighted toward engineering and business disciplines.

NACE’s Salary Survey remains one of the few sources for new college graduate salary data, and its rich cache of historical data makes it possible to view salaries for new college graduates over time.

This examination of the history of average starting salaries for college graduates covers several areas of study at the bachelor’s degree level, including business (accounting, business administration/management, and marketing majors), engineering (chemical, electrical, and mechanical engineering majors), humanities majors (English and history majors), and mathematics majors. These particular majors have been reported consistently since the first Salary Survey reports were published, so a complete picture of salaries can be provided.

Figure 2 represents the overall adjusted average salaries in five-year increments. From 1960 until 1970, when an economic recession occurred, the overall adjusted average salaries rose. Once the average salaries dropped, they remained fairly level even through the recessions of 1975 and 1982.

The overall adjusted average salary hit its lowest point in 1995, when there was a slump in overall productivity in the economy and the real gross domestic product (GDP) grew at an average annual rate of just 2.4 percent per year. From 1996 to 2000, the GDP improved, averaging 4.3 percent per year, driven by increased production of computers, software, and telecommunications components.

The dot-com bubble was evident in the rise of overall adjusted average starting salaries by more than 20 percent from 1995 to 2000. Once the bubble burst, the adjusted average salary hovered close to the $50,000 mark. Average salaries were slightly affected during the 2008 stock market crash, but greater effects were seen in new college graduate hiring, with employers reporting plans to decrease their number of new college hires by more than 20 percent.

Overall, from 1960 through 2015, the inflation-adjusted average starting salary for a new bachelor’s degree graduate increased by 5.9 percent.

Salaries to Business Majors Follow Overall Trend

For the most part, starting salaries for the three business majors presented here—accounting, business administration/management, and marketing—followed the trend seen for bachelor’s degree graduates overall. (See Figure 3.) The adjusted average salaries for accounting majors even topped the adjusted overall average salary in the years 1970, 2005, 2010, and 2015.

In more recent years, the demand for accounting majors has grown, largely due to the passing of the Sarbanes Oxley Act in 2002. This act set new or expanded requirements for all U.S. public company boards, management, and public accounting firms, and was enacted as a reaction to a number of major corporate and accounting scandals, e.g. Enron.

Business administration/management and marketing majors were more affected by the recession period of the early 1980s, as they hit low points in 1980 when they averaged adjusted salaries of $40,215 and $37,804, respectively. Business administration/management majors hit an all-time low adjusted average salary of $39,698 in 1995—the same time the overall adjusted average salary for all college graduates hit its lowest point of $45,202.

The change in adjusted average salaries from 1960 through the present reporting year of 2015 also shows that accounting majors have far more earning power today. Their overall change is an increase of 20.3 percent in real dollars. Business administration/management majors have also improved compared to 1960, with an overall change of 18.9 percent. Marketing salaries, on the other hand, have actually decreased overall by 3.4 percent.

Engineering: Consistently Above Average

Engineering majors have consistently earned above-average starting salaries. (See Figure 4.)

While their salaries grew tremendously during the period from 1960 to 1970, the three majors shown (chemical, electrical, and mechanical engineering) did not see quite as much volatility as some of the other fields, as can be seen by comparing Figures 3 and 4. Since 1970, however, their growth in terms of real dollars has been relatively slow and steady, unlike what was experienced by the business, humanities, and mathematics disciplines.

Among the three engineering disciplines reported here, chemical engineering majors have surpassed electrical and mechanical engineering majors in terms of salaries, except for 1960 and 2015. In fact, chemical engineering graduates were the highest paid of the engineering majors through 1975, when they fell to (and remained in) second place after petroleum engineers.

Their short supply is the main reason that petroleum and chemical engineering graduates have held the numbers one and two spots in terms of starting salaries. For the Class of 2013, a total of just 1,130 bachelor’s degrees were conferred in petroleum engineering, while 7,411 were earned in chemical engineering. In comparison, 12,764 were earned in electrical engineering, and almost 22,000 were earned in mechanical engineering.

Not surprisingly, fueled by demand to match the needs and wants of a society that emphasizes technology and its products and services, starting salaries in real terms have jumped from 1960 through 2015 for chemical (44.4 percent), electrical (34.5 percent), and mechanical engineering graduates (27.4 percent)—far outpacing the overall 5.9 percent salary increase in real dollars for bachelor’s degree graduates overall. (See figures for the individual majors in the Appendix below.)

Salaries for Humanities Majors

In any given year, students who major in the humanities fields tend to earn average salaries that fall below the overall average. However, their adjusted average salaries appear to follow the same trend as the other fields during the same 55-year period. (See Figure 5.)

With the exception of the last five years of reporting, the line graph for the adjusted salaries for humanities majors nearly mirrors the overall average. (Note: Within the 2010 – 2015 period, there were two changes in survey methodology, which accounts for the deviation from the norm for these adjusted average salary amounts.)

The early reports from 1960 to 1962 grouped humanities majors and biological sciences together as one category, with one average salary offer reported. In 1963, “liberal arts” became the reported category, and from 1964 through 1973, humanities and social sciences were reported together as one average salary. Therefore, a true historical comparison between majors is difficult to obtain.

Also, in the more recent Salary Survey reports, especially those of the last two years, the number of reported salaries for graduates of the humanities fields are much more plentiful than has been the case in the past. So, comparing prior years’ limited data to the present creates some issues.

Beginning in 1988, English and history majors were reported as specific majors under the humanities broad category. Their adjusted average salaries generally followed the overall trend, with the ups and downs occurring in 1995 and 2000, respectively.

For humanities majors overall, the change in the starting salary adjusted for inflation from 1960 through 2010 is -5.1 percent. However, using the 2015 data (noting the survey methodology changes and more plentiful data) yields a much better outcome, as the change in adjusted starting salary for 1960 through 2015 is 31.7 percent. (See figures for the individual majors in the Appendix below.)

Mathematics Salaries Rise Over Time

Of all the fields compared thus far, the adjusted average salaries for mathematics majors are closest to the overall adjusted average salaries. (See Figure 6.)

During the period from 1965 through 2015, the largest variations were in 1975 (a 10.2 percent difference) and 2015 (an 11 percent difference). Otherwise, the largest deviations between mathematics and the overall adjusted salary trend line are less than 5 percent. In the last 15 years, the adjusted salaries for mathematics majors have steadily been higher than the overall average, with the 2015 figures showing the 11 percent higher adjusted average salary of $56,440 for mathematics, compared to the overall adjusted salary for all majors of $50,219.

High demand for the STEM disciplines in recent years may play a part in the salary growth. For example, just 20,453 bachelor’s degrees were conferred in mathematics and statistics in 2013 of the total 1,840,164 bachelor’s degrees conferred. This represents just 1.1 percent of total bachelor’s degree graduates.

In terms of overall salary growth for mathematics majors, the change in the starting salary adjusted for inflation from 1961 through 2015 is 13.7 percent. (See the figure detailing salaries to mathematics majors in the Appendix below.)

Factors Driving Salaries

Average starting salaries for new college graduates have been highly correlated to two main factors—the overall economy, and supply and demand by academic major.

While employers see value in their new college graduate hires, their salaries are not immune to the effects of the economy. When the economy is booming, employers hire more graduates and are willing to pay higher salaries for all areas of study. Conversely, during times of recession, employers are less willing to hire new college graduates, and those who are hired tend to receive lower salaries. The increases in average starting salaries were reflected in the growth in the economy of the 1960s and the early 1980s, whereas the decreases were seen mainly during the times of recession.

In addition to economic conditions, supply and demand for particular academic majors certainly plays a part in average starting salaries for college graduates. Students who major in STEM fields graduate with a specific skill set that is attractive to employers that hire in those fields. Combined with a typically small number of graduates in the STEM fields, these students earn the highest average starting salaries.

Humanities majors and more “academic” majors have historically received lower salaries than the “career-oriented” (business or STEM) fields. As they are not as heavily recruited for their specific majors, humanities majors do not exhibit as much growth in terms of starting salaries.
Always of great interest, starting salaries for new college graduates are likely to generate more intense interest as the rising costs of a college education shine a spotlight on the immediate compensatory return on investment. With the new data collection methods introduced by the First-Destination Survey and the wealth of data that are now being submitted, NACE will continue to enhance and expand its Salary Survey reports in the years ahead.

Appendix