What's a Diploma Worth, Anyway?

Go to college. Work hard. Save money. For the baby boom generation, this mantra was considered the tried and true recipe for getting ahead in America. If you're a parent of 20-something today, chances are you gave this advice to your own kids as they emerged from teen-hood into adulthood.

And indeed, a generation ago, most people found that if they followed these three rules, they'd earn a spot under the security blanket of America's middle class. But as one famous boomer said so eloquently, "the times, they are a-changin'."

The recently released 2006 Economic Report of the President reported that earnings for workers with college degrees declined between 2000 and 2004 -- yet another thread of evidence in a growing mound that for those just starting out, the golden rules are no longer so golden.

Getting a bachelor's degree is the required ticket for entry into the middle class today, but the security once implied in that status is gone. In addition to the exigencies now felt by middle-class Americans of all ages -- rising health care costs, soaring home prices and flat or falling incomes -- today's new generation of college grads bear an added vulnerability of massive debt.

"Middle class" for a college-educated 20- or 30-something today means carrying five-figure student loan debt. Two-thirds of college graduates borrow money to help pay for school, putting them $20,000 in the red on average. At current interest rates for federal student loans of 6.8 percent, that amounts to a $230 monthly payment for the next 10 years. And for those trying to buy more security with an advanced degree -- just try getting ahead without one -- leaves today's aspiring professionals with a combined student loan debt of $46,900 on average.

So, what about hard work? Surely a young worker who puts their nose to the grindstone can earn enough to pay off those debts and earn their way to economic security. They are certainly trying. According to one study, Generation X -- those now 25 to 40 years old, work nearly three hours more per week than did young baby boomers in 1977. But those extra work hours aren't adding up to enough additional earnings to counter the effect of student loan debts. Compared to 1980, the median earnings for a young worker aged 25 to 34 with a bachelor's degree or higher were only 6.6 percent higher in 2004. During the same time period, student loan debt has more than doubled.

Even if student loan debt hadn't risen, young workers' would still find getting ahead to be harder today than it was for the previous generation. Remember that the bulk of today's under-34 crowd entered the labor force during the 1990s -- the culmination of America's post-industrial transition. By the beginning of the 1990s, the rules of the game had been totally rewritten. Wall Street investors pushed short-term profits over long-term stability. Global competition created new pressures for companies to cut costs. The new economy had found its sea legs. Gen Xers became the first group of young adults faced with building their lives in this volatile new economy.

A generation ago, the labor market was like an escalator: Productivity went up and so did wages. So young workers back then experienced a steady and swift progression in earnings. Today's labor market is like an automated airport walkway: the economy grows faster, but wages remain flat.

Now, the hardest nut for Americans of all ages: savings. Over the last 20 years, our nation's personal saving rate has plummeted from about 8 percent through the 1980s and early 1990s to zero (actually negative) today. These figures are just for run-of-mill savings. How are young people doing with other types of saving, like retirement? Forty percent of people under age 35 had a retirement account in 2004, with $11,000 in holdings on average.