The income gap narrows between workers with bachelor's and master's degrees

The gap between the starting salaries for those with a bachelor's degree and a master's degree shrunk for a fifth year in a row, adding to a debate about whether graduate school is worth the cost.

The average starting salary of those who graduated with a bachelor's degree in 2021 was $58,862, while those with a master's degree earned $72,105 — about 22% more, according to the National Association of Colleges and Employers. 

That was down from a 26% difference in the prior year and the smallest gap since NACE started collecting the data in 2015, said Josh Kahn, NACE's associate director of research and public policy.

The main cause? The compensation for those with a bachelor's degree is ballooning faster than for those with a master's — an ongoing trend that Kahn said is "market driven." 

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"As companies try to find savings in their workforces, they're trying to recruit more bachelor's degree students, driving up demand there, which is leading to faster increases in salaries," he said.

The NACE report comes at a time when prospective college students are questioning whether higher education is worth the cost. Average college tuition and fees are more than double what they were 30 years ago, data from the College Board show, forcing students to take on more debt. The average undergraduate student borrowed $6,470 for the 2020-2021 academic year, while graduate students borrowed an average of $18,800, according to the College Board.

Decades-high inflation is also eating into starting salaries for every level of education except associate's degrees, which are two-year programs often focused on technical and vocational skills.

The average inflation-adjusted starting salary for those with a bachelor's degree fell by 2.9%, while it dropped by 5.6% for those with a master's. By comparison, associate degree graduates saw a 2.4% increase in real terms.