By Published on .

Most savvy investors know the U.S. population is aging, with clear implications for the eldercare and health-care industries. What many don't know is that along with getting older, the adult population is also getting better educated, which will affect how people spend their time and money.

Consumers with a college education tend to buy far more reading material and travel services than those who have not attended college. But college graduates spend less money on power boats and other recreational vehicles, and less on some alcoholic drinks and tobacco products, according to the Consumer Expenditure Surveys released in December 2001 by the Bureau of Labor Statistics (BLS).

But in most cases, households headed by college graduates spend more than other households simply because they have higher incomes. According to the Census Bureau's March 2001 Current Population Survey, the average household headed by someone with a bachelor's degree or higher earned a median annual income of $71,400, about twice the median income of a household headed by a high school graduate. Individuals with graduate degrees, of course, have even more earning power: The median annual income of a household headed by someone with a professional degree tops $100,000, nearly three times that of a high school graduate. One reason for the big difference in household income is that college graduates and those with graduate degrees tend to marry each other, with both husband and wife continuing to work at high paying jobs.

When it comes to kicking back, college graduate households have a high propensity to buy vacation homes. They spend nearly three times what other households spend on second homes. Those with a graduate degree are twice as likely as the average householder to own more than one home, and they spend 30 percent more for a home away from home than those with a bachelor's degree.

Therefore it's not surprising that the firms the BLS expects to benefit most during this decade from the growing number of college grads have businesses related to home-ownership: lawn care firms, makers of kitchen and dining room furniture and providers of indoor plants and fresh flowers. For each of those businesses, one college graduate is worth as much as three or four other customers. Jewelry stores also stand to benefit, because college grads are by far the most frequent buyers of jewelry, spending on average more than double what high school graduates do for such personal accessories.

Between 1991 and 2000, the number of college-educated heads of households age 25 and older increased by 29 percent to 27 million, according to the Census Bureau. During this time period, households with a high school degree increased 2 percent, while the number of all householders age 25 and older increased 10 percent. The BLS projects that by 2010, jobs requiring a bachelor's degree or higher will grow 2.2 percent per year (or 21.6 percent), compared with 1.2 percent per year (or 12.4 percent) for jobs requiring work-related training only. It therefore appears likely that the number of households headed by a college graduate will continue to grow at above average rates (at least 3 percent per year). But even at their present rate of growth, college graduate households age 25 and older will certainly make up more than 30 percent of all households by 2010, and probably 33 percent or more by 2015.

Perhaps the biggest impact of this growth will be seen in spending on educational products and services. One of the most interesting aspects of education is that the more you have of it, the more willing you are to invest in it, either for yourself or for family members. College graduate households spend 4 times more on tuition annually, schoolbooks and school supplies than households of high school graduates. And they spend 2.5 times more on newspapers, magazines and books. Although college grads make up only 27 percent of households, they account for a majority (57 percent) of all spending on books and about half of all spending on software for non-business use.

College grads eat out a lot, too, spending nearly half of their food budget away from home. But what they really spend money on when they eat out is wine. Owners of fine restaurants and vineyards should be happy to learn that this segment will account for over half of annual wine sales at full-service restaurants and nearly 60 percent of wine bought for drinking at home.

College grads don't, however, spend a lot on clothing. This group spends 44 percent more than all households for apparel, but this figure is much lower when put in the context of their higher income. Only 4.1 percent of the after-tax income of a typical college graduate household is spent on clothing, compared with 4.5 percent for the average household.

Of course, the increasing economic impact of more college graduates is not only the result of their growing numbers. It's also because their income is growing faster. According to the Census Bureau, the aggregate income of college-educated households jumped 54 percent between 1991 and 2000, compared with a 12 percent increase for high school graduates. As a result, the 27 percent of households with a bachelor's degree or higher now take home 44 percent of all aggregate household income.

With that kind of buying power, it's no surprise that credit card companies flood college campuses with card offers and that college campuses are a major focus of brand marketing campaigns. National newspaper publishers, for example, have been making a greater effort to have their publications circulated among students so that they might develop the daily newspaper reading habit early and help stem the decline in subscribers. For these companies, recent college grads represent a smart long-term investment.

Peter Francese is the founder of American Demographics. He can be reached at [email protected].


A look at households age 25 and older by educational attainment and income reveals that education does indeed pay: More education leads to a higher annual income.

Less than HS diploma 15.8 -19.5% $29,400 8.0% -7.5%
High school diploma 30.8 2.0% $45,400 23.9% 12.3%
Some college 8.2 63.0% $60,300 8.5% 80.1%
Associate degree 27.0 29.3% $91,100 42.2% 54.0%
Bachelor's or higher 17.5 33.4% $84,000 25.2% 61.2%
Graduate degree 9.5 22.3% $104,200 17.0% 44.5%
Source: Census Bureau March 1991 and 2001 Current Population Surveys
Most Popular