College is fundamentally a positional good - many job markets will preferentially hire applicants with a college degree over those without, particularly for well-paying and white-collar jobs. What the college graduate earnings indicate is that the people you are willing to preferentially hire end up making more money. When you have more college graduates, this preferential hiring effect is less significant, since you're now looking at the top X% of jobs rather than the top Y% of 50 years ago.