Attention millennials: if you”ve decided to take a five-year trip trekking across Europe or you”ve concluded that you”re not going to look for a job for another year then perhaps you should take a gander at this new study published by the Federal Reserve.
A new report from the United States central bank found that your first 10 years in the labor market will likely determine your lifetime earning potential, an important finding for millennials who can”t locate employment opportunities in their respective fields and work at jobs that don”t pay very well.
Economists Fatih Guvenen, Fatih Karahan, Serdar Ozkan and Jae Song observed the career paths of roughly five million workers over the course of four decades. They noted that the spike in earnings could be related to various learning curves that transpire during the infancy period of your career.
For instance, a recent millennial graduate selects a job that allows him to attain important skills. This allows both the employee and the employer invest in the millennial”s future, which then leads to greater productivity levels and a bigger bottom line for the employer.
“Across the board, the bulk of earnings growth happens during the first decade,” wrote the authors of the study “…[And] with the exception of those in the top 10% of the LE (life earnings) distribution, all groups experience negative growth from ages 45 to 55.”
When looking at the average person, the trend of growing earnings stalls after the first 10 years in a career. The data suggests that the average earnings growth for those between the ages of 35 and 55 is zero, and it”s even direr for the lowest income earners. Workers estimated to earn the median lifetime income will notice their pay boost 38 percent from the age of 25 to 55, but again the biggest gains will be experienced in the first decade.
Meanwhile, workers in the 99th percentile will receive a 1,450 percent increase, and the 95th percentile will garner a 230 percent increase during this same period.
The bottom fifth of American earners are usually situated in physically demanding jobs, which can diminish your income very quickly because brawn deteriorates.
“Low-skilled jobs tend to use brawn, not brain,” Guvenen said. “Brawn depreciates very quickly. Your back starts to hurt. You become less and less productive. You cannot work as much.”
This study is complementary to a report from the U.S. Census Bureau this week that found millennials, which are considered the most educated age group in history, are earning $2,000 per year less than their parents did in the 1980s.
“The labor market is a lot more controlled than it was in the 1980s,” said Chris Westley, the associate director of FGCU”s Regional Economic Research Institute, in a statement. “It”s a lot more expensive for firms to conform to the regulations. That has the effect of favoring large corporations over small businesses because they can afford to comply better. Because of that, people entering the labor force have less options than they used to.”
Nevertheless, the conclusion that these Fed researchers came up with is simple: get going on that career as soon as possible, save your money as much as possible and ask for those raises before the ten-year timeframe is out the window.
As we all know, millennials often gain a bad reputation: they spend much of their free time on social media and Netflix, they”re anti-social when they”re with their friends because they”re buried in their smartphones and they still live at home. Maybe this new study will finally wake them up and encourage them to be career-oriented and independent-minded.
Chart provided by the Federal Reserve.