Screwed for life?

If you don't get good job right out of college, or graduate school, then you are screwed for life.

Yes, that's the depressing news from a New York Times Economic Scene article:

The recent evidence shows quite clearly that in today's economy starting at the bottom is a recipe for being underpaid for a long time to come. Graduates' first jobs have an inordinate impact on their career path and their "future income stream," as economists refer to a person's earnings over a lifetime.

. . .

The Stanford class of 1988, for example, entered the job market just after the market crash of 1987. Banks were not hiring, and so average wages for that class were lower than for the class of 1987 or for later classes that came out after the market recovered. Even a decade or more later, the class of 1988 was still earning significantly less. They missed the plum jobs right out of the gate and never recovered.

And as economists have looked at the economy of the last two decades, they have found that Dr. Oyer's findings hold for more than just high-end M.B.A. students on Wall Street. They are also true for college students. A recent study, by the economists Philip Oreopoulos, Till Von Wachter and Andrew Heisz, "The Short- and Long-Term Career Effects of Graduating in a Recession" (National Bureau of Economic Research Working Paper 12159, April 2006. []), finds that the setback in earnings for college students who graduate in a recession stays with them for the next 10 years.

This was certainly true for law school. In fact, the summer associate position you get, or fail to get, during the summer between the second and third years of law school basically seals your fate in the legal job market.

This clearly demonstrates what a large role luck plays in how much money a person earns. Being unlucky and graduating during a year when firms aren't hiring creates a permanent stain upon a person's future earnings.

Comments

[Frank N Stein]

Yes, if you happen to be "lucky" and get excellent grades and make yourself look worthy of an intern position, you may put yourself in a better standing down the road.
Be careful however, because apparently having a future time orientation is one of many subtle forms of cultural racism:

http://www.seattleschools.org/area/equityandrace/definitionofrace.xml

If only government could help negate all of that luck that some people have, so we can all be the same...

[Anon]

What is "a future time orientation"?

[Half Sigma]

Presumably delayed gratification.

For example, if you have a test the next day, but your buddies want you to go out with them and drink beer, staying home to study would be an example of "future orientation." Apparently it's racist to say this is a positive character trait.

[beenaround]

Actually that whole section dealing with future time orientation is a doozy:

Cultural Racism:
Those aspects of society that overtly and covertly attribute value and normality to white people and Whiteness, and devalue, stereotype, and label people of color as “other”, different, less than, or render them invisible. Examples of these norms include defining white skin tones as nude or flesh colored, having a future time orientation, emphasizing individualism as opposed to a more collective ideology, defining one form of English as standard, and identifying only Whites as great writers or composers.

It is, however, quite interesting that Asians are defined as having little social power. Where I live in CA that have lots of that.

That's not at all what the study shows. The simplest way to be rich is to be an investment banker, and some years have more such jobs than others. Yes, it's luck whether you get an investment banking job right out of college, but if you keep applying for them, it doesn't matter which year you graduated.

What this shows is that people don't pay much attention to really basic things, like what their career is. The result is that luck takes over.
That's not to say that uncontrolable luck plays no role, but that's not what this study shows.