Launching your professional career after college can be difficult, especially if you’re graduating into a challenging job market. And if simply landing a job isn’t stressful enough, new research shows that first job can have a lasting impact on your earning power.
Every additional $1,000 students earn in their first job out of college translates to an additional $700 in annual earnings five years after graduating, a new National Bureau of Economics Research paper finds.
Since career and salary progression tend to be cumulative, starting your career in a low-paying or low-value job can make it difficult to catch up to workers who start with higher salaries or jobs that help them advance their careers faster. The findings build on earlier research that has found workers who graduate into poor economic conditions like a recession can take years to catch up.
Students from low-income families may be more likely to land in lower-paying or lower-quality jobs right out of school, the researchers find, therefore feeling the impact of those roles for years.
Students from low socioeconomic status families — defined as students who received a Pell Grant for the entire duration of their studies — earn $4,900 less per year on average than students from higher socioeconomic status families five years after graduating despite having the same major, grade point average and college, the researchers find.
And roughly two-thirds of that gap can be attributed to the quality and pay at graduates’ first job out of school, the researchers say.
“The first job after college really does seem to have this long-lasting predictive power for how grads are doing, at least in terms of their earnings years later,” Judith Scott-Clayton, a professor at Columbia University’s Teachers College and one of the paper’s authors, tells CNBC Make It.
Many college students, especially those from low-income backgrounds, may not have the privilege of waiting for better job offers. The ability to pass on sub-par job offers or delay applying for jobs altogether is likely part of the reason graduates from higher-earning families tend to land in better roles in the first place, the researchers write in the paper.
‘It is still just the first job’
While these findings may set off alarm bells for future and current college students worried about their careers and long-term earnings, more research needs to be done to determine what students, academic institutions and career counselors can do to intervene, Scott-Clayton says.
“Everybody wants to know, ‘OK, so what do we do? What should we do differently?’ And I think where we are with this work is more raising questions, starting a conversation, hoping that people start thinking about some of these potential trade-offs that [students] might be making,” she says.
Importantly though, students probably aren’t doomed to an under-paying or lackluster career just because their first job out of college isn’t what they’d hoped, Scott-Clayton says.
She encourages students to consider what they may be getting out of their first job beyond salary, such as transferable skills, valuable connections or learning opportunities.
“As important as the first job is, as predictive as it is of the future … it is still just the first job,” Scott-Clayton says. “It’s always a starting point, not necessarily an end point.”
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