When: The Scientific Secrets of Perfect Timing(25)

Her big discovery: When these men began their careers strongly determined where they went and how far they traveled. Those who entered the job market in weak economies earned less at the beginning of their careers than those who started in strong economies—no big surprise. But this early disadvantage didn’t fade. It persisted for as long as twenty years.

“Graduating from college in a bad economy has a long-run, negative impact on wages,” she writes. The unlucky graduates who’d begun their careers in a sluggish economy earned less straight out of school than the lucky ones like me who’d graduated in robust times—and it often took them two decades to catch up. On average, even after fifteen years of work, people who’d graduated in high unemployment years were still earning 2.5 percent less than those who’d graduated in low unemployment years. In some cases, the wage difference between graduating in an especially strong year versus an especially weak one was 20 percent—not just immediately after college but even when these men had reached their late thirties.27 The total cost, in inflation-adjusted terms, of graduating in a bad year rather than a good year averaged about $100,000. Timing wasn’t everything—but it was a six-figure thing.

Once again, beginnings set off a cascade that proved difficult to restrain. A large portion of one’s lifetime wage growth occurs in the first ten years of a career. Starting with a higher salary puts people on a higher initial trajectory. But that’s only the first advantage. The best way to earn more is to match your particular skills to an employer’s particular needs. That rarely happens in one’s first job. (My own first job, for instance, turned out to be a disaster.) So people quit jobs and take new ones—often every few years—to get the match right. Indeed, one of the fastest routes to higher pay early in a career is to switch jobs fairly often. However, if the economy is listless, changing jobs is difficult. Employers aren’t hiring. And that means people who enter the labor market in a downturn are often stuck longer in jobs that aren’t a good match for their skills. They can’t switch employers easily, so it takes longer to locate a better match and begin the upward march to higher pay. What Kahn discovered in the job market is what chaos and complexity theorists have long known: In any dynamic system, the initial conditions have a huge influence over what happens to the inhabitants of that system.28

Other economists have likewise found that beginnings exert a powerful but invisible influence on people’s livelihoods. In Canada, one study found that “the cost of recessions for new graduates is substantial and unequal.” Unlucky graduates suffer “persistent earnings declines lasting ten years,” with the least skilled workers suffering the most.29 The cut may eventually heal, but it leaves a scar. A 2017 study found that economic conditions at the beginning of managers’ careers have lasting effects on their becoming a CEO. Graduating in a recession makes it tougher to find a first job, which makes it more likely that aspiring managers will take a job at a smaller private firm than a large public company—which means they begin climbing a shorter ladder rather than a taller one. Those who began their careers during a recession do become CEOs—but they become CEOs of smaller firms and earn less money than their counterparts who graduated during boom years. Recession graduates, the research found, also have more conservative management styles, perhaps another legacy of less certain beginnings.30

Research on Stanford MBAs has found that the state of the stock market at the time of graduation shapes these graduates’ lifetime earnings. The chain of logic and circumstance here has three links. First, students are more likely to take jobs on Wall Street when they graduate in a bull market. By contrast, in bear markets, a sizable portion of graduates choose alternatives—consulting, entrepreneurship, or working for nonprofits. Second, people who work on Wall Street tend to remain working on Wall Street. Third, investment bankers and other financial professionals generally outearn those in other fields. As a result, “a person who graduates in a bull market” and goes into investment banking earns an additional $1.5 to $5 million more than “that same person would have earned if he or she had graduated during a bear market” and therefore had shied away from a Wall Street job.31

My sleep will remain undisturbed knowing that a swerving stock market steered some elite MBAs to jobs at McKinsey or Bain rather than at Goldman Sachs or Morgan Stanley and thereby left them extremely rich rather than insanely wealthy. But the effects of beginnings on a large swath of the workforce is more troubling, especially since the early data on those who entered the job market during the 2007–2010 Great Recession look especially dim. Kahn and two Yale colleagues have found that the negative impact on students who graduated during 2010 and 2011 “was double what we would have expected given past patterns.”32 The Federal Reserve Bank of New York, looking at these early indicators, warned that “those who begin their careers during such a weak labor market recovery may see permanent negative effects on their wages.”33

This is a tough problem. If what you earn today depends heavily on the unemployment rate when you started working rather than on the unemployment rate now, the previous two strategies in this chapter—starting right and starting again—are insufficient.34 We can’t solve the problem unilaterally, as with school starting times, and simply dictate that everyone will begin her career in a healthy economy. Nor can we solve it individually by exhorting people to recover from their slow start by looking for a new job on the day after their birthday. On this sort of problem, we must start together. And two previous smart solutions offer some guidance.