The New York Fed recently released a landmark study on individual lifetime earnings, called “What Do Data on Millions of U.S. Workers Reveal about Life-Cycle Earnings Risk?“.
The breadth and depth of the data analyzed – more than 200 million observations using Social Security data from 1978 to 2010 – makes the report worthy of your attention. And if you are in school or just starting out in your professional career, you’re about to feel a whole lot more pressure, due to what they found.
“For all lifetime earnings (LE) groups, the bulk of earnings growth happens during the first decade.”
Uh oh. Yeah, so you thought you’d have a few years to get your stuff together and think about what you want to be when you grow up, right? Well, the reality is that the first few years of your career magnify what you will earn for the rest of your career. No pressure.
But, wait a minute. “Bulk of earnings”? Sounds ambiguous. What exactly does that mean? Get ready for the hammer…
“For the median LE group, average earnings growth from ages 35 to 55 is zero. Second, with the exception of those in the top 10% of the LE distribution, all groups experience negative growth from ages 45 to 55.
OK, now that’s just downright depressing if you’re not in the top 10% of earners. If you are in the top few percent of earners, however, the news gets even better:
“The median individual by lifetime earnings experiences an earnings growth of 38% from ages 25 to 55, whereas for
individuals in the 95th percentile, this figure is 230%; for those in the 99th percentile,this figure is almost 1500%.”
Hot. Damn. No wonder we have such crazy income inequality in the US. The rich get richer and the poor stay poor.
These trends mirror what I’ve seen in corporate America. There is psychology behind it. As human beings, it is natural for us to want to categorize everything – particularly our co-workers. It’s part of our survival DNA. We don’t like grey areas, we like clear cut black and white and we like to make those definitive judgments and be done with it. It’s no different in the workplace. At the moments of judgment, workers are typically lumped in to one of two categories:
- “fast risers”
- “everyone else”
There’s a lot that can factor in to the personal opinions that end up determining which of those two buckets you are lumped in:
- the perceived value of a piece of paper (where you went to school)
- the reputation or brand of previous employers
- your appearance
- your perceived charisma
- your perceived likability
- opinion of influencers
- age, gender, ethnicity, race and discrimination and biases
- and maybe, just maybe the quality of our work
Guess who gets the promotions, biggest raises, and best opportunities – not just in the present, but for the rest of their careers.
Here’s where we go glass half full…
When you understand that this reality exists, you have a distinct advantage over those who don’t, because you can take the following actions to better your situation:
1. Work on What you CAN Control
For starters, know what you have some level of control over and can work on: where you work and go to school, networking, some aspects of your appearance, charisma, likeability, and quality of work. If your goal is more pay, you need to work on these things.
2. Remove Yourself from Situations where you Cannot Win
There are many things about you that are out of your control and you cannot change. Sometimes, no matter how good your work is, you will find that you just can’t win. And if you’re not careful, you could spin your wheels for years or decades and advance no further. Fortunately, you can control how you react. Do your homework and show some patience, and then if you are certain that you’ve done all you can and the biases of decision makers in your workplace are preventing you from getting desired opportunities and pay, you need to remove yourself from that situation. Don’t beat yourself up or waste energy trying to fight it. It happens to most of us in our lifetimes.
3. Take Calculated Leaps of Faith
Those who advance the fastest and earn the most are the ones who take calculated leaps of faith and embrace the unknown. In some sense, fake it til you make it. If you are totally comfortable moving in to another role, you might be limiting yourself.
Right or wrong, once you gain a reputation, it tends to stick. If you can build a reputation as someone who can handle new challenges, you will be a rapid ascender.
4. Don’t Stay in One Place Too Long Unless you Love it and Don’t Care About Pay
If you stay in the same place for a long time and it’s not a place that you love, you are being your own worst enemy. Fast risers don’t stay in any one place for too long. There’s no time for that! If you want to be a fast riser, you have to actively chase it and look for other opportunities and not let yourself become stagnant. General rule of thumb for a shelf-life per role: 2 years.
Based on the data of millions of Americans, how you start your career is vitally important and has a profound impact on your lifetime earnings. In a perfect world, earnings and opportunity would be based solely on the quality of your work and your loyalty. The reality is much different.
It’s up to you to determine how much energy and effort you want to put in to how much income you generate from your career. Anyone can be a late bloomer, but understand that the longer you wait, the steeper the uphill battle will be. If higher lifetime earnings is your goal, it’s best to start fast, move quick, and don’t look back. And always remember that work is a temporary transactional opportunity that can disappear at any time, so save as much as you can while you can.
Dear Mr. Miller,
Regarding the title of the New York Fed’s study, “What Do Data on Millions of U.S. Workers Reveal about Life-Cycle Earnings Risk?,” it turns out that the use of “Do” instead of “Does” is correct. The word “data” is the plural of datum. A datum is a single unit of information while data are many units of information. As a statistician and researcher, this is a frequently encountered point of confusion. I always enjoy reading your essays, so please keep up the nice work.
Thanks for the clarification! I will update the post.
It’s more that “data” is mostly used as plural in scholarly works and as a singular mass noun in more conventional contexts. Basically, either is correct:
Being close to 35 years old, all I have to say is “Thanks for ruining my breakfast!” haha
All kidding aside, this is good information to know and I guess I’m going to have to prove this study wrong… challenge accepted.
Well, studies are studies. They look at the averages, not the exceptions. I think that with the right attitude and approach, anyone can be a positive exception. But… the longer one waits, the harder the battle.
Great concluding thoughts. I was unemployed for 6 months out of college, and I’ve unofficially done all of these things. It took a couple of years, but those four things led me to accepting a dream job this month–and it wasn’t anything I expected to do when I graduated.
Really interesting point about categorizing people into “fast risers” and “everyone else.” I’d noticed in my previous workplace, but didn’t really know how to put a label on it.
And it’s so true that MAYBE the quality of your work will be a consideration.
I remember shortly after I started the company hired a handful of writers for me to train (none of which I had any influence in picking), and they were all terrible. The funny part was, the worst writer was the one that ended up staying in the company the longest. She had charisma, likability, and a drive to work hard, which made her stand out above even the writers who were in positions above her.
She may or may not have been ‘in’ on these particular office politics, but I can see how if someone were ‘in’ on them, how it would help them rise to the top faster.
This is interesting data and the applications you draw are helpful. It is affirming my husband’s recent move into a new job where he has the opportunity to gain more skills and move up. It was a risk to change from a good, stable job but it seems wise for his career and he really likes the work better, too. We are almost 8 years into career so hopefully we can set a good trajectory in the next 2!
The biggest take away from the data is to make sure you do whatever it takes to make it in the top 10% of earners.
I would imagine this is precisely why they say “soft skills” are far more critical to your success these days, and it’s only skewing that way even more so.
Now maybe people wont think it’s weird to take courses on how to be more sociable. lol.
Why wasn’t a solution to open your own business? Why must we all resign ourselves to corporate jobs? Open a business, be a job creator, control your own destiny and cut the BS of all the stuff you mentioned.
I absolutely agree with you, I just don’t think it’s broadly applicable to everyone, like the other suggestions are. Some don’t have the drive, creativity, and confidence to become an entrepreneur. But those who do know who they are.
Wow what an ego boost! I’m proud that at 30 I can consider myself a “fast riser.” I have doubled my salary since college, with a starting pay already double my friends.
My first bosses motto was “control the controllables” so the first point spoke to me. The second point on removing yourself from situations you can’t win was harder to figure out. After 4 years chasing a dangling carrot, I jumped ship to a different division. Critics said I was setting myself back but within 6 month in the new role I got another promotion, that I would have never had the opportunity for in a previous role. Next I’ll have to tackle #3 and make a big move to the HQ. This article gave great, usually unspoken advice! Thank you!
Interesting piece for sure. I’m glad to be reading it now since I still have time (I’m only 23). :) Controlling the things you can and trying not to stress about everything else is something I’m trying to do better about for sure.
Why did you have to politicize this article with the income inequality comment? Maybe the “rich”,(whatever that extremely ambiguous term means) tend to work harder and have higher life and career aspirations than the “poor”. But I see no mention of this in your article. You imply that they were just deemed rich and did not work to achieve it.