You’ll have to follow the money
Did you know that if you start work during a recession, you are likely to never make as much as someone who started working during good times? This is probably not news to you: Forbes and the Wall Street Journal both covered this back before the class of 2009 graduated in May.
It turns out that economic research showed that people who graduate during a depression not only make less money when they come out, because the market is depressed and jobs are scarce, but they continue to make less for years to come and may never catch up with people who are exactly like them but graduated a couple of years earlier during a run-up. Even when times get better, they still earn less money for the same jobs.
The reasons for this should be obvious, but that hasn’t stopped people from continuing to spout useless claptrap.
For example, Forbes’s David Serchuk (“How To Graduate In A Recession”, 2009 April 16) wrote that:
Having the bad luck to graduate in a recession can mark someone’s entire career, as it can lead workers to start careers at smaller firms that pay less….
[S]ometimes having your plans shattered can bring you to make a career out of what you’d really like to do with your life, as opposed to simply chasing the money.
John Osborne, later in the article, said that
Graduating into a recession or a Great Recession or whatever we are calling it is a great gift, a real blessing in disguise. Why? For two simple reasons: You are learning in dog years (one year equals seven years of experience), and you are getting more experience since you are more actually valuable.
If your Bullshit Detector hasn’t already gone off, it should. Forbes, of course, doesn’t make money by telling people the truth which is why they seemed blissfully unaware of the impending crash even though everyone knew that it was coming. These are nice thoughts but they clearly aren’t true, or at least aren’t true for the vast majority of graduates.
To see why this is bullshit, we need to look at why recession-era graduates will make less, even after the recovery.
(Before I start, let me head off some folks: Yes, there are thousands of exceptions. But thousands of exceptions when millions follow the rule aren’t that interesting. Even in a normal distribution, there are always outliers. I know a man who smoked a pack a cigs and drank at least 10oz of whisky every day of his adult life and lived to be 104. But you probably won’t. Citing him as the reason why you won’t contract lung or mouth cancer is probably disingenuous.)
It turns out that your entire career hinges that first paycheck (in a “real” job) because money is a proxy for ability. Almost no one knows how to measure most workers to see how much they are worth, so they go by what you were paid last. Potential employers want to know your last salary for just this reason.
My brother taught me this when he was a headhunter in the oil industry. Back then, in the early 1990s, the magic number was $100,000. If you didn’t make that, it didn’t matter how much experience or success you had had: his clients weren’t going to hire you. Even if someone had made a mistake and paid you much more than you were worth, it was likely that his clients would hire you because they saw the salary as an indication that someone had done his homework and determined that you were really worth it, something that they were either too lazy or (more likely) too ignorant to do.
Now let’s look at how this plays out over a career. Rosa and Bill both graduated from Mirco Evusial University (MEU) with the same degree, but in different years. Rosa graduated in 2006 during the last up turn. Bill graduated in 2009 during this Great Recession when unemployment rates in some states exceeded those they had during the Great Depression. Rosa got a job and the salary was, say, $40k, which wasn’t great but pretty good. Bill got out and took the only job he was able to find and got $20k and was happy to have
Now let’s fast forward three years. It’s 2013 and the economy has picked up again. Bill is trying to get a job with Rosa. He is competing with a 2012 graduate of MEU, Sunjay, who got the same degree he did. Because the economy was better, Sunjay was able to get a higher paying job than Bill when he graduated and was making $40k. Adjusted for inflation, that’s still lower than Rosa’s first salary but much higher than Bill’s. Rosa, who doesn’t know the work levels or how to measure capability, sees two similar candidates. But the younger one is making more right out of school. She believes that this indicates that he has greater future potential, what I have called “higher mode”, than Bill. Add to it all that time that Bill spent unemployed (“must be something wrong with him”) and the fact that he has moved jobs twice to earn more money (“instability”)
That’s why Bill will always be a loser.
Now let’s look at the specific things that the Forbes people said that are so stupid.
It turns out that graduating in a recession makes you more likely to have to “follow the money”, not less, because the pay is so incredibly low. If you are making $20k but thought you would make $40k, you are probably out looking for a different job, much more so than if you had been making $44k on the same $40k assumption. You are, as he suggests, moving from job to job to work your way up and to people who didn’t graduate in recessions (and therefore didn’t have to do that), this will be a major black mark on your resume.
You are also less likely to “follow your heart”. It turns out that having options makes following your heart much easier. It also turns out that when the economy is going down the drain, non-profits and NGOs lose a lot of funding. People are less likely to spend money on things like art and literature. The fact that there is so much less money circulating means that it is much harder to follow your heart during a recession.
So you end up following the money because you must to survive.
Not all of their advice is bad. You are probably best served by going to graduate school, especially if you can do this at a state school or on a strong scholarship to keep costs down. Of course, you have to find a way to eat and it’s harder to even part-time work during a recession, upon which many a grad student relies to pay her way through.
Which means you are out hustling jobs and following the money.
I’ll say again that, yes, there are nice stories out there of people who got high-paying jobs of their dreams during this recession. I have also heard stories of a prostitute who had unprotected sex with HIV-positive clients but never caught the disease herself. Great stories, but the mass of evidence means that you are probably statistically better off playing the Lottery.
Presidential $1 coin program. (c) 2007 Bill Koslosky, MD (CC BY 2.5)
Comments 11
You are a consistent downer. I actually looked at those NBER no.s and unfortunately what you wrote makes sense. (please tell me that the prostitutes & Aids comment came from you reading “Influencer”…. otherwise, wildly weird in so many ways)
Author
Yes, the reality of today is fairly grim in some ways. (Still beats plague or living under Communist rule.) And, yes, the reference was the result of reading — listening to, really — Influencer: The Power to Change Anything, which I highly recommend. I have found Wiwat Rojanapithayakorn’s work to be fascinating ever since Prof. Sternin told me about it years ago, when I embarrassed myself in front of the real deal. By taking the tack that they did, looking at the whole system rather than individual behaviours, they reduced HIV spread considerably. Perhaps eliminating sex tourism at its root in the foreign market would be better, but it was unlikely to work. A friend of mine who worked in one of Thailand’s legal agencies against the Thai sex trade believed that the money being given out was just too large of an incentive to keep it going. The actual story of many of these young women (girls, really) is horribly depressing. The influence techniques Jerry Sternim outlined re creative deviance probably have a great chance of succeeding. But it will be hard. Still, they had stunning success in other intractable problems, like female circumcision in norther Africa and malnutrition in Vietnam.
All that said, if you are a graduate coming out in today’s market, you will probably always be looked down upon by those who got their first jobs in boom times. Maybe the massive unemployment figures mean that won’t happen, but I think not. The employed are making more, and the unemployed are being less and less likely to get employed. He who has is given more, and he who has not will have even what he has taken from him. I always despised those words of Jesus but I have come to realize that they’re more true than most people undersand, a principle of networks. I’d rather kick against the pricks than accept it in the world of work, though.
Hi Forrest,
I particularly enjoyed this post. Forgive me for my tardy kudos. I’m linking to it on my current post.
Regards,
Michelle
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Author
Glad to be of service, Michelle! Everyone, you could do a lot worse than to take a look at what she says at http://www.missionmindedmanagement.com/ — always insightful and she says the same thing with A LOT LESS WORDS than I do!
What you say is very true. I went to an elite university, got good grades, but my first job was low paid. I worked hard, but I had to change jobs a couple of times simply because my first salary was so low. Subsequent salaries are based on your last salary.
I’ve been labeled as a job hopper, simply because I lived in an expensive city and needed to earn more money. A lot depends on your first job.
I’ve also found recruiters don’t evaluate my on my work, but just on how long my past jobs have lasted, grade or last salary. This is just lazy because I have a publicly available portfolio of work. But it is simpler to ask to a number, than to take 15 – 30 minutes to actually examine the work I’ve done.
Really a lot depends on the first job you get. Employers should evaluate the whole person.
Author
Of course, you are a job-hopper. The situation you were in made you one. That’s not an accusation: I’m one myself, until I started my own businesses.
I’d like to say that Requisite Organization implementation would make your life better, but I’m not sure that it will. PeopleFit continues to be exceptional, in my experience. (And probably MVC Associates, although in a different way.) They, too, would look at your experience and assume that you cannot do the work or, even worse, that your job hunting represents not generational reality but some personality defect (what Jaques called “-T”) that disqualify you from working. This is especially true if you are higher mode; I say this because I tried to pawn all my Mode7+ folks on the RO folks who were complaining about not having anyone in the succession pipeline when baby boomers retire.
The only good news I can relate is that your experience models that of people who have created new realities. These people are always hated, even after they succeed. They are never beloved but feared.
I wish I could say something more encouraging. I’m certainly trying to figure out a social solution to this problem. Strauss and Howe said that 13th-ers would never succeed but take upon themselves to pay for the sins of the Baby Boomers and restore a future to their children. We’re not the only generation to be in this boat, and now we have an entire new cohort that will be with us.
I’ll close with this thought: Money is a proxy for stratum and capability. My brother was a recruiter in the oil industry years back. He taught me that no one had any idea what anyone was worth: it was all based on whatever you had convinced someone else to pay you. The magic number for him back in ’93 was US$100k. If no one was paying you that, you weren’t worth anything.
I’m dedicated to this issue: I have too many of you people around me. I’m not entirely sure that it will come out the way that we’d like, though.
Forrest
I appreciate and savour your timely insight(s).
If modern social cycles (~10 years for crashes; ~ 50 years for Kondratieff waves) are too long term for most people to “see” we are doomed to continue behave ignorantly…
…it reminds me of the data-point about gold-fish having attention spans of a few seconds.
Now we know why “Those who do not learn from history are bound to repeat itâ€.
Author
It’s always great to hear from the other hemisphere, Johan!
OBTW, some of what Warren Kinston has developed about the framework of Interacting for Benefit (how careers progress) shows how this getting stuck happens for the kids coming out today.
Warren’s “latest” article on http://globalro.org , and several others, is an exercise in elegance/beauty/challenge…
I trust that the “leakings” of his vastly exercised, van Gogh-esque insights will continue to seep to ‘our side’ of the universe.
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