Stack of golden George Washington dollar coins,. (c) 2007 Bill Koslosky, MD (CC BY 2.5)

Money is a Proxy for Ability: Why “Recession” Graduates Make Less Over Their Lifetime

Forrest ChristianCareers 11 Comments

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. [read full post]