Thursday's New York Times Economic Scene article by Austan Goolsbee made the rounds late last week. Here's Alex Tabarrok's take. Be sure to read the comments. From the left, here's Lindsay Beyerstein and commenters. Goolsbee presents research that shows that the state of the economy when you take your first job can have a long-lasting effect on future earnings:
Lost in the argument over whether young people today know how to work, however, is the mounting evidence produced by labor economists of just how important it is for current graduates to ignore the old-school advice of trying to get ahead by working one's way up the ladder. Instead, it seems, graduates should try to do exactly the thing the older generation bemoans — aim for the top.
The recent evidence shows quite clearly that in today's economy starting at the bottom is a recipe for being underpaid for a long time to come. Graduates' first jobs have an inordinate impact on their career path and their "future income stream," as economists refer to a person's earnings over a lifetime.
The importance of that first job for future success also means that graduates remain highly dependent on the random fluctuations of the economy, which can play a crucial role in the quality of jobs available when they get out of school.
These data confirm that people essentially cannot close the wage gap by working their way up the company hierarchy. While they may work their way up, the people who started above them do, too. They don't catch up. The recession graduates who actually do catch up tend to be the ones who forget about rising up the ladder and, instead, jump ship to other employers.
What's really the advice here? Shoot for the top, or do a lot of switching? Goolsbee seems to be endorsing aiming for the top, but the last sentence above, about jumping ship, seems to support something else altogether.
In 1995, with my degree in Studio Art and the History and Philosophy of Art firmly in hand, I landed a plum "you want fries with that" gig at the Arby's in the Iowa City mall. I guess I should be glad I didn't try work my way up the Arby's ladder!
Stanford's Paul Oyer, whose study Goolsbee cites, says: "Try to get lucky. And also, think carefully about that first job because it can matter for the rest of your career." Isn't this is terrible advice?
First, Oyer assumes that maximizing lifetime income is our goal, which is absurd. I imagine you should try to get a job you will like. And it is lucky indeed to hit the career bullseye with the first throw. So you should simply assume that you won't get lucky, won't get the dream job out of the gate. Even if you do get the dream job, you'll likely find that it's not such good luck after all, and find yourself dreaming a different dream. It will take a while to find the right fit, so plan for that.
Still, even if your goal is lifetime income maximization, the article seems to indicate that you should bail from your first job just as soon as you can get one that pays more. Your earnings are path-dependent as long as you stay on the same path. So don't. Switch paths. The days of 35 years, a gold watch, and a pension are long gone.
Anyway, why even try to get lucky with your first job? If I'm giving advice to undergrads, I'm going to tell them to study something they really enjoy---something they'll get satisfaction from for their rest of their lives. I don't use it on the labor market, but my art history major is and will continue to be a source of enjoyment to me. About the first job: don't think ladder, think springboard. (However, if you're studying something interesting but not very marketable, make sure you get some real work experience in another area, so you don't find yourself in the dread category "educated but unskilled.") As I mentioned before, people are afraid of volatility, but many would be happier if they took more risks. In a society like ours, a good diploma from any decent college, grad, or professional school is pretty much all the safety net you'll ever need, especially when young and childless, so the risk of job-switching isn't actually very risky at all.