Want to be rich when you’re older? Better get cracking.
The Federal Reserve Bank of New York has released a new report, finding that your first 10 years in the labour market is likely to shape your lifetime earning potential.
“Across the board, the bulk of earnings growth happens during the first decade,” states the paper written by economists Fatih Guvenen, Fatih Karahan, Serdar Ozkan and Jae Song.
The Federal Reserve Bank studied individuals’ earnings over the period 1978 to 2010 and concluded that getting off to a good start can ensure a better salary in the years to come.
The research, which looked at American workers only, found that the average earnings growth for the 35-55 age group was zero, with only the wealthiest workers maintaining increases throughout their careers.
For workers expected to earn the median lifetime amount, the last pay rise they got was before they were 55, gaining just a 38 per cent increase in their salary from age 25-55.
The report had particularly sobering news for the bottom fifth of earners, who can expect an income decline from age 25 to 55.
Yep, that’s right, an income decline.
“Low-skilled jobs tend to use brawn, not brain,” Guvenen said. “Brawn depreciates very quickly. Your back starts to hurt. You become less and less productive. You cannot work as much.”
Guneven, a 25-year-old economics professor at the University of Minnesota and co-author of the research, told the Washington Post he’s chosen a job that allows him to learn much-needed skills.
“I’m investing in my future, and my employer is allowing me to invest in my future. Soon, I’m producing more for my employer, and more employer is paying me more,” he said.
It’s a tough economic reality, and one you need to realise sooner rather than later to address.
In a nutshell, get moving before it gets too late.