Workplace Issues

Income Growth Limited to First 10 Years for Most

Only the top U.S. earners enjoy sustained earnings increases throughout their careers, says a New York Fed study.
Matthew HellerFebruary 12, 2015
Income Growth Limited to First 10 Years for Most

American workers should make the most of their first 10 years in the labor market because, according to a new study from the Federal Reserve Bank of New York, their earnings aren’t likely to grow over the subsequent 20 years of employment.

From an analysis of U.S. Social Security Administration data, New York Fed researchers concluded that “Across the board, the bulk of earnings growth happens during the first decade” in the workforce. Workers projected to earn the median lifetime amount will see pay swell 38% from age 25 to 55, with the strongest upswing in the first decade, the study found.

A Better Way to Do Ecommerce

A Better Way to Do Ecommerce

Learn how Precision Medical leveraged OneWorld to cut the cost of billing in half and added $2.5M in annual revenue.

young workers“At 25, I choose a job that allows me to learn valuable skills,” co-author Fatih Guvenen, an economics professor at the University of Minnesota, told The Washington Post. “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 my employer is paying me more.”

“But after that first decade, things stagnate for the median lifetime earnings group as average earnings growth is zero,” the New York Fed said.

Only the top earners enjoy sustained increases throughout their career — 230% for those in the 95th percentile and almost 1500% for those in the 99th percentile. With the exception of those in the 90th percentile, all workers suffer negative earnings growth from ages 45 to 55.

At the other end of the scale, the bottom fifth of American earners suffer an income decline from age 25 to 55. “Low-skilled jobs tend to use brawn, not brain,” Guvenen told The Washington Post. “Brawn depreciates very quickly. Your back starts to hurt. You become less and less productive. You cannot work as much.”

“Unless you plan to become Zuckerberg-ian wealthy, the lesson is clear: Chase the proverbial carrot while you’re young,” recommends the Post’s Danielle Paquette. “Save your money while it’s coming in. Or ask for that raise — sooner, rather than later.”

Image: Thinkstock