20s may decide life earnings

People get their largest raises in the early years of working, a study from this month found.

Sophomore Mohamed Khatib works at Adam's Food and Fuel, his family's business, in Roseville on Sunday.  Khatib wants to major in business marketing education and says his experience with the family business will help him in the future.

Holly Peterson

Sophomore Mohamed Khatib works at Adam’s Food and Fuel, his family’s business, in Roseville on Sunday. Khatib wants to major in business marketing education and says his experience with the family business will help him in the future.

Ethan Nelson

Mohamed Khatib says he’ll make most of his life’s mistakes in his 20s, just as he enters the job market.

And as he gets older, the University of Minnesota marketing sophomore said he hopes to learn from those mistakes — especially regarding his career plan — and then make improved decisions that move him closer to his goals.

Khatib is right to be aware of his life decisions at this point because according to a report involving a University researcher published earlier this month, they will likely influence his future earnings.

The report suggests that people’s salaries increase the most during the first 10 years of working in their chosen fields.

Fatih Guvenen, a University economics professor who worked on the study, said the jump in pay could be affected by the steep learning curve people experience when they first start working.

If someone enters his or her job field with the correct set of skills, he said, they are more likely to advance in the field more quickly.

Guvenen helped researchers with the Federal Reserve Bank of New York, who spent three years looking at the careers of about 5 million workers in the U.S. over the course of 34 years.

Alessia Leibert, a labor market analyst with the Minnesota Department of Employment and Economic Development, said if people enter into the labor market after their 20s, their earnings could potentially be lower than if they started right after college.

“The rewards of getting your foot in the door early, even when you are studying, are huge,” Leibert said.

The overwhelming majority of currently employed Minnesotans worked before they graduated from college, according to a January 2015 report that Leibert authored.

She said taking time off school to focus on a full-time job or internship can increase earnings in the long run.

For most workers, pay growth stops after their first decade in their careers. The average earnings for workers between the ages of 35 and 55 don’t grow at all, according to the report Guvenen worked on.

The researchers also found instances of people getting sick or laid off — ultimately decreasing their earnings — to increase when looking at workers who are over 45 years old.

Despite the new research and emerging trends, those who enter fields with the highest-paying jobs will see the greatest jumps in pay over their lifetime.

The top 1 percent of earners will see a 1,450 percent increase in pay during their lifetime, the study found, while the 20 percent of workers with the lowest pay in the U.S. will see their income decline as they age.

Still, researchers found that most people experience few dramatic changes to their paychecks during their lifetime.

Even though he doesn’t have a business internship right now, Khatib said he’s not worried about his future job prospects, and he plans to look for one soon.

He said he thinks his degree will help him get a job once he graduates.

“You never know what opportunities might pop up,” Khatib said. “You always have to prepare yourself.”