Undercover Economist

The untold career value of a little bit of luck

Almost exactly 20 years ago, fresh out of graduate school, I started work at a smallish strategy consulting firm. It was a poor choice, both for them and for me; I am not cut out to be a management consultant. I was even allergic to my own suit.

When one of my fellow recruits learnt this she pointed out that, in this job, “you only need to do two things: talk shit and wear a suit, and you can’t do either of them”. (I like to think that I have since mastered at least one of those skills.)

In any case, I was miserable and useless. My employers generously suggested that I might want to resign, and that if I did they would happily keep paying me for a while. I followed their advice and found a much more conducive job, most of which I was able to perform without embarrassment, wearing blue jeans. I had been very lucky.

But it is only recently that I realised that some of my luck required being born at the right time. Had I been a year younger I’d have crashed out of my job, not in the spring of 1999 but of 2000, just as the dotcom bubble was bursting.

Pity the babies of 1987 and 1990, then, who left school or university around the time that Lehman Brothers collapsed in 2008. Sending around a CV in the middle of the greatest financial crisis since their grandparents were born cannot have been a whole lot of fun.

Of course the financial crisis made life difficult for a lot of people, not just graduates. It is now over, although the scars remain. So here’s a question: are those people who were unfortunate enough to have been looking for their first job as a recession struck still disadvantaged after the recession itself has passed?

In 2006, an economist called Paul Oyer posed that very question about the young academics he was teaching. Let’s say that two equally able young economists, Alexandra and Betsy, are looking for work. Alexandra arrives on the job market during the good times, when departmental budgets are fat, and is hired by the 30th best university in the country. Betsy is a couple of years younger, tries to find a job during a lean year, and can only get a job at the 60th best university.

The question that Professor Oyer posed is: will this matter in the long run? Will the equally talented Betsy find a better job, given a few years? Or will she be trying to catch up with Alexandra for decades?

Prof Oyer assembled data describing the PhD students graduating from seven excellent graduate schools, and he concluded that Betsy would remain at a disadvantage for a long time. Students who graduate in good years are more likely to find good jobs — obviously — but there is also a strong correlation between getting a good job immediately and still having a good job four, eight or even 12 years later.

This makes some sense; if an economist applies for a mid-career job having already been an assistant professor at (say) the Massachusetts Institute of Technology, employers are unlikely to adjust for whether she secured that assistant professorship in an impossibly difficult year or at a somewhat easier time. The halo will shine, regardless. And regardless of whether it was a good year or a bad one, the young economist will have picked up skills from working at MIT, teaching MIT students and rubbing shoulders with Nobel Prize winners. If you want to work in a top research job, it helps a lot to start out in a top research job.

Prof Oyer conducted a similar analysis for MBA graduates looking for high-paying jobs in finance and consulting in the late 1980s. The results were similar. Could this be a problem only for the young elite — students on such a precision-engineered career path that their fate is sensitive to accidents of timing? Or might it be even more serious for those further down the educational pecking order?

A new study from economists Hannes Schwandt and Till Marco von Wachter suggests that the latter is true. Looking at young people entering the US labour market between 1976 and 2015, every group suffers lasting harm if they have to find their first job during a recession, but disadvantaged groups suffer more and for longer. High school dropouts fare particularly badly, both immediately and several years later, as do those from a racial minority. People with a college education suffer less.

Overall, for a typical recession, the unlucky cohorts can expect to lose the equivalent of seven months’ pay over the course of a decade, relative to their more fortunate peers, who are only a couple of years older or younger. That’s no trivial sum. People who can’t find the job of their dreams end up settling for something else, building up skills and contacts in a field that was never their first choice.

Few people, by now, need reminding that the financial crisis has had a lasting impact and that, in many ways (though not all), it is the younger generation that has been left to count the cost. But this research points towards other lessons. It’s easy to overlook luck; but good or bad, a single piece of luck can last in ways that we find it hard even to notice.


Written for and first published in the Financial Times on 2 November 2018.

My book “Fifty Things That Made the Modern Economy” (UK) / “Fifty Inventions That Shaped The Modern Economy” (US) is out now in paperback – feel free to order online or through your local bookshop.

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