Millennial “Earnings Hangovers” And How to Fight Them

We all know how to treat a regular hangover: drink! No, silly, not more Smirnoff Ice, aka, the hair of the dog that bit you; lots of water or soda water, juice, and coffee. Sprite. Pedialyte. Eating can help, although I’ve heard arguments both for and against fatty foods. Ibuprofen (not Tylenol, which, like liquor and/or in combination with it, can damage your liver). Waiting. But how does one deal with the earnings hangover that one did not bring on oneself by partying but simply by graduating at the wrong time?

Students entering the job market in 2010 and 2011 took a 19 percent pay cut from what they could have expected without a recession, according to economists at Yale University in New Haven, Connecticut — about double the penalty in prior downturns. … That reality is haunting a segment of millennials, the 82 million people born between 1981 and about 2000. Full-time 25-to 34-year-old workers saw income erode to a median of $38,000 in 2012 from $38,760 in 2007, based on National Center for Education Statistics data. Salaries for bachelor’s degree-or-higher grads fell to $49,950 from $52,990 in 2007.

It gets … not better:

Pay penalties from entering a difficult labor market are long-lasting, research from prior contractions shows. Earnings shortfalls have persisted for 15 years, University of Maryland at College Park researcher Shu Lin Wee reported in a December paper. That’s because early years are critical to lifetime income growth, with half of gains between 18 and 46 occurring by age 30 as workers switch jobs and climb corporate career ladders.

All right, so, life isn’t fair. Through not fault of our own, some of us graduate into recessions and lose both real money and future earnings. This generation also has the very real setback of dealing with crushing student loan debt. How do we help, or try to, compensate for that? Here are ten suggestions!

1) Change jobs when necessary. Very often, we advance not by climbing one ladder but by making lots of moves up and to the side. Millennials get criticized for job-hopping; if done strategically, it can be, however, the best way to advance. For whatever reason, lots of institutions don’t like to promote from within. The New York Times Magazine recently parted ways from its #1, Hugo Lindgren, and replaced him not with an internal candidate but with Jake Silverstein from Texas Monthly. Happens all the time. You might think you’d be best suited to replace your boss, should your boss leave, and yet all your boss’s boss can see is that greener-looking grass in the next yard. What can you do? Be the greener grass yourself. There aren’t merit badges given out for loyalty anymore.

2) Make sure you get the most from your money. When you are able to save even small amounts, don’t let your cash languish in the bank. Sock it away in index funds, buy property/real estate, say yes to employer matches, do whatever you can to maximize your investments. Your money needs to work as hard as you do.

3) Be flexible. Try out places where the costs of living are cheaper, like Boulder, CO, the way this guy, who’s now an Editor at Forbes, did, and take advantage of the opportunities. Or go further afield, like to Hong Kong / China. Become a Peace Corps volunteer: if you can’t get a foothold at home, at least you can do good in the world.

4) Know your worth and negotiate for raises and promotions. It can be scary but it can also work, especially if you are firm and persistent, and if you’ve laid the groundwork in advance by making yourself indispensable.

5) Become an entrepreneur? I’m less sure about this one, though it works for some people, like this guy.

6) Go to grad school? Maybe only if you were going to go anyway. Academia isn’t the greatest plan of action anymore, but there are lots of things you can only do, and gobs of money you can only make, with an advanced degree.

7) Delay / deny. Be spartan with yourself, and shack up with someone who has similar values so you can pool your resources. (Also see #10.)

8) Say “To hell with all that” and devote your life to something other than making money. It’s an opportunity! Just scrape together enough to get by and do what you love, whether it’s lucrative or not.

9) Tithe?

10) Marry rich. If you’re college-educated, you’ve got a leg up on that already, since more high-earners with BAs are marrying other folks with similar backgrounds. (It’s bad news for Cinderellas, though.)

Other suggestions? What works for you?

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