Yale study: Starting career during recession can damage salary for decades


What happens to bright young things when they graduate college in the middle of an economic downturn? According to Lisa Kahn, assistant professor of economics at the Yale School of Management, it's not a pretty picture. While it might seem like things will be looking up as soon as the economy revives, her findings show that the damage from entering the job market during a recession can last up to 20 years.

Khan says salaries for new employees are directly related to the unemployment rate. Using data from the National Longitudinal Survey of Youth, she calculates that those graduating during hard times earn 6 to 8 percent less in their first year on the job for each percentage-point increase in the unemployment rate. That means a 1982 graduate entering the job market when the unemployment rate stood at 10.8 percent earned, on average, 23 percent less than a worker graduating in May 1981 when unemployment was 7.5 percent.