The surprising benefits of taking your 20s to use the labor market as a laboratory, rather than commit to the first company that happens to hire you
My friends sometimes approach me with career anxieties, under the false impression that writing about economics makes somebody a good career advisor. My counsel is typically something like optimistic incrementalism. Don’t quit your job, mastery comes with time, job satisfaction comes with mastery...that sort of stuff.
When the same friends ask my roommate, an entrepreneur building a financial services app, they’re whiplashed with radical optimism. Get the hell out of there! Quit if you have to! You’ll be happier doing just about anything else!
I never said it outright, but I assumed that my cautious approach was more responsible, even if it seldom proved more inspirational. But according to a new study of youth unemployment by economists Martin Gervais, Nir Jaimovich, Henry Siu, and Yaniv Yedid-Levi, my incrementalist advice, while appropriate for the worst periods of the Great Recession, isn’t so great, overall.
Instead, there is what you might call a "dream-job premium.” Jumping between jobs in your 20s, which strikes many people as wayward and noncommittal, improves the chance that you'll find more satisfying—and higher paying—work in your 30s and 40s.
"People who switch jobs more frequently early in their careers tend to have higher wages and incomes in their prime-working years,” said Siu, a professor at the Vancouver School of Economics. “Job-hopping is actually correlated with higher incomes, because people have found better matches—their true calling.”
"True calling" is a messy term, since (a) job mastery, (b) job satisfaction, and (c) compensation don’t always line up. There are talented yet miserable investment bankers (a and c, not b), talented and fulfilled public-school teachers (a and b, not c), and several shan’t-be-named general managers of professional sports teams (b and c, not a). But overall, Siu said, adults who switch jobs multiple times are more likely to find a position in their prime-work years where they earn a higher wage and have a lower chance of quitting. (As always, causality is difficult to prove: Perhaps pro-active behavior leads to both higher wages and a greater likelihood of quitting.)
Young people are more likely to be unemployed. Siu's paper tries to understand why. Is it because they have a harder time finding work or because they’re more likely to leave jobs? I always assumed that youth unemployment was higher because it was harder to find a job than keep one, and most people graduating from college or high school are starting at zero.
Siu informed me that I have it backwards. "You can quite clearly see the reason young people have relatively higher unemployment is not because they have a harder time finding jobs,” he said. “Actually, they find jobs with greater ease than somebody who is 45 or 55. But they are more likely to leave a job."
In conversations with executives at larger companies about Millennial behavior, I've heard over and over that young people today are more likely to quit quickly. This has been used as an excuse to not training young workers—why invest in an asset that's going to disappear in a few months, anyway? But Siu said that young people aren't any more likely to quit today than they were in the 1970s or 1980s. But once they leave, young people today are more likely to try out an entirely new job. (For the technical-minded: the "separation rate" for young people isn't radically different than it used to be, but "occupational switching" is up.)
In Siu's words: "For the HR person considering a young worker, it’s not true to say, 'If I hire them they are more likely to leave my firm.' That likelihood hasn’t changed. But if that person does leave my firm, the next job is more likely to be totally different." Young people aren't quitting more. They're experimenting more.
Youth unemployment has been particularly elevated in the last few years. Young people are the only age group that has seen falling real wages since 2008, according to Pew, and there is really very little good to say about the labor market of the last few years, particularly with regard to wage growth. But, if you squint really hard, there is a silver lining to the fact that youth unemployment is typically elevated. It shows young people treating the labor market appropriately—as an laboratory for trying a few jobs rather than chain themselves to the first company that returns their phone call.
"There’s still this antiquated notion that success is a stable labor force attachment, and then you get to your 50s and 60s, and you’re golden with the pension plan and that’s it,” Siu said. "The US labor market is much more fluid than that. There is more movement in between jobs. The fact that young people have higher unemployment than others is, to the extent that it’s due to [switching jobs], a good thing."