Key Takeaways
Researchers found that the quality and timing of a graduate’s first job explain most of the earnings gap between low- and high-income students five years after college.
Lower-income graduates are more likely to land in lower-paying firms and earn about 12% less five years out, even after accounting for grades, major, and college.
Graduates who secure a reliable job before or soon after graduation and stay at least two years earn thousands more later on.
New research from Columbia University and the National Bureau of Economic Research reveals a troubling pattern: your first job after college can lock in an earnings gap that lasts for years, and low-income graduates get hit the hardest.
“What surprised us was how much of the earnings gap between low- and high-income graduates could be explained by differences in that first job transition,” Judith Scott-Clayton, corresponding author of the study and a professor at Columbia University’s Teachers College, told Investopedia.
Why This Matters To You
Understanding how early career choices compound over time can help you or someone you know navigate those critical first months post-college more strategically, especially if you don’t have family funds to fall back on.
How Your First Job Shapes Your Paycheck Years Later
The study tracked 80,000 graduates from a large public university system and found that features of your first job—the company’s size, its average pay, the industry, and your starting salary—explain almost two-thirds of why low-income graduates earn less five years out. Even among students with the same GPA, major, and college, a $4,900 gap persisted.
“It’s quite common for graduates to experience periods of non-employment, of low earnings, or switches between jobs in those early years,” Scott-Clayton said. “Some of this is just inherent in a period of transition.”
But it’s not equally rocky for everyone. The research found critical differences in how graduates from different economic backgrounds navigate those early months:
- Early plans matter: Only 33% of lower-income graduates had a job lined up before finishing school, compared with 39% of higher-income peers.
- Where you start shapes where you go: Lower-income grads began at firms paying 18% less on average, limiting access to training, advancement, and professional networks.
- Starting salary sets your trajectory: Every extra $1,000 earned at your first job translates to an additional $700 in earnings five years later—and low-income graduates started 12% lower ($37,600 versus $42,700).
- Stability compounds: Staying at your first job for at least two years correlated with earning $6,800 more by the fifth year after graduation.
Scott-Clayton is careful to note that some churn is normal.
“But when we see systematic differences by income, even among equally qualified graduates, that’s a signal something deeper is happening—whether it’s access to networks, financial pressure, or information gaps,” she said.
How To Improve Your Chances
Whether you’re still in college or already making your first paycheck, these moves can help:
- Start your search early—before you need the job: Scott-Clayton noted that “informational, structural, and financial barriers” affect post-college transitions just as they do during college, citing recent research in the United Kingdom that shows lower-income graduates apply to jobs later than their higher-income peers, which may contribute to different outcomes. You can help close some of the gaps by reaching out to professors, alumni networks, mentors, and peers.
- Look beyond the paycheck: It’s tempting to take the first offer, especially as your post-college bills mount up. But graduates who joined larger or higher-paying firms—the kind that invest in employee development—saw stronger growth five years later. When evaluating offers, think about where you’ll learn the most, not just earn the most.
- Stay long enough to grow: The research found that staying at your first job for at least two years correlated with earning $6,800 more by year five.
Finally, remember that college graduates still have a significant earnings advantage (see chart above). “College graduates are still very well positioned in the labor market as a whole, though that’s very different from a guarantee that it will be easy for everyone,” Scott-Clayton said.
