How to Launch Your Career In a Lousy Economy

The high stakes of first jobs.

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Great careers often begin with inauspicious jobs. Jim Skinner's first job after he got out of the Navy was trainee at a McDonald's restaurant in Carpentersville, Ill. Today, Skinner is the CEO of McDonald's Corp. Before Evan Williams cofounded the wildly popular social networking site Twitter, the college dropout did odd technology-related jobs throughout the country and created several start-ups that never got off the ground.

That's not to say that your first job isn't important. A growing body of academic research suggests that where you begin your career does matter—a lot. Many young Americans have entered or attempted to enter the workforce in the midst of this recession. But because of bad timing, they will not only have to work lower-paying jobs than those who graduated into better job markets, but they may also expect lower wages for well over a decade.

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Recent college graduates are facing one of the toughest job markets in dec­ades. Casey Muller, who graduated in May 2009 from Rollins College in Winter Park, Fla., hoped to use his degree in international business to land a job in finance. But after he was rejected or did not hear back from about a dozen firms, the only job he was offered was a sales position that paid on commission. Muller didn't take the job out of worry that his lack of experience in the field would prevent him from making enough to pay for graduate school. "I eventually just got frustrated," he says. So Muller moved to Washington, D.C., to live with friends and try to find work waiting tables. "I don't have any experience, so I'm even struggling with that," he says.

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Many people have to make compromises in recessions. But first-time job seekers may be forced to pay a price bigger than just working at a job that's not their top choice. Lisa Kahn, an assistant professor of economics at the Yale School of Management, has researched the long-term effect the 1980s recession had on the wages of college graduates. She found that for each 1 percent increase in unemployment, the wages of those who graduate from college during a recession are, on average, 6 to 7 percent lower than those of people who graduate when the economy is stronger. Although the gap closes over time, 15 years after graduation the decrease in wages can still be as high as 2.5 percent.

While Kahn's research focuses on only one time period, other academics have found a similar effect in different recessions. "College graduates who find a job in a recession suffer from wage losses that persist for a pretty long time before they catch up to their peers," says Hani Mansour, an assistant professor at the University of Colorado–Denver.

School or work? Many new job seekers must consider jobs that they would not otherwise be interested in. The problem is, a job that might seem temporary can have a long-lasting impact on a career. "You spend time developing skills at that job or other industry, while your counterpart who graduated at a better time is working in a job they've been interested in forever," says Kahn. "You could try to switch to what you're best at. But you haven't been developing those skills."

Ryan Kellett, who graduated from Vermont's Middlebury College in January, spent the previous semester looking for work in online media, hoping to leverage his earlier experience as an intern for National Public Radio. But after coming up empty in his job search, Kellett took a four-month contract with his alma mater, working as a research consultant. Though he is considering graduate school, Kellett says he's wary of leaving the job market. "I think it's important to get some practical work experience" before continuing his education, he says.

For the average person graduating and looking for work in a recession, grad school might actually be one of the best ways to avoid a long-lasting reduction in wages, says Kahn. "If you compare the people who got graduate degrees in good or bad times, they look similar" in terms of wages, she says. The tough economy helped convince Muller that he should delay the job search for a few years and go to law school. "As I reached senior year and heard how difficult it was to find work, it just solidified my desire to go to law school," he says.