New research shows that your first job out of college matters more than your major, and here’s why

New research from Columbia University and the National Bureau of Economic Research reveals a troubling pattern: Your first job out of college can close an income gap that lasts for years, with low-income graduates being hit hardest.

“What surprised us was how much of the income gap between low-income and high-income graduates could be explained by differences in that first career transition,” said Judith Scott Clayton, corresponding author of the study and a professor at Teachers College at Columbia University. Investopedia.

How your first job shapes your salary years later

The study tracked 80,000 graduates from a large public university system and found that characteristics of your first job — company size, average pay, industry, and starting salary — explain nearly two-thirds of why low-income graduates take less than five years. Even among students with the same GPA, major, and college, a gap of $4,900 persisted.

“It is very common for graduates to experience periods of unemployment, low income, or job switching in those early years,” Scott Clayton said. “Some of this is rooted in a period of transition.”

But it’s not equally rocky for everyone. The research found crucial differences in how graduates from different economic backgrounds dealt with those first months:

• Early plans are important: Only 33% of low-income graduates got a job before finishing school, compared to 39% of their high-income peers.
• Where shapes start and where they go: Low-income graduates start at companies that pay 18% less on average, limiting access to training, advancement, and professional networks.
• Your starting salary determines your path: Every extra $1,000 you earn in your first job translates into an additional $700 in earnings five years later — and low-income graduates started 12% less ($37,600 vs. $42,700).
• stabilization compounds: Staying in your first job for at least two years is associated with earning an additional $6,800 by the fifth year after graduation.

Scott Clayton is careful to note that some fluctuations are normal.

“But when we see systematic differences by income, even among equally qualified graduates, that’s a sign that something deeper is going on — whether it’s access to networks, financial pressures, or information gaps,” she added.

How to improve your chances

Whether you’re still in college or already earning your first paycheck, these moves can help you:

• Start your search early, before you need the job: Scott Clayton noted that “informational, structural and financial barriers” impact post-university transitions just as they do during college, citing recent research in the UK showing that low-income graduates apply for jobs later than their higher-income peers, which may contribute to different outcomes. You can help fill some of the gaps by connecting with professors, alumni networks, mentors, and peers.
• Look beyond the salary: It’s tempting to accept the first offer, especially with rising post-grad bills. But graduates who joined larger or higher-paying companies — the kind that invest in employee development — saw stronger growth after five years. When evaluating offers, think about where you will learn the most, not just earn more.
• Survive long enough to grow: Research found that staying in your first job for at least two years is associated with earning an additional $6,800 by year five.

Finally, remember that college graduates still have a significant earnings advantage (see chart above). “University graduates are still very well off in the job market as a whole, although that’s very different from ensuring it’s going to be easy for everyone,” Scott Clayton said.