S-Curves Everywhere

From Salaries top out at age 40 by Penelope Trunk. Trunk reports on a conversation with Al Lee, the director of quantitative analysis at PayScale.

I am constantly intrigued by the pragmatic knowledge which we collectively know and selectively share. I have the idea that were some simple pragmatic truths more broadly disseminated, everyone would likely be better off and more productive. Our estimable desire that everyone should always have choices and can be whatever they wish to be tends to stand in the way of such pragmatic sharing. There are always exceptions to the norm but it is useful to know what the norm is.

As an example, it is well established, though not necessarily broadly known, that only 2% of people who graduate high school on time, are employed and stay employed (regardless of type of job), and who get married, stay married and do not have children before marriage will ever be in poverty. That is an astoundingly simple life strategy. Could there be a more straight forward policy to cut the poverty rate seven-fold?

The fact that it has about the same success rate as the strategy that in order to lose weight one needs to eat less and exercise more is a separate matter.

Trunk's conversation with Lee illustrates the prevalence of S-curves as I discussed in Predictability and Adaptability.

Al’s data, which is based on the careers of college graduates, is basically that the salary curve for most people in their 20s is very steep. Then it starts to flatten in the 30s, and then you get into the land of the 3% raise. In real dollars, those 3% raises are not actually raises, they are just keeping up with inflation.

[snip]

To be precise, pay tops out at age 38 for women ($61K) and age 45 for men ($95K). But the difference, according to PayScale data, is not due to unequal pay for equal work. Rather, the difference is that women choose lower paying careers, and women are more likely to take time out of the workforce for kids. So the first thing you can do to prevent your salary from flat-lining is choose a career that men dominate. But it's not just about industry—it is also about influence. Stick to line-management positions rather than support roles. For example, skip human resources and go to supply chain management.

This observation regarding salary S-Curves has some real world implications.

Buy a house assuming you won't get a raise. Ever. When it comes to houses in the U.S., the average age of a first-time buyer is 33. So people go through their 20s gaining super-high raises, and then people buy a house in their mid-30s with the assumption that the raises will continue. In fact, though, you should buy a house preparing for your real income to remain unchanged until age 55, when it is likely to go down.

I find all this interesting in and of itself. However, it highlights a paradox that most parents experience.

Increasingly, in our high-velocity, heterogeneous, uncertain world, the highest returns are to those who work hardest and practice longest in some specialized and competitive field. That means that it pays the most for children to get focused early.

At the same time, we want children to have a childhood. I think that is one of the most precious things we have to offer these days - shelter from a world environment that puts a premium on children growing up too soon, becoming worldly before their time.

Two competing goals: Get focused early to be successful but also experience childhood for a reasonable period. No wonder the field of parenting is so perilous. There is no right answer. But it is useful to know the S-curves that are out there and which influence everything.