Earnings rates and age -

[deborah]

The following article is an interesting one about when people increase their earnings: http://www.canberratimes.com.au/business/markets/wealthy-earn-it-all-before-40-or-not-at-all-20150210-13a91j.html

Unfortunately it doesn't have a reference to the original research (I always like to read the actual research to see whether the reporter has it right, and whether there is something even more interesting buried within the research). However, it says that people who end up wealthy (they don't define wealth, but I think it is earning humungous salaries) start early rising quickly up pay scales, whereas most people rise more slowly early on. Both groups stop rising before they reach 40, and pay actually reduces after 45. It is a US study.

So what do I think this means for us MMM types? Retiring early makes a lot of sense because we are actually taking advantage of the relatively high increases early on - especially if we resist lifestyle inflation. People starting the MMM lifestyle later have a more difficult task because they are not going to see much in the way of pay increases, and so they need to be even more diligent in removing the excess in their budget. Early adopters of MMM are possibly more likely to fast track into higher salaries because they are very conscious of what a rise in salary can do for their FIRE plans.

[Beric01]

Good article. Mustachianism is all about retiring in the peak of your career, rather than when your market value has tapered off (assuming you were fortunate enough to start early, of course).

One thing I really like about Mustachianism is not having to worry about age bias when you hit 45-50. I'll be FI long before then, so I'll have no need to worry about people not hiring me due to my age.

[Jouer]

I'm with you on wishing there was a link to the actual research. As a researcher myself, I'm rarely satisfied unless I can get my hands on a methodology report.

Having said that, it does make sense to me that % increases would be higher earlier in the career. Going from 0 experience to 1, 2, 3, 4, 5 years experience is a huge increase in your worth to a company.

However, I think a top performer is still going to see nice increases later in their career. Remember that 3% of $30k is not as much as 2% of $60k in terms of $$ increase.

[Static Void]

And once again, Silicon Valley tech is a complete aberration to the norm. I can only speak personally and anecdotally, but for myself and people whose salaries I know, they seem to increase steadily or slightly up-ticked throughout the career. My own salary from age 22 to 52 went up ~1000% all in all, including 40% across the last 5 years.

Part of this is that i'm older than most "techies" -- there are so many more of us today than 30 years ago -- and when I began, starting salaries were perhaps much more "normal". But still.

The whole thing is ridiculous. I'll speculate that part of this spiral salary inflation is self-fulfilling: The necessary retention incentive for "one more year" has to be noticeable.

(Eventually it will be corrected... but that's the status quo now.)

[MrFrugalChicago]

Remember that 3% of $30k is not as much as 2% of $60k in terms of $$ increase.

True, but inflating going up 2% a year in both cases would make the first guy get a 1% net raise, and the second guy get a 0% net raise.

[BayIslandSaver]

And once again, Silicon Valley tech is a complete aberration to the norm. I can only speak personally and anecdotally, but for myself and people whose salaries I know, they seem to increase steadily or slightly up-ticked throughout the career. My own salary from age 22 to 52 went up ~1000% all in all, including 40% across the last 5 years.

Part of this is that i'm older than most "techies" -- there are so many more of us today than 30 years ago -- and when I began, starting salaries were perhaps much more "normal". But still.

The whole thing is ridiculous. I'll speculate that part of this spiral salary inflation is self-fulfilling: The necessary retention incentive for "one more year" has to be noticeable.

(Eventually it will be corrected... but that's the status quo now.)

Care to elaborate your beginning or ending salary ;)

I work with several techie baby boomers and always curious as to what type of salary disparity exists between the old and the new.

[willow]

I would be interested to know how much of this is based on life changes. Such as having children, settling down and working the same job for a few years. Do they account for people who acquire new skills or attain more education?

In my experience, when you change jobs voluntarily, it almost always comes with a nice raise. Whereas, if you stay in your current company, you could be staring at 3% for reasons outside of your control. Even a nice 8% doesn't match a 15% or greater raise you could get from switching up companies every now and then.

[Janie]

For those interested in the full text.
What Do Data on Millions of U.S. Workers Say About Labor Income Risk?
http://www.newyorkfed.org/research/staff_reports/sr710.pdf

[clarkfan1979]

Salary is going to go up with experience for a skilled position. For an unskilled position, this is not the case. I think many people think they have a skilled position, when in reality they do not. If you are 55 and being replaced by a 25 year old the market is telling you something.