How does age affect the amount of income people earn?

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Age can be a determining factor for income, but in reality, is not nearly as much a determining factor as other variables. For instance, what kind of degree one holds, if that person has access to generational wealth and social connections, years within a company, starting salary/hourly wage at a company, and access to higher paying jobs in the area one lives or access to higher paying online positions are all determining factors in income.

How many years one is employed at a company is probably the closest determine factor to one's age as a factor. However, a person can take a high-paying, salaried job at a company at the age of 23, and by the time that person is 33 years of age, that person may be making a substantial amount of money if promotions have occurred. However, a person could be working a lower-salaried job with little room for promotions for far longer and never make as much income as the 23 year old.

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For the most part, individuals earn more as they age. There are many factors behind this, but the trend is still there. For one, an older person has more experience in their field and can leverage that for a raise or a higher position. For another, older people tend to be promoted to higher roles in their company, which command higher salaries. However, if someone who is older moves into a new field, they will see their earnings drop to roughly the same as other new entrants into that field.

An additional factor is compound interest, as people get annual raises that typically fall in line with inflation. If someone starts a job that earns $50,000 annually and makes annual 3% raises, in five years, they will be making nearly $58,000. If someone starts the same job that fifth year, they may only start out at $55,000. Once again, there are many factors, but these are some that contribute.

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In general, the relationship between age and the amount of money that a person earns is not linear.  That is, it does not start low and get higher for a person’s entire life.  Instead, there is more of a curve in which a person starts out making very little money, gets to make more and more, and then at some point starts to earn less.  To some degree, age is really not a causal factor, though.

Younger adults typically make less money than older adults.  However, this is not so much because of their age per se.  Instead, it is because of their experience and skills.  Having not gained much experience or many skills, they are not yet as valuable as they could be to a firm.  As they grow older, they make more money.  Again, however, this is not really because of their age but more because of their experience and skills.

Of course, the trend of making more and more money does not typically continue.  At some point, most people retire.  It may be voluntary or they may no longer be able to perform the job they once did (for example, airline pilots face mandatory retirement due to age).  At that point, a person’s income tends to decline.

Thus, one’s ability to earn tends to rise for most of one’s life, but it then starts to decline after a certain age. 

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