Who has realistic income expectations: students or workers?
Southampton University, UK
I analyse a nationally representative, longitudinal dataset to investigate the income expectations of 20 year old men over a 10 year time horizon. Specifically, I compare the accuracy of students’ expectations to young adults from the same cohort who have chosen to enter the labour force. The results indicate that 20 year old American men overestimate their income at age 30 by an average of 50%. Yet, there is little evidence that those in the labour force are more realistic than their peers in higher education. In fact certain groups of students appear to be more realistic than those who are working, overestimating their future income by less than 10%.
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