Millennials should get used to budgeting because the recession's lingering impact on their income could last years. "There's a misperception out there that once the economy recovers, it will take two or three years and everything will be back to normal, but for a lot of people, these impacts will last years," says John Irons, research and policy director at the Economic Policy Institute in Washington. "People who graduate into a recession can be on a permanently different career track than someone just like them who had the fortune of graduating in a boom."
It can take a decade to recover, according to Mr. von Wachter's longitudinal study of college graduates in Canada. Persistent damage to income was pronounced for those leaving small schools with less career-oriented degrees. More important, the students who did recover the initial income gap actively worked to improve their job and income prospects. But some workers never caught up.