As in past recessions, young people just out of school face long-term negative job impacts

Economists predicted that the Great Recession would have lasting effects on the careers of people who graduated early in the downturn. According to the National Association of Colleges and Employers, hiring projections for new graduates fell by 22% in the spring of 2009. One in two people who graduated then were underemployed in the first couple of years after leaving school, holding jobs that didn't require degrees, according to a Federal Reserve Bank of New York study. Normally, that figure is one in three. When the economy picked up, recession graduates had to compete with newer graduates for entry level positions. 

The longer it takes for young people forced to delay getting their careers underway, the worse their long-term prospects will be, whether or not they have obtained a higher education. Citing studies of earlier downturns​​​​​​, Till von Wachter, an economics professor at the University of California, Los Angeles, said it can take 10 to 15 years for recession graduates to catch up. These graduates typically start at lower-paying companies when they do find a job, he said, and then move to bigger ones with better compensation when the economy gets better. But moving up at those larger employers can take several more years. 

The same situation now faces Pandemic Recession graduates, reports Bloomberg News.

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Currently, unemployment levels for the 20-24 age group are the highest of any age demographic. And while the economy has been improving, the spread of coronavirus infections across the nation and the probability of more stay-at-home orders and business closures make the economic futures of these young people dicey.

Julia Coronado, founder of MacroPolicy Perspectives LLC, said, “There is a structure to the labor market—if you miss the entrance, how do you get back in? If you veer off the career path by necessity, how do you get back into the pipeline?” Said Ernie Tedeschi, a policy economist at Evercore ISI, “They take jobs that will help them live and pay the bills, and when times get better they try and switch over to a preferred career path They haven’t built the skills and the professional networks and that puts them at a persistent professional disadvantage.” While their situation is affected by other factors, people who dropped out or never started college have an even tougher go of it.

In an April 2019 policy brief, Hannes Schwandt and Wachter wrote:

Our first main finding is that high school graduates and dropouts suffered even stronger income losses than college graduates when entering the labor market during a recession. Second, we find that negative impacts on socioeconomic outcomes persist in the long run. In midlife, recession graduates earned less, while working more. And they were less likely to be married and more likely to be childless.

Our third important finding is that recession graduates had higher death rates when they reached middle age. These mortality increases stemmed mainly from diseases linked to unhealthy behaviors such as smoking, drinking, and eating poorly. In particular, we discovered a significantly higher risk of death from drug overdoses and other so-called “deaths of despair” among those who left school during a downturn.

Our results demonstrate that health, mortality, and economic and personal well-being in midlife can bear the lasting scars of disadvantages that come during young adulthood. Simply put, the bad luck of leaving school during hard times can lead to higher rates of early death and permanent differences in life circumstances.

The two researchers also found that the years-long recovery from negative income effects didn’t keep these impacts from striking again when young people who entered the job market in a recession reached their late 30s. These effects appeared for all education groups and stayed significantly negative until age 50, at around 1% for each percentage point rise in the graduation-year state unemployment rate. The also found a higher divorce and childlessness rates in midlife.

Proposals for a stronger social safety net, consistent full employment policies, debt relief, universal health care, and other measures could go far to weaken the impacts of recessions and shorten the time it takes for young people with or without college degrees to quickly find employment suitable to their career skills and desires despite downturns. Crafting and enacting such programs will, of course, require electing more lawmakers who, unlike most Republicans, aren’t advocates of devil-take-the-hindmost policies and don’t sneer at any modest assistance as a source of worker laziness.

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