When the pandemic hits, I think young people entering the job market will be in for a shock that will continue throughout their careers for years. I’ve never been more happy to be proven wrong.
There is good reason to worry at that time. Young people usually struggle in recessions. They have a harder time finding work and, when they do, it is more likely for jobs that they are overqualified for. As the economic recovery slows, it becomes more difficult for them to switch jobs to improve their pay and advance their careers. After the 2008 financial crisis, for example, the chances of graduates working in low-paid occupations increased by 30 percent in the UK. It remained elevated seven years later.
Moreover, the pandemic seems to be specifically calibrated to hurt young people. Workers under 25 are more than twice as likely as those over 25 to work in the closed sector. While furlough schemes in many countries protect people who already have a job, they are not used for outsiders. No wonder unemployment among young people soared when the lockdown began.
Less than three years later, it is difficult to overstate how much has changed. Youth unemployment is falling rapidly in many OECD countries and is below pre-pandemic levels in places including Germany, France, Italy and the UK, according to OECD data.
How did that happen? Labor shortages after the economy reopened — caused by older people exiting the labor market and high economic stimulus — sent job vacancies soaring. A tight labor market can cause problems, but it also has benefits, especially for young people. When there are many jobs, there are more opportunities to get a job and more job space among employers to find one that matches your skills.
In the Netherlands, researchers are following the prospects of the 2020 cohort graduating and entering the labor market amid the lockdown. They found it harder than previous cohorts to find a job, but in June 2021, they were more likely to be employed than the 2017, 2018 and 2019 cohorts at the same stage in their careers.
In the UK, Sam Ray-Chaudhuri and Xiaowei Xu at the Institute for Fiscal Studies found “no strong evidence of persistent negative effects” on labor prospects post-pandemic. As in the Netherlands, the employment rate recovered quickly. Importantly, people in this group do not seem to have lower paid occupations, nor do they have slower career progression to date.
In terms of job quality, the researchers looked at different measures, from the share of people working in large companies to the share with permanent contracts. They found that people from poorer socio-economic backgrounds tended not to change jobs since school or university, but otherwise, the quality of their work appeared to be similar to previous cohorts.
There are caveats, of course. Youth unemployment is still structurally high in many countries, especially in southern Europe. Young people are also experiencing increasing mental health problems. In the UK, a small but growing number say they are too sick to work, with mental illness being the biggest cause.
The economic outlook has also darkened. Young people may have jobs, but high inflation is destroying their standard of living along with everyone else’s. As household incomes are squeezed and central banks raise rates, the labor market will weaken, although no one knows for sure. Youth unemployment has started again in Europe. It may be this year’s cohort, who graduated into a deteriorating economy after a disrupted education, that it gets worse. And in all this, I am only talking about the labor market. Other trends (such as house prices and rents) have been bad for young people.
But acknowledging the bad news doesn’t mean discounting the good. Bert Colijn, senior economist at ING bank, said he was often surprised by how low people fell. “But the truth is, it’s remarkable that the economy and the labor market have been able to recover so quickly from such a big shock,” he said. “We fail to understand what a major victory is for the economy.”
Among the beneficiaries of the recovery is a group of young people who have a better start in the job market than expected. In the midst of gloom, it needs to be celebrated.
sarah.oconnor@ft.com