When the pandemic hit, I thought young people entering the job market were going to suffer a shock that would reverberate through their careers for years. I’ve never been more glad to be proved wrong.
There was good reason to worry at the time. Young people usually struggle in recessions. They have a harder time finding work and, when they do, it is more likely to be a job for which they are overqualified. When economic recovery is slow, it is more difficult for them to switch jobs to boost their pay and career progression. After the 2008 financial crisis, for example, the chance of a graduate working in a low-paid occupation rose by 30 per cent in the UK. It remained elevated seven years later.
On top of that, the pandemic seemed particularly calibrated to hurt the young. Workers under the age of 25 were more than twice as likely as those over 25 to work in the sectors that were closed down. While furlough schemes in many countries protected people who already had jobs, they weren’t much use for outsiders. Little wonder that joblessness among young people shot up when lockdowns began.
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Less than three years later, it’s hard to overstate how much things have changed. Youth unemployment has come down quickly in many OECD countries and has dropped below pre-pandemic levels in places including Germany, France, Italy and the UK, according to OECD data.
How did this happen? Labour shortages after economies reopened – caused in part by older people dropping out of the labour market and high levels of economic stimulus – sent job vacancies surging. Very tight labour markets might cause problems, but they also have benefits, particularly for the young. When jobs are plentiful there is more opportunity to get work and more scope to job hop between employers to find a better fit for your skills.
In the Netherlands, researchers followed the prospects of the 2020 cohort who graduated and entered the labour market in the middle of a lockdown. They found it harder than previous cohorts to find jobs to begin with but, by June 2021, they were more likely to be in work 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 have found “no compelling evidence of persistent negative effects” on the employment prospects of those who graduated into the pandemic. As in the Netherlands, employment rates recovered quickly. Just as important, people in this cohort don’t seem to have ended up in lower-paid occupations, nor do they seem to have had slower career progression so far.
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On job quality, the researchers looked at a range of measures, from the share of people who work for large companies to the share who have permanent contracts. They found that those from poorer socioeconomic backgrounds were less likely to have changed jobs since school or university, but other than that, the quality of their jobs looked very similar to previous cohorts.
There are caveats, of course. Youth unemployment is still structurally high in many countries, particularly in southern Europe. Young people have also experienced a rise in mental health problems. In the UK, a small but rising number of them say they are too ill to work, with mental illness the biggest cause.
The economic outlook has darkened too. The young might have jobs, but high inflation is eroding their living standards along with everyone else’s. As household incomes are squeezed and central banks raise rates, labour markets are likely to weaken, though no one knows how much. Youth unemployment has already started to tick up again in Europe. It could be this year’s cohort, who graduate into a deteriorating economy after a disrupted education, who turn out to have been dealt the worst hand. And in all this, I’m only talking about the labour market. Other trends (such as house prices and rents) have been terrible for the young.
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But acknowledging the bad news shouldn’t mean minimising the good. Bert Colijn, a senior economist at ING bank, says he is often struck by how downbeat people are. “But actually, it’s just incredible that economies and labour markets have managed to recover so quickly from such a massive shock,” he told me. “We fail to understand what a major victory for the economy that is.”
Among the beneficiaries of that recovery are a cohort of young people who have had a much better start in the jobs market than anyone dared to hope. Amid the gloom, that is something worth celebrating. – Copyright The Financial Times Limited 2023