Opportunities for graduates are bleak. Many will be unable to find full-time work after finishing high school or completing a postsecondary program. The weaker labor market will also have long-lasting effects. But with patience and ingenuity, graduates can make the most out of the situation and even come out better from the experience.
Some research my colleagues and I conducted in Canada examined the consequences of graduating in a recession during the 1980s and 1990s. In the first year after graduation, earnings were about 10–15% less, on average, than peers who graduated when unemployment rates were 3–4 percentage points lower. Earnings were lower when they found work, even after five years. The gap closed after a decade, but by then unlucky labor market entrants had lost, on average, 5% of their lifetime earnings.
Research on European countries finds similar patterns. However, postsecondary graduates in a recession in countries with higher minimum wages and more job security experience smaller short-term wage losses but larger longer-term losses than in countries with more flexible policies. This research also finds that high school graduates’ earnings are affected for many years after entering the labor market in a recession.
Other research finds that graduates in a recession also experience long-term negative health effects, including a half-year lower life expectancy.
The consequences of the Covid-19 recession could be even more severe. This year’s graduates face labor market conditions significantly worse than those examined in past research. Closed businesses will make finding any work challenging. The longer the “stay at home” restrictions last and the longer the economic downturn, the more graduates will settle for lower-paying occupations unrelated to their field of study.
Fortunately, there are ways to minimize these adverse impacts. In the short term, job vacancies are likely to be extremely scarce. Youths might instead consider acquiring new skills, potentially through online courses, or even stay on in school. Now would be an excellent time to pursue a one- or two-year graduate program of interest that leads to higher earnings, a new career, or a chance to enter the labor market in better times.
Another opportunity is volunteering. Many organizations and households are currently in dire need of help. Volunteering not only benefits others, but also increases the volunteer’s well-being. It also improves skills that employers value. In one study, for example, resumés that randomly listed volunteer experience were found to be more likely to receive invitations for job interviews than those without. European Youth Portal and European Solidarity Corps both provide links to organizations currently looking for help during the pandemic, including virtual volunteering.
As economies recover and businesses begin to hire, there are steps youths can take to minimize adverse effects from the recession. Those youths who are more mobile—switch jobs more often—recover faster. Getting back onto a steeper wage trajectory requires seizing better job opportunities when they come along. A willingness to move cities or to consider a wider range of industries will also help accelerate the recovery path.
Governments can also spend money to help. Some countries, like Canada, are providing immediate financial assistance to students unable to find summer work or who have had their job offers revoked. To relieve financial pressure further, governments can defer student loans and subsidize staying in school. They can also encourage entrepreneurship with start-up seed money. In the longer term, governments can promote improved career services for assisting better matches between youths and firms.
My advice to graduates is to take a long-term perspective. What matters is your long-term well-being, not how much you earn this year. You and everyone else are learning much about life and what matters most. The pandemic presents opportunities to gain experience, help others, and mature in ways you never otherwise would have imagined. Stay patient, optimistic, and persistent and things will (hopefully) work out.
© Philip Oreopoulos
Philip Oreopoulos is Professor of Economics at the University of Toronto, Canada
Read more on the coronavirus crisis:
"Coronavirus and the labor market," by Daniel S. Hamermesh
"Fighting a coronavirus recession," by Daniel S. Hamermesh
"Pandemics and the labor market—Then and now," by Karen Clay
"Pricing the lives saved by coronavirus policies," by W. Kip Viscusi
"Health effects of the coronavirus recession," by Christopher J. Ruhm
"The long-term consequences of missing a term of school," by Simon Burgess and Hans Sievertsen
"Coronavirus, telecommuting, and the labor market," by Nikos Askitas
"Expectations about Covid-19 social-distancing measures in Italy and their impact on compliance," by Guglielmo Briscese, Nicola Lacetera, Mario Macis, and Mirco Tonin
"The coronavirus crisis and the next generation," by Bart Cockx
"Korea: A paragon of dealing with coronavirus," by Sok Chul Hong
"Economic implications of postponing the Tokyo 2020 Olympic Games," by Peter J. Sloane
"The sudden growth of employee autonomy during the coronavirus lockdown," by Elisa Gerten and Michael Beckmann
"Mitigating the work–safety trade-off," by Tito Boeri, Alessandro Caiumi, Marco Paccagnella
"Trading off lives for jobs," by Daniel S. Hamermesh
"Trends in Covid-19 infection: What New York City neighborhoods tell us," by George J. Borjas
"Labor markets during the Covid-19 crisis: A preliminary view," by Olivier Coibion, Yuriy Gorodnichenko, Michael Weber
"Did California’s shelter-in-place order work? Early coronavirus-related public health effects," by Andrew Friedsen, Drew McNichols, Joseph J. Sabia, Dhaval Dave
"200 billion hours to spend: The Covid-19 opportunity to upskill," by Peter Siminski, Emil Temnyalov
"The CARES Act—Massive government intervention in the economic crisis," by Richard Prisinzano
"What is happening to unemployment in the post-Covid-19 labor market?," by Katharine G. Abraham
"Measuring employment and unemployment—Primer and predictions," by Daniel S. Hamermesh
"Can inflation be accurately measured during a lockdown?," by Erwin Diewert and Kevin J. Fox
"The Covid-19 crisis exacerbates workplace injustices," by Philippe Askenazy
We recognize that IZA World of Labor articles may prompt discussion and possibly controversy. Opinion pieces, such as the one above, capture ideas and debates concisely, and anchor them with real-world examples. Opinions stated here do not necessarily reflect those of the IZA.