For many school and college-leavers, the “gap year” has become a rite of passage — taking a year away from education, or even an early-stage career, to travel the world, learn more about themselves and figure out what they want from life. The class of 2020, however, are likely to find themselves taking time out not by choice, but thanks to an economic crisis. Students leaving university or school will emerge into a labour market already saturated with unemployed workers, many of whom will have decades more experience.
While the coronavirus is much more deadly to the elderly, it is the young who are bearing the brunt of the economic damage. They are more likely to work in the hospitality businesses that may be among the last to reopen, less likely to be in stable employment, and have the fewest resources to fall back on. Younger and less well-paid workers have been the first to lose their jobs.
Recessions always hit the young the hardest, and have long-lasting effects on wages and career progress. The Resolution Foundation think-tank says UK graduates’ wages will probably be 7 per cent lower within two years of leaving full-time education thanks to the pandemic. For those with fewer qualifications, hourly pay is likely to be about a fifth lower, the think-tank calculates.
Entry-level jobs are often the first to be cut by companies looking to save money; inexperienced workers are an investment in the future, not an immediate priority. The nature of this crisis will make it harder to gain workplace experience as companies cut back on internship. Businesses that recruit applicants from around the world will be hamstrung by travel bans.
While there is no good time for a pandemic, this one also comes on the heels of a decade of financial crisis, austerity policies and weak growth. Many early-career workers have only experienced a few years of wage growth before the latest blow. Compared with previous generations, so-called millennials have lower levels of wealth and are less likely to own their own homes. In many parts of Europe, youth unemployment never recovered after the eurozone crisis.
The best thing governments can do for precarious workers is get the health policy right: ensure the virus is properly contained and prevent a second wave. But when lockdowns can be safely brought to an end, policymakers should also focus on making the recovery as rapid as possible. That means keeping viable businesses alive now through credit guarantees and furlough schemes, and using fiscal and monetary policy to support demand even as customers and businesses retrench. There may also be merit in employment tax cuts for entry-level workers to encourage hiring.
For young people themselves, staying in education can be a good bet. An extra year of education can reduce the hit to a less-skilled school-leaver’s wages by half, according to the Resolution Foundation. Policy could help encourage this process through targeted subsidies. Governments should also think about how to “rebuild better”, and improve options for those who do not go to university.
This recession is different. During the 2010s, many young jobless people from eurozone countries emigrated to countries with better employment prospects. That will be harder now, thanks to restrictions on movement and a backlash against migration, not to mention the broad-brush economic disruption. Even the traditional gap-year escape route will be hit — young people hoping to ride out the worst of the economic disruption, backpacking between bar jobs in south-east Asia, may find themselves stuck much closer to home.
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