Yahoo Finance New grads will take it on the chin during the next recession
If the bears are right about a recession being around the corner, the timing will be terrible for new graduates.
RBC (RY.TO) looked at the last global recession in 2008, in a new report. Young people who had the misfortune of entering the workforce back then are still feeling its effects today.
“Evidence suggests the health of the economy at the start of a person’s working life can accelerate, or delay, a person’s entire career,” said Andrew Agopsowicz, senior economist at RBC Economics, in the report.
“Periods of joblessness or underemployment can allow skills acquired in school to deteriorate, hamper the acquisition of important new skills, and delay opportunities for moving into specialized or management roles. It can take years to catch up.”
The report found young Canadians were hit the hardest. The unemployment rate for those between 20 and 24 jumped from 9 per cent in 2008 to more than 12 per cent in 2009.
Things were so bad in the following years that many chose to stay in school instead of looking for work. Enrolment rates at post-secondary institutions rose from 39 per cent in 2008 to 43 per cent in 2012.
“Even after they ventured into the labour market, unemployment rates for this group remained persistently high long after things had improved for older workers. And men were disproportionately affected,” said Agopsowicz.
“Young women with a bachelor’s degree fared better, likely because they were more likely to be employed in healthcare and educational services occupations that largely avoided any negative employment shock.”
Many recent graduates were forced into part-time and precarious work, instead of the skilled occupations they went to school for. This means some of their best years for earning potential were lost.
Average hourly wages for people who entered the workforce between 2009 and 2011 rose about 60 per cent over the first 10 years. That number jumps to 71 per cent for those who started working between 2006 and 2008.
“Studies indicate about one-half of the total increase in earnings over one’s career occur in the first decade,” said Agopsowicz
“Creating a track record of competence is key to securing future promotions or changing employers. Consistent employment is also a big factor.”
The long-term consequences can be seen in people aged 30 to 34 today, who were 19 to 23 at the start of the recession.
“Less than 10 per cent are in a management position. During the 2000-2008 period, workers in that age cohort occupied 12 per cent of management positions.” said Agopsowicz.
“Meanwhile, 37 per cent of today’s 30-34-year-olds are in a skilled occupation; their share in the 2000-2008 period was 41 per cent.”
Jessy Bains is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jessysbains.
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