Long-term consequences of the pandemic

From immediate impact to long-term implications: 4 articles exploring the effects of the pandemic on the student experience: Part IV

Despite the many things that happened in 2020 - remember when Australia was on fire? - we will all remember it for the one thing that shook the world: Prince Harry and Meghan Markle left the royal family. Oh, and a global pandemic may have forever changed the way we work, study, socialise, and generally live our lives.

In the previous instalments, if you recall, we looked at the short-term impact of the pandemic on the student experience, its implications for students’ mental health, and how it will affect the student experience post COVID-19. This fourth and final article will focus on the potential consequences of the crisis for the careers of recent and soon-to-be graduates.

One more time, let me introduce Kate, a graduate from the London School of Economics, whose experience as a student during the pandemic has inspired the narrative of this series. Kate is one of many graduates who joined the workforce in recent months, and her cohort has been faced with one important question...

What are the consequences of graduating during a recession?

A recession means the economy is shrinking. It typically involves fewer jobs, less profitable companies, and therefore lower wages for employees. Since more people are applying for fewer vacancies, the labour market becomes more competitive, and graduates can have a hard time finding a first job or internship.

As stated in the New York Times, “Historically, college students who graduate into a recession have settled for lower-paying jobs at less prestigious companies than people who finished college even a year earlier. Economists have found that the impact of that bad luck can linger for as long as 10 or 15 years, leading to higher unemployment rates and lower salaries — a phenomenon known as “scarring.””

Let’s have a quick look at these three trends.

1. A more competitive job market

Countless opportunities for students and soon-to-be graduates evaporated when it became clear that COVID-19 was here to stay indefinitely. In one survey, 13% of students said they had delayed graduation, and 40% said they had lost a job, an internship, or an offer.

“We do feel like the generation that graduated in 2008”, says Kate, who is pursuing a career in International Relations. With little to no work experience, her cohort have had to contend with people who have been part of the workforce for years, building up skills and know-how that make them more attractive to potential employers.

Back in May 2020, economist Gary Burtless said this crisis is “much worse than the Great Recession. Over the entire Great Recession, 8.5 - 9 million jobs were lost over the course of a 5 year period. Between February and April 2020, the US lost 21.5 million payroll jobs. People graduating this Spring are going to face the worst job market in the entire post-depression history.”

2. Lower salaries

According to economics columnist Jon Talton, while a recession may affect individuals differently depending on their skills or chosen field, “graduates that enter the job market during a recession start with lower pay and it takes much longer for them to catch up — if they ever do — with those who came in during an up-cycle.”

Students, it seems, are aware of the obstacles that lie ahead. In the survey mentioned before, 29% of students said they expect to earn less at 35 because of the pandemic. Sadly, they are probably right.

Lisa Kahn is an economist who has studied the long-term labour market consequences of graduating during a recession. She found that “for each percentage point increase in the unemployment rate, those who graduated during the recession of the early 1980s earned 6 to 8% less in their first year of employment compared to their more fortunate counterparts. The effect was long lasting; even 15 years out of school, the recession-era graduates earned 2.5% less.”

3. Higher unemployment rates

In March 2020, Khan expressed concern for the financial future of those who were about to graduate from higher education institutions, warning of “severe short-term consequences” which will probably haunt them for the next decade.

However, according to the National Bureau of Economic Research, employment and wages show “scarring” effects in different ways: “Those who face high unemployment rates at the start of their careers have lower wages through their first several years in the labor market, but these scars gradually fade. Scarring effects on employment, in contrast, are permanent. Cohorts that face high unemployment when they enter the labor market have lower employment rates throughout their careers.”

If our current predicament were like the Great Recession, this would conclude the article. Unfortunately, this particular recession is accompanied by a pandemic, which changes things - but not for the better.

How is the COVID-19 recession different?

Decreased postsecondary enrolment

As we saw in the previous instalment, higher education enrolment usually increases in times of economic downturn. When jobs are scarce, people take the time to train certain skills, hoping that these will give them an advantage when more opportunities arise.

Why, then, are American colleges experiencing a drop in enrolment? Well, as we’ve also seen in this series, the current circumstances haven’t created ideal conditions for students. In addition, with entire industries either closed or struggling, many typical student jobs - in retail and the food industry, for example - simply aren’t available at the moment, which means many people can’t afford to go back to school.

Fewer alternatives

Due to global travel restrictions and lockdowns, the most popular alternatives to joining the workforce - like travelling - are no longer an option. This is one of the things that has made the COVID-19 crisis so difficult for young graduates.

Travelling across borders is prohibited, unless absolutely necessary, and taking a sabbatical would be a great idea if you were allowed to do anything other than shopping for groceries. Let’s face it: graduates are running low on options, which leads us to the final question...

What to do?

Whenever possible, during a crisis, it is good to learn from the past. In this case, many graduates from the cursed year of 2008 have shown their solidarity with the younger generation, and shared what they have had to learn the hard way. Here are 3 pieces of advice that resonated with Kate:

• Be flexible and open-minded: Everything changes, so it’s important not to fixate on things that don’t work out. Be open to opportunities you may not have planned for, because they could lead to new skills and opportunities you otherwise wouldn’t have considered.
• Don’t focus solely on job-hunting: Try to spend some time learning new things, or brushing up on things you have already learned. Dedicating all of your time to job-hunting will drive you mad, so use all the spare time you have to pick up things you want to apply going forward. Kate considers this “an important time to choose what to do and learn or develop skills you might not have had the time for otherwise”, which is why she started taking language classes while applying for internships.
• Be confident: Kate says that “despite the rejections, it’s important for graduates to remember that they did achieve something important: they got their degree.” Your degree, your skills, and your digital knowledge as part of Gen Z are all assets that will see you through this difficult time.

Finally, remember that there are opportunities out there. Some sectors - like apps for remote work, entertainment, and online and remote learning (EdTech) - have been thriving during the pandemic. As it happens, we’re currently hiring people who want to change education for the better!

Economics being what they are, you can find comfort in the knowledge that the economy will recover, like it did after the Great Recession. And if your predecessors are any indication, you will emerge from this crisis with a story of “resilience, ingenuity, and deep inner reserves in the face of bad odds.”

Best of luck!

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