Not a Lost Generation, but a 'Disappointed' One: The Job Market's Impact on Millennials.
October 27, 2010.
They are one of the biggest generations in American history, and they are certainly the best educated. But for Generation Y -- a group of young people of about 70 million between the ages of 15 and 30 -- the future doesn’t seem bright.
With a national unemployment rate of 9.6%, many of them cannot find jobs. Some have had to move back home with their parents; others are forced to work with low-level jobs that is not enough to pay back the loans they took out for college.
The bad news for Generation Y, also known as the Millennial Generation, does not stop there: Numerous studies indicate that entering the job market during a recession has both immediate and long-term negative impacts. "We have seen from previous recessions that groups who enter the workforce during a downturn pay a persistent penalty in terms of wages and benefits," notes Bidwell. "It takes them longer to get into the workforce so they are not acquiring the skills they need. In addition, they are more apt to take a lower level job or an unpaid internship. And once the economy improves and they land a better job, it takes these workers longer to climb the ladder because they have to learn skills they should have been developing immediately out of college. In the meantime, they are at risk of being leapfrogged by new graduates."
The great fear of economists who study employment has to do with workers who are forced out of the labor market during a recession and never return. But with this particular generation, a more apt concern might be for those who never have the opportunity to enter it in the first place, Bidwell suggests. "If you don't get a decent job in your first five years in the workforce, do you ever? You don't develop the stable work habits or the self-esteem to move up the corporate ladder," he says. "It's a horrendous waste of human capital."
Several recent studies indicate that entering the job market during a recession has a long-lasting, negative effect on wages. One study, by Lisa Kahn, an economics professor at the Yale School of Management, found that for each percentage point rise in the unemployment rate, those who graduated during the recession earned 6% to 8% less in their first year of employment compared to people who graduated during a better economy.
The earnings gap that these recession-era graduates contend with will not have much of an overall impact on the U.S. economy. Economists say that one group amid a very big population does not have the power to greatly effect consumption levels. But, they say, the discrepancy will have significant implications for how these individuals carry out their adult lives. The Millennials will lack the spending power of more fortunate boom-time graduates, which means that many of their life milestones, such as buying a first house, getting married or even starting a family, will be delayed.
"Everything gets pushed back," Allen notes. "It's a problem that's not well appreciated. People's careers are being damaged. People who are in their 20s and 30s are not being promoted, they are not getting raises and they are not getting opportunities [to progress in their careers] because the people above them are not moving. They can't leave their jobs because they probably won't be able to find work elsewhere. So they're stuck. This is a serious issue: It's setting people back a few years and they never really recover."
Millennials are a generation that "expected the world would be the way it has been for the past 20 years," Allen adds. "They had expectations that they would find jobs and make lots of money. This will be a disappointed generation, but young people entering the labor market during good times tend to believe that all jobs come easy, and they count on big paychecks. Graduating into a bad economy is a more sobering experience, he says. "We saw that people who graduated during the boom of the late 1990s -- who had their pick of jobs, and were getting big signing bonuses and buying BMWs -- had a hard time adjusting to the downturn," he notes. "There is something quite important about entering a labor market in a downturn.... It shapes your worldview. It makes you more modest and more realistic."