Many economies across the world have been rocked by the coronavirus pandemic. Hundreds to thousands of businesses closed and many industries decided to stop their operations. The US, for instance, is facing the sharpest rise in unemployment in its history. Recent reports show that about 3.3 million American workers have filed for unemployment the previous week, bringing total claims to 9.95 million for the two weeks. More people have filed for unemployment in the past weeks compared to the last 10 months.
According to The Guardian, a British daily newspaper, all 50 states in the US have reported a rise in unemployment claims. The largest claims are reported in Pennsylvania (up by 362,012), followed by Ohio (up by 189,263) and Massachusetts (up by 141,003). William Rodgers, a former chief economist at the US Department of Labor, stated that US unemployment has already reached 17% in just two weeks from only 3.5% in February and that rates for African Americans have soared to 19% from 5.8%.
Experts predict that unemployment in the US will skyrocket to a point higher than that of the peak of the Great Depression: 32%. According to Vox, a liberal-leaning American news and opinion website owned by Vox Media, the highest unemployment during the depths of the Great Recession reached 10%. It soared to 24.9% after a century. The figure will probably be revised sharply upwards next month when more data is available. Rodgers added that it is too early to say how long this will go. “We really are in uncharted waters,” he said.
Impacts on Recent Graduates and Young Workers
Now that the pandemic has massively affected the labor market, it would become a lot more difficult for recent graduates and young workers to find a job. Cheryn Shin, a senior at Wellesley College majoring in English and creative writing, said that she spent the past few months looking for a full-time job to start after graduation. However, her job search has become even harder because of the pandemic.
Research has shown that both new graduates and young workers would be hit hard by the coronavirus recession. According to Fast Company, the world's leading progressive business media brand, young workers attempting to enter or reenter the labor market during a recession will have a harder time finding employment. And even if they were able to find a job, it wouldn’t be good news too. Previous studies found that entering the labor market in a recession leads to large early career losses in earnings and employment.
A recent study has also emphasized that even with a college degree, new entrants to the job market could earn less compared to the graduates who entered the workforce under stable economic conditions. "Labor market effects will be felt acutely by new entrants, as their labor market trajectories will likely be permanently altered by entering in this downturn. We are already seeing the contractions affecting new offers of employment and resulting in rescinded offers, so this situation has made the job market immediately difficult for graduating high school and college seniors,” Notre Dame Assistant Professor of Economics Chloe Gibbs said.
A 2016 study revealed that younger workers, who often have the most to lose in terms of establishing a career, suffer disproportionately during a recession because firms tend to favor experienced workers. They want workers with longer resumes, workers whom they know have been productively employed before instead of younger, inexperienced workers.
"Younger workers are less likely to be hired during recessions and, when they are hired, they tend to find lower-quality jobs and earn lower wages. More-experienced workers see neither of these effects. In fact, the evidence indicates that these more-experienced workers actually crowd young workers out of the labor market during recessions,” Eliza Forsythe, a professor of labor and employment relations and economics at Illinois, said.
According to CNBC, the world leader in business news and real-time financial market coverage, things will also not be favorable for those who managed to land a new job. This is because they will have a difficult time negotiating their salary and benefits because of the current labor market and economy. Brian Buck, CEO of Scotwork North America, a negotiation consulting firm, said that negotiating could be harder for applicants “as companies are working through understanding all the impacts of COVID-19 on their business.” “However, as companies become accustomed to the new normal, it will get easier to have these types of conversations,” he added.
Health and Economic Impacts
New grads and young workers will not do great at finding a job during a recession, and this could heavily impact their health. A recent study published as a working paper in the National Bureau of Economic Research revealed that entering the labor market or starting on a career path for millions of young people during the Great Recession suffered long-term health consequences.
According to Phys.org, an internet news portal that provides the latest news on science, the findings showed that young people who entered the labor market during the deep recession of the early 1980s suffered increased mortality as early as their 30s. The increased mortality rate was driven by diseases, including heart disease, lung cancer and so-called "diseases of despair" such as liver disease and drug overdoses.
"Our study is the first to examine the effect of entering the labor market in a recession on mortality. Our findings demonstrate that temporary disadvantages in the labor market during young adulthood can have substantial impacts on lifetime outcomes, can affect life and death in middle age, and go beyond the transitory initial career effects typically studied,” author Hannes Schwandt, an assistant professor in the School of Education and Social Policy and an economist with the Institute for Policy Research (IPR) at Northwestern, said.
This would also impact our economy. Forsythe said that firms choosing more experienced workers won't be able to find the trained workers they need to help them grow. "What happens is that we have these younger workers who should be developing skills, advancing in their careers. For young workers, it's really important to be able to move between jobs. But during a recession, that just grinds to a halt. Once the economy recovers, the labor market still has these young people who have been, essentially, underinvested in as workers,” she said.