Young workers hit hardest in global downturn. What’s the answer?

It seemed, at first, like a joke.

“It was like, ‘Ha ha, we all lost our jobs because of COVID; we’ll be back in two weeks,’” recalls Gina LoPresti, who lost her restaurant job in March.

Then reality sank in for the recent college graduate. She wasn’t asked to return to the restaurant. She moved back in with her parents in Holland, Pennsylvania. While she still has savings from her job and no student debt, her plans to work and save up before transitioning to the job she really wants – as a teaching assistant or at a nonprofit – have been put on a long and indefinite hold.

“The past month, I haven’t even applied to jobs,” she says, “mostly because a lot of places due to COVID either aren’t hiring at the moment or they’re looking for people that have ... experience that I know I don’t have.”

Juliana Quiñones, a Colombian millennial, left her job in social work on Colombia’s northern coast in December, hoping to find something new in the field of environmental development in Bogotá. Then, in late March, after a surge of coronavirus cases, the entire country shut down. Businesses closed. And youth employment soared to nearly 30%, one of the highest rates among nations that the Organization for Economic Cooperation and Development (OECD) ranks as industrialized. Young women were especially hard hit: More than 1 in 3 are now jobless. 

“Let’s just say it was bad timing,” Ms. Quiñones says of her job search. Today she’s trying to launch an eco-fashion shoe line from her parent’s home.

Around the world, from Colombia to Sweden, China to the United States, high-income nations have seen unemployment rise as they’ve locked down their economies. Joblessness has hit workers age 15 to 24 especially hard. Depending on the country, youth unemployment is running double or even triple the jobless rate for the general population. And the effects may last long after the coronavirus is brought under control. If the pandemic-led recession mimics previous downturns, young workers now looking for their first job could see depressed earnings for as long as a decade and more frequent joblessness over a lifetime. And there are concerns about the mental impact joblessness can have on young people. 

“Each country will be in a slightly different context [but] it seems to be a global situation,” says Ronald McQuaid, professor of work and employment at the University of Stirling in Britain.

Time for tax incentives for hiring the young? 

Will this generation of young workers be any different than the millennials a decade ago, when they started their job search in the teeth of the Great Recession and endured reduced earnings and more unemployment, as a result?

Part of the answer lies with the pandemic itself. If a resurgence causes new lockdowns in nations, the economic damage could last beyond those entering the workforce in 2020 or 2021, says Jesse Rothstein, professor of public policy and economics at the University of California at Berkeley. His research shows that in the U.S., those who start looking for work during a downturn earn 2% less for up to a decade and experience longer bouts of joblessness than those who join the workforce during normal times. Some studies put the damage to incomes higher still.

Even if the past turns out to be prologue, “there will always be exceptions,” says Professor McQuaid. The trend “is a propensity, not a predestination.”

In fact, part of the answer also lies with what governments and private agencies decide to do to alleviate the situation. Most immediately, that involves fiscal stimulus to offset the effects of the downturn, economists say. Longer-term solutions involve everything from job training to tax cuts and even military recruitment. Some job-training directors are also aiming to boost the quality of jobs that organizations are offering youth.

Sweden addressed its high youth unemployment in 2007 with a payroll tax cut for companies that hired workers 26 years old or younger. For the eight years that it ran, the program not only boosted youth employment, its effect doubled near the end of the program and continued even after the tax cut was eliminated, according to one 2019 study.

“Large payroll tax cuts aimed at youth could be a useful policy as we come out of this [COVID-19] crisis that has hit the young particularly hard,” writes Emmanuel Saez, director of the Center for Equitable Growth at the University of California at Berkeley, in an email. “It is possible that a large shock like COVID reverses the gains, and that a new special policy toward the young will be needed to speed the recovery.”

At nearly 29%, Sweden has the fourth-highest youth unemployment rate in the industrialized world, behind Spain, Greece, and Colombia.   

Crisis and response in Colombia

The Colombian government is taking several steps to address the problem. That includes programs to pay school fees for low-income students in an effort to keep them enrolled in the education system, federal contributions to help companies keep formal workers on the payroll, and doubling down on existing efforts, like making it easier for citizens to apply for entrepreneurial licenses. 

Civil society has stepped up, as well. Futbol Con Corazon (Soccer with Heart), a nongovernmental organization based in Barranquilla, works through soccer to empower disadvantaged youths, age 5 to 17, in communities across the country. One of the central parts of the program is to help them create life plans, envisioning options like higher education or professional careers. This year, the group is launching a new initiative in partnership with Atlético Nacional, one of Colombia’s biggest professional soccer clubs, that will train former participants to become program coaches and mentors.

Masses of unemployed young people cost a nation far beyond jobless subsidies and lost payroll taxes. 

“When a young person can’t be in the education system and can’t find employment, they become easy recruits for illegal activities and groups, or they become victims or victimizers,” says Juan Sebastián Arango, a presidential adviser on Colombian youth, ticking off illegal industries that have long plagued the nation like trafficking and illegal mining. “We have to put youth at the center of these policies.”

One feature of youth unemployment is that it swells every summer as high school and college students graduate. Nowhere is that stress larger than in China, where a record 8.7 million young people completed college and university this year. That’s the equivalent of adding the population of Switzerland to China’s workforce every year.

And this year, it will be especially tough to find jobs for them as the economy slows. Recruiters were seeking 2.5 million fewer graduates in the first quarter of this year, compared with last year. The unemployment rate for young workers peaked at 13.8% in April, with a slight drop in July. That’s double the overall national unemployment rate, which is based on the urban workforce and does not reflect joblessness among China’s rural population, including roughly 300 million migrant workers.

In China, new jobs as soldiers or rural doctors

Government and private-sector initiatives – together with stepped-up army recruitment – are underway to open up opportunities for graduates. For example, China’s state Cabinet in June approved a pilot in 16 provincial areas that will allow Chinese college students majoring in clinical medicine to apply to work as rural doctors without a time-consuming exam process. Easing the requirement will also alleviate a shortage of rural physicians. A similar program will open doors for graduating veterinarians. 

“We must remove such unreasonable barriers to job entry and ... help with the employment of college graduates,” said Chinese Premier Li Keqiang at a June 24 Cabinet meeting, according to the official China Daily newspaper.

Some of China’s large tech and communications companies are launching recruiting drives. The Chinese internet giant Tencent is seeking to hire 5,000 graduates this year, the most in the company’s history, and a 40% increase over last year. 

In Hong Kong, the number of job openings for the territory’s 30,000 new university graduates plummeted more than 40% in the first four months of 2020, compared with the same period last year. Luke Chu, an experienced digital marketing specialist, just completed a master’s degree in Hong Kong. But after sending out dozens of resumes, he is still waiting for an interview. “I’ll try to lower my salary expectations,” Mr. Chu was quoted as saying in China Daily.

“Only supermarkets were hiring”

After two pandemic-related layoffs in Germany, Lena at least still has a job, although for reduced hours and at lower pay. The young bilingual émigré from China, who didn’t want her last name used for privacy reasons, had worked in fashion retail for 40 hours a week in Düsseldorf. Then the pandemic hit. “For two months everybody was closed,” she recalls. “Only supermarkets were hiring.” 

Now she works part time at an H&M store, earning a third of what she used to. Her income, now diminished to 600 euros a month, pays food and rent while she finishes a degree in fashion marketing. She’s already worried about finding solid work after graduation. 

“The fashion industry is lacking a pulse right now,” she says.

Vocational gateways that work in Germany

To combat youth unemployment, Germany decided to focus on propping up the country’s vocational education and training system. Available to all who complete compulsory schooling, this system is historically the most important gateway into the labor market, used by two-thirds of Germans, says Werner Eichhorst, head of research at the IZA Institute of Labor Economics, a nonprofit research group in Bonn. The current generation of teens can use the help.

“They are disproportionately affected, they suffer lasting negative effects,” says Dr. Eichhorst. The program matches young people into temporary jobs at participating companies, overlaid with vocational training, in an arrangement that typically leads to permanent employment after three years.

During the pandemic, realizing that vocational apprenticeships might take a back seat in company priorities, Germany’s federal government has worked to offer one-time bonuses to firms that stepped up training or took over apprenticeships from other, more strapped companies. “And it looks like the market is functioning quite nicely,” says Dr. Eichhorst. “Most [new graduates] should find an opportunity,” he says. “I’m quite optimistic that in Germany, at least, young people will not suffer a lot.” 

Germany’s youth unemployment is holding steady at about 5.6%, the lowest among all industrialized countries except Japan, according to OECD data.

Big gap to fill in the U.S.

The situation in the United States looks more dire, despite some improvement since the spring. Youth unemployment peaked at 26.9% in April and by July had dropped to 18.5%. 

That’s still the highest youth unemployment for a July since the economy was emerging from the Great Recession a decade earlier. And it has received little attention from the federal government. 

“It’s a really serious issue. But there has not been any policy – period – to assist new job entrants,” says Susan Houseman, vice president and director of research at the Upjohn Institute for Employment Research, a nonprofit research organization in Kalamazoo, Michigan. 

Private groups are doing what they can, but the economic squeeze has slashed the number of jobs they can offer. Newly minted college graduate Matthew McLeod-Warrick planned to teach English abroad, but as the pandemic made its way around the globe, the programs offering him a position began canceling.

“I was really disappointed,” says Mr. McLeod-Warrick, who moved back in with his dad in Lynn, Massachusetts. “There are certain jobs that are hiring that I know I could get into, so I know I might not be unemployed for that long. [But] I want to be doing something ... that’s going to help me in terms of my long-term goals. And that might not happen.”

Last summer, the YMCA of Greater Boston employed 725 teens; this summer, it’s closer to 425. But there’s a silver lining, says President and CEO James Morton. “There’s more emphasis today to making sure that young people get meaningful experience and not just busywork.” 

The YMCA, which has dramatically ramped up its nutrition programs this year because of the downturn, has put its teen employees in charge of packing and distributing the food. “Young people are bagging groceries that they know will feed a family in the community,” Mr. Morton says.

The positive experiences are important, as some research has made a link between heightened youth unemployment and diminishing self-confidence and negative social behaviors. 

“You kind of just want to give up,” says Ms. LoPresti, the unemployed restaurant worker in Pennsylvania. “But getting out of that funk is really important, because while it’s horrible right now, the pandemic isn’t going to be forever.”

Reporting for this article was done by Laurent Belsie and Jules Struck in the Boston metro area, Ann Scott Tyson in Seattle, Whitney Eulich in Mexico City, and Lenora Chu in Berlin. 

Editor’s note: As a public service, we have removed our paywall for all pandemic-related stories.