Coming of age during a downturn can cause scarring – and it takes up to a decade to heal

Published on Intergenerational Commission

Recessions are bad for people’s standard of living. And they’re particularly bad for young people. That’s the painful lesson we learnt after the 1980s recession where, for most of that decade, at least one in seven people under 30 were unemployed.

We know a lot about the unemployment scarring of the 1980s – from the rich academic literature, to UB40 or Shane Meadows’ This is England. But we’re only now beginning to learn what kind of long-term impacts the last big recession has had on young people.

While there’s never a good time to experience a recession, it’s particularly unlucky to come of age during one. What that bad luck means in terms of how much you earn, or what job you do, is something the Resolution Foundation has explored by looking at the ‘crisis cohort’ who left school, college or university between 2008 and 2011.

First, the good news. Although the recent downturn was far bigger than the 80s and early 90s recessions, it didn’t spur the big spike in youth unemployment that many feared. The recovery was quick, and Britain returned to record employment by early 2015. Instead, the pain of the recession was shared across more young people, through a deep pay squeeze. Now the biggest pay squeeze since the Napoleonic Wars isn’t pretty. But spreading the pain of a recession through everyone’s pay packets is certainly much fairer than concentrating the pain on those joining the dole queues, as occurred in the 1980s.

Britain didn’t entirely steer clear of youth unemployment in the last downturn though. Those who left education between 2008 and 2011 with only GCSE qualifications were 20 per cent less likely to find work than those who left school in the years before or after the crisis. What’s more, this unemployment scarring has stayed with them for nearly a decade.

Young people who left university between 2008 and 2011 were able to find work on the whole. But for many it was not the kind of work they were hoping for. Graduating amidst the crisis meant a 30 per cent higher risk of working in low-paying jobs, compared to their pre- or post-crisis peers. The higher risk of low-paid work stayed with them for a full seven years.

The greater likelihood of ending up in a low-paid occupation meant that ‘crisis cohort’ graduates experienced a 6 per cent bigger pay squeeze compared to those who graduated in the years before or after them. And it has had longer term consequences for their careers too. It’s hard to make the leap from a lower-paying occupation to a higher paying one – each year just four per cent of young people who switch jobs manage to do so.

Many of those who entered the world of work in the midst of the recession are still feeling the scarring effects through lower pay today. This matters as they are now hitting their 30s and facing big financial decisions about buying a home or raising children.

But as well as lamenting – and supporting – the crisis cohort today, we should also think ahead to the next generation of young people who could find themselves leaving education amidst a downturn. Take one example. Just because we avoided high levels of unemployment in the last recession, it doesn’t mean the issue won’t return during the next one. If it does we’ll need to rethink how Universal Credit is implemented at a time when many more people will coming into Jobcentres to find work.

But even if high youth unemployment really is a thing of the past, we still need to get a grip on the problems of low-pay scarring, and getting more young people to move jobs, more frequently, and into higher paying roles. Since the 1970s, recessions have come around roughly once a decade. The last one ended 9.7 years ago. Time to start planning.

This article originally appeared in The Times Red Box