After Lehman

Graduating into The Lost Generation

Sabri Ben-Achour Sep 11, 2013
After Lehman

Graduating into The Lost Generation

Sabri Ben-Achour Sep 11, 2013

If you graduated during the recession, or during the period of high unemployment right after the recession technically ended, your experience probably went something like this:

You graduated. You applied for hundreds of positions, and were lucky to get an interview. If you didn’t move back home with your parents, then you burned through your savings. You ended up in a job that probably wasn’t your ideal one, at a pay that’s probably not ideal either.

You are not alone.

“I don’t think any of us expected when we went into college in 2005 that it would be so difficult,” recalls Danielle Jaffee, who graduated from the University of Maryland in 2009.

But here’s what you need to know: you might have a job now — the unemployment rate for 22-24-year-olds, for example,  is 12 percent — but your struggle is not over.

“On average, young people that enter the labor market when job opportunities are so weak, don’t do well,” says Heidi Schierholz, a labor economist with the Economic Policy Institute. “They as a group will have lower wages and fewer opportunities than they otherwise would have.”

Researchers have followed people who entered the job market during recessions in the ’70s, ’80s, and ’90s.  Because they were searching for work in a bad job market, they started off making between 8 percent and 20 percent less than they would have made during a boom. In part, that’s because that’s all the economy can offer them.

24-year-olds, who graduated during the peak of unemployment, are the slowest to improve

After a year of interning for free in Vietnam, Danielle Jaffee got a job in international development.

“I remember when my then manager was offering me the position and the salary, he prefaced it with ‘this is a little lower than we had in the past but this is what we can offer you at this time.’” she recalls. “ I was just happy I had a job.”

And Jaffee’s employer wasn’t just feeding her a line.

“Wage growth [among recession grads] has been extremely weak in fact it’s been negative,” says Shierholz. “The wages of people with a high school degree, college degree, are lower now by significant amount than they were before the great recession hit.”

Luckily for Danielle Jaffee, she’s been promoted and given raises, but for many of her peers, that little loss they took in starting salary is adding up.

“The negative impact of entering a labor market during a downturn can follow you for one to two decades,” says Shierholz. Not just because people started out making less. There can be indirect results — Abigail Wozniak, an economics professor at Notre Dame, says it maybe that because people settle into jobs they don’t really like, they don’t perform as well and don’t put effort into it. They don’t rise through the ranks as quickly.

Of course, a lot of people start out below their skill level — you know, a paralegal instead of a lawyer. The underemployment rate for young college grads is 18 percent — twice what it was before the recession.

When Alicia Weeks graduated in 2007 from UC Santa Cruz with degrees in political science and fine arts, she expected to be working on a congressional campaign or in a gallery. Instead she took a job she’d had in high school, as a lifeguard. “I knew it was a job I could get and I had to pay rent,” she says.

It was a real letdown. “It’s been pretty hard emotionally you have these ideas coming out of college of what your life is gonna be like and now you’re doing the exact same thing you did before you went to college.”

If this recession is like previous ones, Weeks and many others will eventually work their way up  to the salaries they would be earning if they’d graduated during good times. But the earnings they’ve missed out on in the meantime?

“These are permanent losses,” says Abigail Wozniak, an economics professor at Notre Dame. “This is what makes my undergraduates look really sad.”

Courtesy of the Economic Policy Institute

By “catch up,” she says, “it means they just catch up to where they would have been — it’s not like you make up those 10 years of earning 15 percent less than you would have been earning.”

For some people, that could mean delaying a down payment on a house, or waiting to get married. And for those taking the double hit of a lousy-paying job and a boatload of student loan debt, it could mean years of struggling. The student loan default rate is now around 9 percent, double what it was before the recession.

But back to what you need to know if you ARE a recession grad:  All is not lost.

“Be patient, but also be an active job searcher,” says Till Von Wachter, an economist at UCLA*.

To succeed, you have to do what may seem like the hardest thing to do right now: even if you have a job,  keep looking until you find the right job for you.

Jobs are coming back, they will continue to come back. Young people, especially recession grads, need to remain flexible for as long as possible — be willing to move, be willing to try something different.

“Four or five years into the labor market, people settle down — buy houses, get married, get children,” says Von Wachter. “If they settle too early, they settle with that lower quality job.”

If your current job isn’t offering promotions at a pace that works for you, try different jobs. That’s one tried and tested way to bump up income. Each new employer usually offers a raise to your previous salary.

And, of course, there’s getting more (and practical) education. Alicia Weeks has set a course for grad school — a Master’s in speech pathology. “I think if I had gotten a job off the bat I wouldn’t have been able to find my true calling,” she says. After lifeguarding, babysitting, taking care of developmentally disabled children, she says, “I’m good at it and I know I’m helping kids. I’m finding something I can carry into the long term.”

Lehman’s Legacy: A Timeline Follow the key events before and after the Lehman Brothers collapse, and see how the financial crisis unfolded. Follow the timeline

CORRECTION:The original version of this story misidentified UCLA economist Till Von Wachter. The text has been corrected.

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