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Below is a complimentary Demography Unplugged research note written by Hedgeye Demography analyst Neil Howe. Click here to learn more and subscribe.

The Misfortune Of The 2020 Class | More Crucible Than A Curse  - 6 1 2020 2 16 02 PM

As the class of 2020 graduates into a pandemic, they’re being forced to reckon with the possibility they may never catch up with those who enter the job market in better times. A large body of research indicates that those who begin their careers during economic downturns experience long-lasting negative effects on their pay, confidence, and even their health. (The New York Times)

NH: Before COVID-19 struck, the class of 2020 was poised to graduate into the strongest job market in 50 years.

Now they’re facing record-high levels of unemployment and the worst economic conditions since the Great Depression.

This is more than just temporary misfortune. The effects are going to haunt this cohort for years. Research shows that those who begin their working lives during an economic downturn are at a lasting disadvantage.

It drags down their wages, limits their employment prospects, and affects their health and happiness long after the crisis is over.

Why? There’s a snowball effect. (Economists call this "hysteresis.") Recession graduates have fewer opportunities and are more likely to start in jobs that are a worse fit. While they’re struggling, they’re vulnerable to adopting unhealthy behaviors like drinking too much or eating poorly.

When the economy recovers and they try to catch up, they have to compete for jobs against older people with a lot more seniority--or against younger people who cost less. And that’s made harder by the fact that their experiences tend to make them more risk-averse. 

Even recession graduates who later become CEOs are more likely to run smaller, less prestigious companies and have more conservative management styles than those who graduated in prosperous times.

Some scholars have suggested that the gap in earnings closes after a decade. But others argue that the negative effects last far longer. One study published last year, which followed college graduates who entered the labor market after the 2008 financial crisis, found that by 2018 those who had begun working in 2010 and 2011 had a lower employment rate than people at the same age who graduated before the recession hit.

What’s more, those who were working earned less. The author, Jesse Rothstein, contends that the slow speed at which this cohort’s employment rates have recovered suggests that they will continue to feel the effects for “decades to come.”

Another recent study focused on Americans who entered the labor market during the early 1980s recession--that is, late-wave Boomers and early-wave Xers. The researchers followed the trajectory of college graduates as well as high school graduates and dropouts through midlife.

Not only did all of these groups earn less in midlife than those born just before and after, but they were also less likely to be married, more likely to be divorced, and less likely to have children.

In addition, they had increases in mortality that began in their 30s and further worsened through age 50, which were driven by heart disease, lung cancer, liver failure, and drug overdoses--Case and Eaton’s “deaths of despair.”

These researchers found that while the initial gap in earnings did fade over 10 to 15 years, it reopened when people reached their late 30s and stayed negative until age 50.

Not all downturns, of course, are created equal. The life-cycle scarring that results depends heavily on the nature and severity of the downturn--and right now, the trajectory of the pandemic and the economy remains uncertain.

It also depends on the type of generation getting scarred. Young-adult Silent hit by recession in the 1950s tried to avoid risk by playing even more by the rules than they already were. Young Gen-Xers, on the other hand, were more likely to respond to adversity by striking out on their own.

Those being hit today are the students graduating from high school and college in 2020 (mostly late-wave Millennials, born between 1998 and 2002). It’s also delivering a double whammy for those who graduated during the Great Recession (early-wave Millennials born between 1986 and 1990): They were just beginning to feel stable only to be knocked back again a decade later.

In the coming years, we’ll see the cumulative effects of these experiences play out not only in their jobs, their families, and in their health.

They’ll help shape these young people’s civic personalities and who they vote for. They may emerge more resourceful, less narcissistic, and (surprise!) more grateful for the jobs they have. The Greatest Generation, after all, was the product of the Great Depression.

Starting one’s career during a recession isn’t so much a curse as it is a crucible, one that sends those who experience it down a different track from their peers with better timing.

*  *  *


Neil Howe is a renowned authority on generations and social change in America. An acclaimed bestselling author and speaker, he is the nation's leading thinker on today's generations—who they are, what motivates them, and how they will shape America's future.

A historian, economist, and demographer, Howe is also a recognized authority on global aging, long-term fiscal policy, and migration. He is a senior associate to the Center for Strategic and International Studies (CSIS) in Washington, D.C., where he helps direct the CSIS Global Aging Initiative.

Howe has written over a dozen books on generations, demographic change, and fiscal policy, many of them with William Strauss. Howe and Strauss' first book, Generations is a history of America told as a sequence of generational biographies. Vice President Al Gore called it "the most stimulating book on American history that I have ever read" and sent a copy to every member of Congress. Newt Gingrich called it "an intellectual tour de force." Of their book, The Fourth Turning, The Boston Globe wrote, "If Howe and Strauss are right, they will take their place among the great American prophets."

Howe and Strauss originally coined the term "Millennial Generation" in 1991, and wrote the pioneering book on this generation, Millennials Rising. His work has been featured frequently in the media, including USA Today, CNN, the New York Times, and CBS' 60 Minutes.

Previously, with Peter G. Peterson, Howe co-authored On Borrowed Time, a pioneering call for budgetary reform and The Graying of the Great Powers with Richard Jackson.

Howe received his B.A. at U.C. Berkeley and later earned graduate degrees in economics and history from Yale University.