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Pandemic’s tough job market could hurt new graduates for life, says report

With Friday’s jobs data expected to indicate a pandemic employment shortage extending into a second year, new research shows that a protracted dearth of work will create lifelong pain for many of its victims. Not only that, the report suggests it will have a wider social impact.

The adverse effect of recessions on the careers of new graduates and on their lifetime earnings has been well documented, including by Statistics Canada.

But a recent report published by the International Monetary Fund, titled The Long Shadow of an Unlucky Start, insists that failure to launch can lead to even worse outcomes, including increased criminal behaviour, an unhappy family life, depression and early death.

The impact of COVID-19 on the workforce is expected to have a lingering effect on the economy long after the virus has been conquered. And it has led to calls for strategies to mitigate the damage.

On the bright side, Doris Chu, a senior economist at the Conference Board of Canada, is optimistic about the recovery of the Canadian job market. The board foresees a strong economic resurgence leading to an unemployment rate of six per cent by the end of 2021.

Miraculous recovery halted

But what had seemed like a miraculous recovery in employment, after jobs crashed by nearly three million in March and April last year has hit a new snag. A consensus of 14 leading economists polled by Bloomberg indicates the second wave of the pandemic will lead to a loss of about 66,000 Canadian jobs in January.

“We’re still heavy into the recession,” Chu said, “so it’s going to be a slower road to recovery, up until we have a vaccine pretty much widely distributed to Canadians.”

The number of jobs for new entrants to the employment market varies with skills, with the advantage going to software and other hard skills as businesses push to expand remote services, Chu said. Other workers where demand remains strong include lab technicians, medical professionals and teachers.

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Health-care workers, at Toronto’s Pearson International Airport on Monday as they prepare to test arriving passengers for COVID-19, are among those professions still in demand. But a long recession means many graduating students have poorer chances of finding the job they want. (Carlos Osorio/Reuters)

But for careers hit hard by the pandemic — such as in the arts, physical retail and travel, to name just a few — demand for workers has plummeted. For all other jobs not at those two extremes, the deepest recession in decades means companies have rolled back new hires.

“It’s a fact: Recessions hit young people and others with less-developed skillsets especially hard,” said a 2019 report by RBC looking back at the impact of the previous recession. “Persistent unemployment or underemployment can allow specialized skills earned in university to atrophy, increasing potential wage losses.”

In the current recession, those who failed to find a good job during nearly two years of reduced hiring will find themselves going head to head with fresher graduates once the market opens up again.

The Royal Bank report looked at career progress and at earning potential, which declined by about five per cent during the first 10 years of those entering the workforce during an employment recession. But the IMF’s detailed analysis goes much further, suggesting that the negative effects of failing to launch a career can be dire and last a lifetime.

Worse wages, more deaths

“We find that the negative earnings effects from entering the labour market [during a recession] never fully disappear,” said the report’s authors, based on analysis of research following the 2008 Great Recession. “Even more dramatically, we find that mortality rates of recession entrants start to rise in their early 40s compared with those in luckier groups.”

This list of gloomy findings is long and dispiriting. As well as shorter lifespans, recession entrants had lower self-esteem, committed more crimes and tended to distrust governments — a possible clue to a growing insurrectionist mood in the United States and elsewhere.

Poverty rates are higher in the group, and those who pair up tend to do so with a partner in a similar financial situation. Family incomes and likelihood of owning a home are reduced.

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Montreal police dismantle a homeless camp in December. Workers with the lowest skills are most affected by the downturn in the economy and are more likely to end up in poverty. (Christinne Muschi/Reuters)

Extrapolating from the previous recession, the IMF report shows a one percentage-point decline in lifetime income for every one per cent increase in the unemployment rate on entering the workforce.

The conclusion is that the deep employment recession of 2020 means that by the time they are 40, recession entrants will be earning seven per cent less at the same stage than those who entered the workforce in 2019.

According to Katherine Scott, a senior researcher with the Canadian Centre for Policy Alternatives, when economists focus on the challenges for skilled youth entering the workforce, more disadvantaged new entrants frequently remain off the radar.

“There are particular groups — whether it is Indigenous young people, people with disabilities, youth aging out of care — that are hugely at risk and have been really neglected in the context of the pandemic,” Scott said.

The authors of the IMF report, which was released in December, found that people with lower skill levels trying to enter the workforce do even worse than the better educated — a lifetime decline in wages more like 15 per cent for high school dropouts — and have more trouble catching up.

That is why one of their solutions is to encourage young people to increase their skill levels, which might also delay graduation until the job climate improves. Other suggestions include help with job searches, government temporary job creation and employment incentives — all ideas supported by Scott.

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Katherine Scott, a senior researcher with the Canadian Centre for Policy Alternatives, says when economists focus on the challenges for skilled youth entering the workforce, more disadvantaged new entrants frequently remain off the radar. (Jennifer La Grassa/CBC)

For those compelled to enter the workforce now, the research is merely statistical, not an inevitability. Better skilled people can catch up by changing jobs after the market improves and by recognizing the reason for the disadvantages they will face.

“Knowing that their challenges probably don’t reflect a lack of skills or personal failure can motivate those in less productive jobs to keep seeking opportunities and move to better jobs as the economy recovers,” said the report’s authors.

Follow Don Pittis on Twitter: @don_pittis

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