The New York Times’ recent op-ed, We’re Making Life Too Hard for Millennials, highlighted how “[t]he most educated generation in history is on track to becoming less prosperous, at least financially, than its predecessors,” in large part due to the lasting impacts of the 2008 financial crash. As Steve Rattner writes, “[t]hose who graduate in weaker economic times typically earn less than those who enter the work force during more robust periods. Starting behind often means never catching up.”
As Better Markets’ Cost of the Crisis report outlines, the impacts of the 2008 financial crisis – the worst collapse since the stock market crash of 1929 that caused the worst economy since the Great Depression of the 1930s –were felt by tens of millions of Americans from coast to coast. Those entering the job markets after the 2008 financial crash were among the most deeply impacted.
Two years after the crash, in 2010, nearly one in five 16- to 24-year-olds were without a job, the highest unemployment figure in this group since the Census Bureau began reporting numbers in 1947. As they struggled to get a foothold in the job market, some decided to continue their education in an attempt to improve their prospects. Unfortunately, many went to for-profit colleges where the costs were very high and the degrees were often of little value. The average tuition at a for-profit educational institution is about six times higher than a community college and twice as high as a four-year public school. To pay for these staggering costs, 96% of students at for-profit schools take out loans, compared to only 13% of community college students, 48% of public college students, and 57% of nonprofit college students.
As Mr. Rattner points out in his piece, this student loan debt is further dragging down graduates. Today’s younger Americans are taking on more student loan debt than any generation before them, delaying major life milestones such as buying a home and starting a family. This debt is also threatening older generations, who need a large and growing workforce paying into social safety net programs such as Medicare and Social Security.
In a sign of the depth of the 2008 financial crisis, this increased investment in education didn’t necessarily provide the desired return. While those young Americans with a higher level of education experienced greater employment prospects post-2007 than their counterparts without a college degree, unemployment rates rose across the board and the unemployment rate for 16- to 24-year-olds with a bachelor’s degree more than doubled from 2007 to 2010:
Those that are employed are frequently working in positions well below their level of education. In the 2009-2011 period immediately following the crisis, over half—56%—of 22-year-olds who just graduated ended up in jobs that did not require a degree, categorizing them as “underemployed.”
Mr. Rattner gets it right in his column when he writes that “starting behind often means never catching up,” since it’s been proven that graduating in a poor economy can have a long-lasting effect on a person’s career. In one study, Lisa B. Kahn of the Yale School of Management found that people who graduated during the recession in the early 1980s earned between 6% to 7% less in their first year of employment, and 2.5% less 15 years later, compared to their peers who graduated in better economic times. Given that the Great Recession following the 2008 financial crash was so much more severe than the recession of the early 1980s, these numbers will certainly be significantly worse for those graduating in 2008 and after. This decrease in earnings, both early and late, will delay everything from starting a family to buying a home to saving for retirement.
Although tens of millions of Americans have felt the damaging impacts of the crisis, by simply coming of working age in the years following the 2008 financial crash, millions of young people have had to pay an especially high price. This lost generation faces an uncertain future and the resulting fallout will negatively impact them, their families and the entire U.S. economy for decades to come. To read more, download the Cost of the Crisis.
