Post-secondary students are graduating into a recession — here’s what that means for the social impact sector

The International Monetary Fund forecasts that Canadian gross domestic product will fall by over 6 percent this year, which will be the most substantial economic contraction since the Great Depression of 1929-1933 and significantly more severe than the Great Recession of 2007-2009. While no financial crisis is the same, economic recessions disproportionately negatively impact those entering the workforce, in comparison to the general population. 

Leaders from across society — including businesses, non-profits, post-secondary institutions, and governments — need to take action to empower recent graduates to launch their careers successfully, as this will enhance the productivity, skills, and health of our country’s workforce for decades to come. Talent is the number one resource of the social impact sector, and it is the fuel for future social innovations. Young people can bring new perspectives, experiences, and skills, which are crucial to addressing our country’s challenges. Canada cannot afford to have a generation who struggle to launch their careers.

The short-term impacts of recessions on new graduates 

Under normal economic circumstances, finding one’s first job is a complicated process. During an economic downturn, it is substantially more challenging. According to a study from Rutgers University, only 56 percent of Americans who completed a post-secondary program in spring 2010, during the midst of the Great Recession, were employed 9 months after graduation. In comparison, 90 percent of individuals who graduated in the booming economy of 2006 were working within the same period. Unemployment can have significant negative consequences on individuals, with studies showing that job loss often results in physical and mental health problems in the short term.

Not only is it more difficult to find jobs during an economic recession, but once grads secure employment, incomes are lower compared to regular economic times, which then has lasting ripple effects on young people’s overall career earnings. A comprehensive study of Canadian post-secondary students and graduates found that new graduates who begin their careers in recessions earn 9 percent less than students who begin their careers in a booming economy. 

Researchers Arne Kalleberg and Till Von Wachter argue that job quality decreases in recessions and “that a substantial fraction of earnings losses of job losers in recessions arises because of a persistent decline in job quality.” It is not only harder to get a job during a recession, but the available jobs are lower-paying than before a recession starts. 

The long-term effects

The negative effect that graduating into a recession has on wage growth can often last for decades. According to Lisa Kahn of The University of Rochester, “taken as a whole, the results suggest that the labour market consequences of graduating from college in a bad economy are large, negative, and persistent.” Moreover, those who graduate into an economic recession are less likely to be in a management role or hold a skilled position at the age of 30-34, compared to people in the previous age cohort who graduated into a robust economy. 

Furthermore, as recessions often disproportionately harm start-ups, an economic downturn could result in further long-term reductions in entrepreneurial activity, thereby limiting labour productivity and wage growth. As working in a start-up is one of the best ways to prepare to become an entrepreneur, fewer job opportunities at these firms reduces the opportunity for young Canadians to eventually create their own businesses or non-profits. Canada’s leading charities and non-profits — such as Evergreen and Artscape — were once startups. Fostering entrepreneurial skills in young Canadians is essential to laying the foundations for Canada’s future social innovations. 

There are many reasons why those who graduate into an economic recession experience persistent wage and suppressed career growth. For instance, in the first ten years of employment, workers on average experience 70 percent of their lifetime career growth. A study from RBC Economics argues that this happens “because it’s the time when one starts accumulating marketable skills,” and that “persistent unemployment or underemployment can allow specialized skills earned in university to atrophy, increasing potential wage losses.” During an economic downturn, a recent graduate is more likely to take any job to make ends meet, even if it doesn’t necessarily align with their skillsets or long-term career aspirations. 

Graduating into a recession also brings about adverse health effects, not just in the first few months but for decades to follow. According to Hannes Schwandt of Northwestern University, entering the workforce during a recession “is associated with about a 6 percent increase in a cohort’s age-specific mortality rate,” and that “by age 50 one extra death per 10,000 was registered for every percentage-point increase in unemployment at graduation.” Schwandt theorizes that “experiencing a recessionary economy just when one is transitioning from school into the labour force may have psychological or behavioural consequences,” which influence a person “to adopt unhealthy behaviours,” resulting in a higher risk of mortality in middle age. 

The importance of supporting recent graduates

Given the significant and pervasive negative impacts that a generation can experience as a result of graduating into a recession, it’s imperative to take action to support graduating students to begin their careers successfully. While all recent graduates require support, it’s particularly important to aid recent graduates who are the lowest predicted income earners. 

Providing all students with the opportunity to participate in work-integrated learning (WIL) programs before graduation softens the blow of the recession on recent graduates. A recent study by the Higher Education Quality Council of Ontario observed that recent grads who participated in WIL earn 24 percent more than individuals who did not participate when entering the workforce. Initiatives such as the Student Work Placement Program, which support the Venture for Canada Internship Program, provide students with real-world experience and support students’ successful transition into the labour market. Furthermore, the Canada Emergency Student Benefit and Canada Student Service Grant will constructively support youth to transition into the workforce by providing much needed financial support and the opportunity to develop relevant skills further. 

In addition to providing paid work experience, it’s worth offering graduating students enhanced access to career coaching and mentorship programs. Hannes Schwandt argues that “informing recession graduates about the vulnerability of graduating during a recession” may enhance career outcomes. Doing so improves morale by providing graduating students with an understanding that their current challenges are not “a sign of personal failure and better prospects may be waiting.” Moreover, it is worth exploring the development of other training supports that will develop skills, such as adaptability, which will be particularly crucial in a post-COVID-19 world. Finding a job in this economy will be very challenging, and recent graduates will need all the help they can get in order to stand out in a competitive labour market. 

Recessions come and go, but unfortunately, their consequences live on for decades. In comparison with the general population, recent graduates are particularly hard hit by downturns, experiencing long-term reductions in wages, employment, and even mortality. Supporting graduating students to launch their careers successfully will result in a workforce that — years from now — is more highly-skilled, healthy, and productive. Canada cannot leave the Class of 2020 at the wayside: it’s essential for our national future that they have the support to successfully begin their careers.

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