New research from the Institute for Fiscal Studies: Are the kids alright?

New research from the Institute for Fiscal Studies explores how the cohorts of young people who entered the labour market during the pandemic have fared up to now. 

The research finds no evidence of persistent negative effects on employment rates or job quality for cohorts that graduated during or just before the pandemic, compared with earlier cohorts. However, the report does acknowledge that this may be because the worst impacts of the COVID-19 are yet to materialise. The report also warns of a potential ‘double whammy’ for young people who are entering the workforce in the next two years, having experienced the disruption to their education throughout the pandemic and are now entering a labour market during a time of economic uncertainty. 

Key findings 

1. Evidence from previous recessions tells us that young people who enter the labour market during downturns tend to experience worse career outcomes that take several years to recover from. In 2020–21, the total number of hours worked by those aged 16–24 dropped by a fifth year-on-year. The loss in working experience and the reduced ability to move up the career ladder during the pandemic, coupled with shocks to mental health, could be expected to leave long-lasting scars on recent graduates. 
2. The cohort that graduated in 2020, particularly individuals with university degrees, initially saw worse outcomes on some measures. They struggled to find work three to six months after graduation, were less likely to receive on-the-job training in their first year, and those with degrees started in lower-paid occupations than previous cohorts. 
3. However, the employment rates of the 2020 cohort had fully recovered nine to twelve months after graduation, and one to two years after graduation there were no obvious differences from the previous cohort across a number of job quality measures. It appears that the rapid economic recovery and the boom in new job vacancies since 2021 allowed new entrants to quickly recover lost ground. 
4. Apart from the 2020 cohort, other cohorts who entered the labour market during or just before the pandemic did not see slower occupational progression or have worse job quality, with one exception: those from disadvantaged backgrounds were more likely to be in the same job that they held at school or university. However, there is, as yet, no indication that this has affected other measures of their job quality. 
5. It may be that some negative effects of the COVID-19 pandemic are yet to materialise. Gaps between the COVID-19 cohorts and earlier cohorts may emerge as the labour market becomes less tight, as the loss of experience and training they experienced puts them at a disadvantage. Working from home may have affected the quality of on-the-job training and learning, effects that are unlikely to be captured by short-term measures of job quality. 
6. Perhaps more concerning are the prospects for the next two cohorts of graduates. They will have suffered an incredibly unfortunate double whammy, with disruption during a key phrase of their education due to the pandemic, followed by an economy in recession upon entry into the jobs market. Despite these challenges, strained public finances mean that government support is likely to be sparse.