The recession officially ended nearly two and a half years ago, in June 2009, but for the generation of young adults who’ve been trying to take their first steps into adulthood, its effects could shape the future for decades to come.
Why is this recession different from other sharp downturns? The standard economic indicators fail to tell the whole story. Yes, unemployment rates for young people remain at the record-high levels they hit at the Great Recession’s peak in 2007, but this is typical for young workers, who tend to be the last group that recovers after a recession—and tend to feel its effects far after the economy has rebounded. The young baby boomers who bore the brunt of the 1981-1982 recession had lower earnings even 15 years after the economy recovered, and during that downturn, the economy only lost half as many jobs as during the Great Recession. For youth entering the workforce today, not only has the sour economy delayed their careers; they are entering a workforce that offers historically low wages and, unlike their parents, they're coming in with massive amounts of student-loan debt.
Dēmos, the think tank for which I work, together with Young Invincible, a policy and advocacy group focusing on young people, recently released "The State of Young America," a report that shows just how hard young people have been hit (editor’s note: Dēmos is the Prospect's publishing partner). A poll we commissioned of young people ages 18 to 34 shows that 32 percent of employed college graduates—and a shocking 53 percent of young workers with only a high school diploma—are working jobs that do not advance their careers. Given that the Federal Reserve, in its most recent projection, predicts unemployment will remain at about 8 percent until the end of 2013, and 7 percent until the end of 2014, that means many young workers will not get their first career-track job for another two or three years. As with the youth of the 1980-1981 recession, the late career start will in turn lead to lower lifetime wages. Combine a dead-end job with a pile of student loans, and you can see just how much this might affect the country’s future middle class. Twenty-five percent of young college grads have more than $25,000 in student-loan debt; 46 percent have more than $10,000. That's many times what their parents borrowed. In 1997, the sum of all outstanding student-loan debt, public and private, in the U.S. totaled just $92 billion. Today, that total is $920 billion and climbing, a 900 percent increase. Millennials’ soaring debt burden is largely due to crushing college tuition rates that have risen far faster than inflation. In 1968, when the first boomers entered college, a student could have paid for tuition and fees at a public university by working just 6.2 hours a week at minimum wage; today, they’d have to work full-time just to cover tuition costs.
Rising debt, un- and underemployment, and dim job prospects have forced many millennials to postpone the key decisions that historically marked entry into adulthood. Nearly half of the 25- to 34-year-olds surveyed said they’ve put off purchasing a home; 29 percent say they’ve delayed starting a family; and 26 percent still live with their parents. These decisions have long-lasting effects. Someone who is forced to delay purchasing a home until their 30s will likely not have that house paid off by the time they retire in their late 60s. Those who have to put off starting a family will still be paying for kid-related expenses until their late 50s or early 60s (or later, if their own children are unemployed and living with them in their 20s). Millennials’ parents, the baby boomers, were able to buy their first homes and start their careers and families in their late teens and early 20s, right out of high school or college, with little or no debt. They had jobs with good benefits and often had traditional pensions, which made saving for retirement easier. The jobs millennials are taking today don't typically come with a traditional pension, forcing them to shoulder nearly the entire burden of saving for retirement themselves.
The lower wages, skimpy benefits, debt burdens, and persistent unemployment that young workers face today are not simply the result of random economic fluctuations or forces beyond our control: They're the direct consequence of decades of bad government policy and inaction. The assault on collective-bargaining rights, the loosening of corporate oversight, the deregulation of the financial sector, and the repeated reductions in taxes—particularly for corporations—have all combined to create a bleak economic landscape.
But there are many ways policymakers could help millennials start their lives with a greater chance of economic security and prosperity. Increasing the minimum wage, for instance, would raise the wage floor and help combat a decades-long slump. Expanding access to subsidized child care, too, which would reduce the burden of child-care costs on parents with young children, giving them more flexibility to pursue career-track jobs. Policymakers could also create an alternative to the failed 401k plans, giving young people a low-cost, safe place to save for retirement. These are just some of the many policies that could help young people, but policymakers need to take action right now to prevent a lost generation of youth whose parents simply did not pay forward the social benefits they inherited.