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Millennial wages will be weighed down for 15 years by the last two recessions

2021-03-30T14:16:36.894Z

The Great Recession and covid-19 will cause the salary of those who enter the labor market to fall, even if the economy recovers



Students from the University of Santiago de Compostela, on March 24. Óscar Corral / EL PAÍS

Entering the labor market in the midst of a crisis drastically reduces the chances of finding a job, as well as the salary received;

and in less than a decade there have been two.

The Great Recession of 2008-2012 and the crisis resulting from the pandemic have left an impassable labor market for those under 30 years of age, much more exposed due to their short work experience and the high rate of temporary contracts in this age group.

“It is expected that this crisis will leave scars, especially for the millennial generation, since

this is the second very deep recession that affects them before they turn 30 ″, explains Marcel Jensen, Fedea researcher and co-author of the report

Lost in the recession: employment and income of young people in Spain

, presented this Monday.

"To what extent does this affect the rest of your career?" Asks the also professor at the Autonomous University.

The study concludes that those who start working for the first time in the middle of a crisis will see their salary reduced during the first 15 years of their career.

According to their estimates, a worker who entered the labor market at the end of the Great Recession in 2013 would have a daily wage 7.2% lower than a similar worker entering 2007.

  • The millennial generation, the one that loses the most income with the pandemic

But not only them, but possibly also those who come after.

"What surprised us from the study of previous crises is that young people who enter later, when economies are recovering, do so in worse conditions than before the crisis," summarized the expert.

"We cannot forget that young people were still in a very delicate situation before the 2020 crisis, with unemployment rates practically double those of 2008," he added.

This entry into the labor market in the middle of a crisis is the so-called "scar effect of recessions", which, although it has not been the subject of study in the Fedea report, the document anticipates that it could be due to "the introduction of labor reforms during recessions that make hiring more flexible ”.

"The 2012 labor reform included reforms to reduce duality, but youth employment was also precarious," said Jensen.

This scar effect is clear in the labor ecosystem in Spain.

In 2019, the median real monthly salary of young people between 18 and 35 years old was lower than in 1980, with falls ranging from 26% for those between 30 and 34 years old to 50% for those between 18 and 20 years.

According to Fedea, these falls are mainly due to a “very marked” reduction in the duration of their jobs and an increase in the weight of part-time employment.

The joint impact supposes falls of the average of the days of work equivalent to full time from 73% to 22%.

In Spain, this situation is much more serious than in the European Union, as the Fedea financial studies foundation explains, which sums up the employment situation of young Spaniards as follows: “They suffer on all fronts: they have very low employment rates, very high temporality with a huge job rotation, and low salaries ”.

Between 1983 and 2019, unemployment among Spaniards between 20 and 24 years old stood at 32.7% and 22.3% for those between 25 and 29 years old.

In parallel, in the EU the average was 17.8% and 11.5%, respectively.

These differences were extremely accentuated in periods of crisis, with a peak of unemployment for Spaniards between 20 and 24 years of age that exceeded 50% in 2013, while in the Union this peak did not reach 25%.

The report - prepared by Samuel Bentolila, Florentino Felgueroso, Marcel Jansen and Juan F. Jimeno - understands that these differences lie in the high number of “involuntary” temporary contracts that young Spaniards have compared to those of European partners.

“When a recession hits, the first contracts to be terminated are temporary ones,” Jansen explains on the phone.

Researchers also add educational imbalances as another problem to be solved to correct labor difficulties.

While the school dropout rate fell 45 points in the last four decades, the proportion of university graduates has quintupled for women and tripled for men.

"This further reduced the employment rates of younger workers", which has caused that "most of those who enter the labor market have no previous experience in it", specifies the expert from the Autonomous Community.

Finally, to the critical Spanish labor ecosystem, it is added that both the Great Recession and the Covid-19 crisis hit two key sectors for those under 30 years of age. The study recalls that the real estate bubble stoned the construction sector, "where many young people who had dropped out of school worked"; while services, where young people were "overrepresented", has been the sector that has suffered the most from the pandemic. "The Spanish labor system favors sectors such as hospitality and construction using temporary contracts," says Jansen.


Source: elparis

All business articles on 2021-03-30

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