Studies of previous recessions show that joining the labour market in an economic downturn can have long-lasting negative effects on employment and earnings. Early evidence suggests that this may not be the case for young people in the UK who left full-time education during the pandemic.
The Covid-19 pandemic led to a sharp fall in employment and hours worked in the UK, especially for young people. During the 2020/21 financial year, those aged 16-24 worked over one billion fewer hours compared with 2019/20, a decline of more than one-fifth. In comparison, the number of hours worked by older adults aged 25-64 dropped by ‘only’ 7% over this period.
Despite this large disruption, it does not seem that those who left education during the pandemic have been adversely affected so far. For those leaving in the summers of 2020 and 2021, employment rates a year after graduating from school or university were virtually the same as for those who finished education before the pandemic.
There were also no obvious differences in job quality across a number of measures, suggesting that the lack of effect was not driven by young people accepting lower-quality jobs. It appears that the rapid economic recovery and the boom in new job vacancies since 2021 have protected new labour market entrants from the persistent negative effects seen in previous recessions.
What happened to young people’s labour market activity during the pandemic?
The onset of the pandemic effectively shut down a large number of sectors of the economy. Workers under 25 were more than twice as likely to work in affected industries, such as retail and hospitality (Joyce and Xu, 2020).
Many firms also paused hiring in response to uncertainty generated by the pandemic, limiting opportunities for young people either to join the labour force or to progress to better jobs (Costa Dias et al, 2020). As a result, the effects of the pandemic on labour market activity were much more pronounced for young people than for older adults.
Figure 1 shows the changes in different forms of worklessness, ranging from being economically inactive (not seeking a job) to being employed but not working any hours. Prevalence of the latter rose especially during the pandemic due to the government’s job furlough scheme, which (initially) paid 80% of workers’ wages to encourage employers to retain staff. Between the fourth quarter of 2019 and the second quarter of 2020, the share of young people either unemployed or inactive rose by three percentage points (from 45% to 48%), while the share employed but working zero hours rose by 13 percentage points (from 5% to 18%). Further lockdowns also had outsized effects on young people, so that across the 2020/21 financial year, 16-24 year olds worked almost one billion fewer hours than in 2019/20.
Figure 1: Changes in worklessness over the pandemic, by age group
Source: Ray-Chaudhuri and Xu, 2023
Note: The figure shows three-month forward-looking averages (for example, Jan 2020 refers to the quarter January to March 2020).
These statistics include a collapse in the provision of apprenticeships, with just 40% of the apprenticeships that were operating when the pandemic first hit continuing as normal (Doherty and Cullinane, 2020).
In the first four months of lockdown, the number of people starting new apprenticeships fell by 45% year-on-year (House of Commons Library, 2021). Apprenticeships are an important route to well-paid jobs for young people with lower academic qualifications, so this disruption could be expected to harm those from disadvantaged backgrounds in particular.
Why might the economic effects of the pandemic be long-lasting?
Studies of previous recessions find that young people who begin their careers during an economic downturn experience persistent negative effects on their employment and earnings, compared with those starting under more favourable conditions (von Wachter, 2020).
This ‘scarring’ effect can happen because a lack of job opportunities forces young people to take or remain in jobs that are less well-suited to their skills, or slows the development of those skills.
The substantial drop in hours worked following the onset of the pandemic meant a loss of valuable work experience for young people. This could have slowed down their career progression by taking away time that they could have been learning on the job, or engaged in training offered by their employer.
The pandemic also led to large deteriorations in mental health among young people over the first and subsequent lockdowns (Ray-Chaudhuri and Xu, 2023). To the extent that these shocks have long-term repercussions, this could further harm young people’s labour market outcomes, as poor mental health is associated with lower productivity.
On the other hand, the recovery seen in the labour market since the first wave of the pandemic could mitigate potential scarring effects for young people. While recessions are often characterised by a sustained lack of new job opportunities, by the middle of 2021, vacancies in the UK had returned to the levels seen before the pandemic. By the spring of 2022, they had reached record highs of more than 60% above pre-pandemic levels (see Figure 2).
As a result, the share of young workers changing jobs recovered quickly, which may have enabled them to recover some of the experience and skills on which they had missed out, and to find a better labour market match. It is therefore unclear how much scarring we should expect to see, since the unique aspects of the pandemic make it hard to compare with previous recessions.
Figure 2: Total vacancies (in thousands)
Source: Ray-Chaudhuri and Xu, 2023
Note: Single-month estimates.
How did the pandemic affect employment rates of young people leaving full-time education?
Although many companies paused their hiring of new workers during the pandemic, any effect on young people’s employment looks to have been remarkably short-lived.
Figure 3 groups young people by the year in which they left either school or university (labelled ‘graduation year’) and plots the share of each cohort employed at various points since leaving. The final two bars represent cohorts of young people who left education during the pandemic, graduating in the summers of 2020 and 2021 respectively.
Those leaving education in 2020 did struggle to find work initially, with only 58% employed after three to six months, compared with 67% for the 2019 cohort, whose first six months preceded the pandemic. But after just nine to 12 months, this figure was 68%, not dissimilar to the outcome for young people who started working before the pandemic.
Figure 3: Employment rates by graduation cohort
Source: Ray-Chaudhuri and Xu, 2023
Note: Cohort is estimated using individuals’ age and the age at which they completed education. Graduation refers to leaving school or university. Not shown on the chart: the nine to 12 month employment rate for the 2008 cohort was one percentage point lower than the three to six month employment rate.
The individuals who left education in 2021 fared even better, with 67% in employment after three to six months. By nine to 12 months, 74% of young people in this cohort were employed, comfortably surpassing the rate for pre-pandemic graduates.
A shrinking workforce, driven by Brexit and rising inactivity among older workers, is likely to have benefitted young workers as employers looked to them to fill the gaps. Compared with the experience of young people leaving education following the global financial crisis of 2007-09 – when employment rates for recent graduates were depressed for multiple years – the overall impact of the pandemic on young people’s employment has been small.
How did the type of jobs found by young people change?
There is no evidence that young people accepted lower-quality jobs or progressed more slowly than those who graduated before the pandemic. The 2020 and 2021 cohorts did not start out in lower-quality occupations, proxied by the median hourly wage in each occupation before the pandemic. Further, those who graduated in the years just before the pandemic did not see slower occupational progression on this measure either (Ray-Chaudhuri and Xu, 2023).
Figure 4 shows that across a number of other measures (such as the share with a full-time, permanent job), young people who graduated between 2019 and 2021 had similar job quality up to one year after leaving education as those who graduated in 2018, whose first year in the labour market was unaffected by the pandemic.
Across most of these measures, there were no statistically significant differences by parental background, with one exception: there was a large and statistically significant decline in the share of graduates from low socio-economic backgrounds who worked in a different job to the one that they held while they were at school or university. This was not the case for those from high socio-economic backgrounds (Ray-Chaudhuri and Xu, 2023).
This is consistent with social ties being more important for finding jobs at the height of the pandemic. But it does not appear that this difference has led to gaps in any other measures of job quality.
Figure 4: Job quality measures by graduation cohort, up to one year after leaving full-time education
Source: Ray-Chaudhuri and Xu, 2023
Note: An individual is considered to be in a different job if their current tenure is less than the amount of time since graduation (calculated at three-month intervals). Professional jobs include those in major occupation groups one and two. A large firm is defined as one with at least 250 employees.
What might happen to young people in the future?
Based on data that are currently available, the young people who entered the labour market during the pandemic do not seem to have performed less well than those who entered before. This makes sense in the context of the very strong labour market recovery that enabled those leaving education to find good jobs quickly and to catch up on lost work experience as the economy recovered. Studies of other developed countries echo this finding (Forsythe, 2022; Bussink et al, 2022).
The more challenging question concerns potential long-term effects of the pandemic. Gaps between the Covid-19 cohorts and earlier cohorts could emerge when the labour market becomes less tight, as the loss of experience and training during the start of their career puts them at a disadvantage. Working from home may have affected the quality of on-the-job training and learning too. These effects are unlikely to be captured by short-term measures of job quality.
Concern may also be warranted for young people leaving education over the next few years. The pandemic led to severe disruptions during a key phase of their education. At the same time, the high number of vacancies, which shielded the Covid-19 cohorts from negative impacts, has fallen some way from its peak in the spring of 2022. This double whammy could mean that these individuals suffer to a greater extent than those who graduated during the pandemic itself.
Where can I find out more?
- Are the kids alright? The early careers of education leavers since the COVID-19 pandemic: Institute for Fiscal Studies (IFS) report by Sam Ray-Chaudhuri and Xiaowei Xu.
- COVID-19 and the career prospects of young people: IFS report by Monica Costa Dias, Robert Joyce and Agnes Norris Keiller.
- COVID-19 impacts: Apprenticeships: Sutton Trust report by Katherine Doherty and Carl Cullinane.
Who are experts on this question?
- Xiaowei Xu, Institute for Fiscal Studies
- Sam Ray-Chaudhuri, Institute for Fiscal Studies
- Emilia Del Bono, Institute for Social and Economic Research (ISER), University of Essex
- Louise Murphy, Resolution Foundation
- Tony Wilson, Institute for Employment Studies