IFS - Career disruption caused by COVID-19 threatens prolonged cost for young workers

3 Jul 2020 11:51 AM

There is growing evidence that the lockdown has had particularly negative impacts on young people’s labour market outcomes. New IFS research, funded by the Turing Institute, shows that the COVID-19 pandemic threatens to severely disrupt the career progression of young workers, suggesting that negative economic impacts on this age group may last well beyond the easing of the lockdown.

The new research finds that:

• Over the last decade, young people starting out in the labour market have increasingly been working in relatively low-paid occupations, many of which are in sectors hardest hit by the COVID-19 crisis – for example, hospitality and non-food retail. 
• The growing importance of those ‘lockdown sectors’ as employers of workers at the start of their careers is primarily due to an expansion of the accommodation and food industry. The share of workers starting their careers in this sector increased by about 50%, from 6% to 9%, between 2007 and 2019.
• As other sources of wage growth have dried up, young workers have become increasingly reliant on moving into higher-paying occupations as a source of early-career wage growth. Around 28% of wage growth over the first five years of the careers of workers born in the 1970s could be attributed to moving into a higher-paying occupation. This had risen to 50% or more among people born in the 1980s.
• The pandemic threatens to have a prolonged negative economic impact on young people by reducing demand for the jobs that are typical among early-career workers and making it harder for workers to find better opportunities than their current jobs. 
• The government should have a particular focus on the challenges facing the young as it attempts to manage the labour market impacts of COVID-19 in the coming months.

Agnes Norris Keiller, an author of the briefing note and a Research Economist at IFS, said: 

‘Even a normal recession can be especially damaging for young workers as, for example, hiring freezes disproportionately affect those coming into the labour market and those who would otherwise be climbing the jobs ladder.'

‘The recession associated with the COVID-19 pandemic threatens to be doubly bad for early-career workers, because the particular sectors being hardest hit are very disproportionately likely to employ them. Indeed, early-career workers have become more concentrated in those lockdown sectors over time. Without effective action, young people are likely to find the economic costs of COVID-19 persist far beyond the pandemic itself.’

COVID-19 and the career prospects of young people