A ‘Lost Generation’ of Job Seekers Struggle with Recession
Economic forces thwart a generation's ability to find work, possibly stifling their earning power for decades.
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The Fiscal Times
April 7, 2010

Marie Frazier, 22, is finishing her master’s degree in business administration at Howard University next month with hopes of landing a full-time job soon. Frazier has sent out résumés and used her networking skills. She’s had a dozen or so job interviews. She’s taken a part-time job selling athletic shoes to gain some experience.

But as a business major, Frazier also understands the harsh dynamics of employment today -- forces that have frustrated even the most aggressive hunt for work and have left many stuck in an economic limbo. Jobs are scarce, and Frazier notices that if there is an opening, “They are looking for the best of the best of the best.”

A Disadvantage Out of the Gate
Her advanced degree, from a prominent, historically black university in Washington, D.C., makes her more marketable than other young people, according to federal job statistics. But even if Frazier is working, some analysts say she still can be considered part of a “lost generation” of young workers entering the workforce in the worst recession since the Great Depression of the 1930s. The recession not only is thwarting their search for work but could stunt their earning power for the rest of their careers, research shows.

Several economists have concluded that, in general, when unemployment rises markedly starting salaries of young graduates decline. Lisa Kahn, a Yale University economist who studied the pay of white men who graduated from college between 1979 and 1989, concluded that for each increase of one percent in the jobless rate, the starting income of new graduates declined by as much as 7 percent. And they never catch up.

“You have your lifetime earnings dragged down,” said Josh Bivens, economist at the Economic Policy Institute in Washington. “This is a very pervasive thing.”

The young are not the only age group that could see lasting generational effects from this recession, according to analysts. There could be several “lost generations” in this downturn, they say, although much of the economic research has focused on young workers in their 20s — and not older workers.

One key factor today is the high jobless rate — which is now 9.7 percent of the work force and projected to stay high for a number of years. It looks so severe that it suggests older age groups could become “lost generations,” too, with declines in job security and income in a labor market with many surplus workers.

Barry Bosworth, a Brookings Institution economist, said workers up and down the age scale are affected by the severe recession, and can be “lost generations” in a way, too, with downward pressure on wages lasting until retirement. “Recessions have costs way after they are over,” he said.

Long-Term Losses
One measure of these costs is long-term joblessness, which continues to rise in this downtown. The Bureau of Labor Statistics reported last week that in March, the number of Americans out of work for 27 weeks or longer rose to a record 44.1 percent of the 15 million unemployed workers.  

Among them is Don Gibbs, 48, of Union, Ky., who lost his job in June 2009 as a service technician for a property management firm for several communities in Northern Kentucky. He specialized in maintenance for condos and townhouses before he lost his job.

“I have been majorly stressed,” he said. “It wears on you more and more each day.” Gibbs had to exhaust 401(k) savings to “fulfill my family obligations,” even though his wife works, often overtime these days. He is worried that unless he finds work, his family might have to give up their house.

 “I made pretty good money doing what I was doing,” he said. “Jobs out there now don’t want to pay close to what I made.” Indeed, many laid-off workers are resigned to being paid less.

Mayumi Okado, 53, who worked for high-tech companies in California’s Silicon Valley, is facing a similar problem. She moved to the Washington, D.C., area from Omaha a year ago after she was divorced. Finding full-time work in the middle of a recession has proved fruitless, though not for lack of effort. She has filled out “countless” résumés and used a growing network to try to get a job.

Okado did get a short-term contract in the past year that helped her reduce her credit card debt and pay some other bills, but a permanent job never materialized. She said she moved in with a friend earlier this year, and now her rent is free.

Alternate Routes
Now, Okado is pursuing another avenue even as she continues to look for work — starting up a personal-service company with two of her old friends from high school.
“It is much tougher to start a business in this climate,” noted Michael Drury, an economist at McVean Trading and Investments LLC, a futures trading firm.  He added that “cheap credit not only created too many homes but it created too many small businesses” that he said aren’t necessarily sound and should fail.

But such talk doesn’t bother Ted Kidane, who like Okado attends a job support group each week at McLean Bible Church in suburban Virginia. Out of work for a year, he is launching a business to help firms outsource their computer operations. 
It is the wave of the future, he maintained. As for “lost generations,” he said, “People who are not working on improving their skill sets are really going to get hurt. This is a global economy. The Internet pretty much created a level playing field.” 

John Abowd, professor of industrial and labor relations at Cornell University, sees self-employment as a rising trend and added that free capital, flexible labor markets, and education “ought to promote businesses that will create jobs faster than the dying ones destroy them.”

Former Labor Secretary Robert Reich said that international competition and information technology improvements have driven down the real wages of less-educated workers. “It’s likely to be many years before we’re back to the same level of employment we had in 2007 — perhaps five to 10 years — and even when they get their jobs back many people won’t regain the wages they had before,” Reich said by email.

“Moreover, the days of job security are gone forever; even before the Great Recession, steady jobs were disappearing. Does this mean a ‘lost generation?’ I suppose you could put it that way.”