Minnesota Viewpoint: Economic suppression will hurt today's grads for years to come
Times are hard for Minnesota's graduates. Not only are they being denied their graduation ceremonies by Gov. Walz' anti-Covid-19 measures, but their prospects beyond that look bleak. They are graduating into the worst job market in decades and the consequences of that will be severe, and linger for a very long time.
Minnesota’s unemployment rate currently stands at 9.9 percent, a record high since the data began and more than 800,000 Minnesotans have filed claims for unemployment insurance since March 16th. Minnesota job postings on Indeed.com, the online employment site, are down about 40 percent from last year and a recent survey by Handshake, a nationwide job hunting site for college students, found nearly half of students are worried about getting a job when they graduate.
This dire labor market is set to improve – the national unemployment fell in May while Minnesota’s rose – but only slowly.
In April, the Congressional Budget Office (CBO) released ‘preliminary projections of key economic variables through the end of calendar year 2021.’ For the labor market, the CBO forecast: ‘The unemployment rate is projected to average 15 percent during the second and third quarters of 2020, up from less than 4 percent in the first quarter…the unemployment rate is projected to decline to 9.5 percent by the end of 2021. Under that projection, the unemployment rate at the end of 2021 would be about 6 percentage points higher than the rate in CBO’s economic projection produced in January 2020, and the labor force would have about 6 million fewer people.’
That isn't the end of it. A body of research shows that college graduates who start their working lives during a recession earn less for at least 10 to 15 years than those who graduate during periods of prosperity.
Recent research by economists Hannes Schwandt and Till von Wachter looked at a broader range of metrics and at those without college degrees.
It paints a grim picture. They found, first, that high school graduates and dropouts who entered the labor market during a recession suffered even stronger income losses than college graduates; second, that negative impacts on socioeconomic outcomes persist in the long run, so that, in midlife, recession graduates earned less, while working more and were less likely to be married and more likely to be childless; and, third, that recession graduates had higher death rates when they reached middle age, stemming mainly from diseases linked to unhealthy behaviors such as smoking, drinking, and eating poorly. There is a significantly higher risk of death from drug overdoses and other so-called “deaths of despair” among those who left school during an economic downturn.
There are some signs that the recession could be ‘V’ shaped, meaning a rapid recovery following the rapid collapse. The economy was strong going into this downturn and we need to maintain and advance the policies of lower federal taxes and deregulation that built that. At the state level, we need to look at pushing such pro-growth policies ourselves. Even so, it is a bleak outlook for today's young Minnesotans and it is through no fault of theirs. What they need is as strong an economic recovery as possible.
Phelan is an economist at the Center of the American Experiment, a non-profit public policy organization based in Golden Valley, Minnesota that advocates for free enterprise, limited government, personal responsibility and government accountability.