In 1999 when I graduated from college, my classmates and I couldn’t wait to get out into the world. During the heady days of the dot.com boom, the world beyond the comfortable ivory tower seemed to be full of opportunities. But things started to look different when the boom turned to bust. Start-ups disappeared. Large firms stopped hiring. Our confidence evaporated.
Today, I fear that my students who are walking out the door with their degrees in hand are entering a darker world. Earlier in the spring, the economy seemed to be picking up. Prosperity was returning and job prospects looked good. But after a tumultuous summer, all that has changed. Large declines in stock markets around the world created an economic gloom some are beginning to compare to the crash of 2008.
This week, turmoil in the global stock market continued with sell-offs in Asia, Europe and the United States. While it’s hard to say the rollercoaster market is temporary, or sign of a bigger trend, there’s no doubt it impacts everyone, from government heads to common investors to retirees.
Usually, when facing darkening economic circumstances, I suggest to my students to take the long view. Just as certain as markets go down, they will go back up again. The problem is this is only half the story. Investors might find their portfolios improve over time. But this isn’t true for graduates hitting the labor market.
Recent research suggest that millennials are likely to face an uphill battle for the rest of their career while those who graduated during better times are spared of the hurdle.
When the economy sours, the hardest hit are often the young people. Following financial crises, they tend to lose their jobs more quickly than other age groups. They often struggle more to find another job — even after the economy begins to improve. More worrisome is that the experience of being unemployed can have a big impact on their mental health years later.
On average, people who lose their job never get back the same level of the happiness they were at before they were unemployed. This means young people who start working during downturns are likely to be less happy in general throughout their lives.
There is also mounting evidence that people who graduate during a downturn face an uphill struggle for the rest of their career.
One study of Stanford MBA students found that if they graduated during a downturn, it was less likely they would get a lucrative job in an investment bank. This initial setback can have a long tail effect. Graduates who missed out the first time around were much less likely to hold down a job anywhere on Wall Street for decades afterward.
Another study that examined two IT firms found people who joined the firms during a downturn tended to perform worse in their career. Why? Because those who entered the firms during tough times spent more time developing relationships and were perfectionists. These skill sets worked well during bad economic conditions when there were downtime to build relationships and get things right. But it meant that people missed out on opportunities and were slow at delivering results when conditions improved.
During tough times, young people might give up on the corporate world and try to go it alone by starting up their own businesses. This seems like a great idea, especially given the hype on start-ups, but in reality, the majority of new businesses fail after a few years.
Research also suggests that entrepreneurial activity such as starting new businesses declined following the 2008 recession. What is concerning is that experiences of failure by entrepreneurs during hard times can dog them for the rest of their career. Entrepreneurs do not always learn from failure. What’s more, one failure makes it more likely an entrepreneur will fail the next time.
Looking back on the people I graduated with, I see many who have been successful. One was the CEO of a chain of upmarket food stores. Another sits in the national parliament of New Zealand. But given what I now know, I wonder if we had left school a few years later what might have become of us.
I hope that the storm clouds hanging over the global economy will not damage the careers of the next generation of bright-eyed young adults.