Wednesday, January 13, 2010

How Recessions Affect Young People

It is too early in the semester to have talked about recessions. But there was an interesting article called Recession may shape young adults' future habits. Here are some exerpts:

Researchers found "...young people who live through recessions tend to doubt their control over their careers. Unlike people who have lived through sweeter economic circumstances, the youth of recessions tend to look at career success as luck rather than a result of personal action."

"Beyond family pressures, unemployment among 16-to-19-year-olds is at an extraordinarily high level of more than 26 percent. Students finishing college face difficult job prospects, with hiring of this year's graduates down 22 percent, according to the National Association of Colleges and Employers."

[when] "...individuals have had low stock market returns for many years, they don't want to take risks in stocks. And bad experiences with stocks early in life "have significant influence even several decades later."

"...Americans aged 22 years to 33 years have shifted toward more conservative financial behavior too. It's influencing everything from investing to job choices: More are seeking job security and strong benefits rather than opting to jump from job to job to further their careers."

Another article, Birth date, business cycles, and lifetime income says:
"...a one percentage point increase in the national unemployment rate is associated with a 6 to 7 percent loss in initial wages. The annual wage loss declines over time, but is still statistically significant 15 years later. Comparing the wages earned by the class of 1982 (a peak unemployment year) with the wages of the class of 1988 (a peak employment year) over the first 20 years of a career, the wage difference resulted in a difference of nearly $100,000 in cumulative earnings in net present value."


veronica said...

This is so interesting.I am 35 years old and for sometime now, I have had the idea that people with "secure" jobs were in much better shape. I guess because a lot of my older friends had worked all of their lives and had made a decent retirement for themselves. I have been a realtor for many years now and my husband is a contractor. So, we have always faced the struggles of running our own businesses and managing the money we earned for times such as these. Even though we have had good lives so far, it has always been in the back of my mind that people with a "secure" job must have it so much better. Because they will always know what they are making and dont have to worry as much. With the recent financial state of our country, it has been heartbreaking to see that they are at the mercy of their employers...leaving them to make forced drastic changes in their lives. Hopefully we can all learn from this on how to have some type of back up plan, learn to spend a little wiser, save as if it is all up in the air because unfortunately, we are always at the mercy of someone else.

Cyril Morong said...


Thanks for dropping by and commenting. Good points. We should all be careful in our spending and financial security should always be a goal. If you save $4,000 a year for 40 years and earn 8% intereste each year, you will end up with about $1 million. If the interest rate were 5%, you would have about $483,000. Start saving as early as you can and save regularly.