Why Gen Z will be hit the hardest by the financial fallout from coronavirus

Generation Z’s future prospects also look gloomy; the Resolution Foundation’s analysis suggests that layoffs linked to the pandemic could affect young people’s pay and job prospects in the long-term.

This means an extra 640,000 people in the age group are likely to be out of work.

“The unique nature of the current crisis has damaged the first rung on the employment ladder for a substantial proportion of education leavers — and it is so far unclear when, and to what extent, these sectors will recover,” the report notes.

Young bear brunt of crisis

The crisis could leave lasting scars. Thanks to the spike in UK unemployment, today’s graduates are 13% less likely to be employed in three years’ time compared to a scenario without the pandemic.

Those with mid-level qualifications are 27% less likely to be employed in three years, while the figure rises to 37% for “lower-skilled” adults leaving education today, according to the report’s projections.

It’s a similar story in the United States, where workers under 24 were disproportionately affected by initial layoffs related to coronavirus, according to Richard Fry, senior researcher at the Pew Center.

The shutdown triggered a surge in unemployment in the US, with the county’s economy losing 20.5 million jobs in April, the largest decline since the government began tracking the data in 1939.

The unemployment rate for adult men in April was 13%, while the same figure for adult women was 15.5%.

“Initially, at least, layoffs were concentrated in a certain set of industries, which hit the 16-24 age group hard,” Fry told CNN. “That initial unemployment was very much concentrated on … Gen Z. [They] got hit badly.”

Despite the early data, Fry said Generation Z has some reason to be optimistic. He said the younger group has time to recover from the virus’ impact, especially when compared to the Millennial generation.

“When it comes to wealth-building, one is … able to better deal with a crisis if you … have more years to adjust,” Fry said.

While Fry is cautiously optimistic about Generation Z’s prospects, research from the Resolution Foundation suggests that those who leave education during recessions suffer from lower unemployment rates and depressed pay for years after the event.

Fry added that early anecdotal data showed young adults were drawing on family resources to survive the downturn, often by continuing to live with their parents or by moving back to the family home.

“During the [2008] recession, Millennials dealt with [the crash] by moving in with Mom and Dad,” he said. “We may be seeing Gen Z do the same here. And that’s not a path that’s as open to older Millennials now. They may have families of their own and aren’t able to access those resources. But I don’t think we know the long-term impact of this yet. We just don’t know how long and deep this downturn is going to be.”

Second setback for Millennials

While the immediate crisis has disrupted Generation Z’s education and job prospects, it is the latest in a series of blows for Millennials. The group, which consists of people born between 1981 and 1996, has been shaped by the 2008 global financial crisis and the slow economic recovery that followed.

“[The Millennial generation] is a particularly aggrieved cohort of young adults,” Reid Cramer, non-resident fellow at the New America Foundation, told CNN. “Already their prime work and family forming years were significantly undermined by coming of age in the great recession.”

“They have lower savings. They have a lower trajectory for [building] long-term wealth. And many are not living in individual households — instead they’re in communal arrangements or still with their parents.”

Searching for solutions

Cramer believes that young people need greater help from government to recover from the financial impact of Covid-19. He argues that public policy should be used to address “the overhang of student debt” hindering millennials in the US.

“Millennials are enormously, enormously disadvantaged when it comes to housing,” said Jim O’Neill, chair of the Chatham House think tank and a member of Britain’s House of Lords. “I hope there’s more [government] focus in the future on providing social […] and affordable housing.”

Cramer told CNN the recession following 2008 had affected Millennials in another way — the group is reaching the traditional markers of adulthood at later dates, or not at all.

“In America Millennials have a significantly lower home ownership rate but that only captures some of the challenges,” he said. “Fewer are of them are getting married [and] having children. These were traditional elements of the aspirational American Dream.”

That dream was perhaps best captured by the baby boomers, who remain the richest generation in both the US and UK. This doesn’t look likely to change soon, with Millennials enduring reduced social and economic progress and Generation Z now facing a similar fate.