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New Graduates Facing Unemployment May Never Reach Income Potential

This article was written by in Career and Work. 12 comments.

The unemployment rate for young workers between the ages of 16 and 23 is 18%, and that is an increase of five points from a year ago. That age group includes high school drop-outs as well as college graduates, and for these people the future looks bleak. Adults are taking the minimum-wage jobs teenagers might be offered in other economic situations. Older workers, otherwise approaching retirement, are not leaving the workforce as quickly. The openings for younger workers aren’t there.

The bad news is starting your career in a recession is one of the worst things you can do for your long-term financial security. More bad news is that there is little any one person can do about the economy at large. Here are the numbers, from a study at Yale quoted in the cover story in today’s BusinessWeek:

For each percentage-point rise in the unemployment rate, those who graduated during the recession earned 6% to 7% less in their first year of employment than their more fortunate counterparts. Even 15 years out of school, the recession graduates earned 2.5% less than those who began working in more prosperous times.

Young adults might be destined to be a “lost generation.” Here are some suggestions for 16-to-23-year-olds who find themselves having a difficult time starting their career in this recession and want to mitigate its effects on long-term income.

1. Finish your education

It’s an issue of supply and demand. First, if you have not done so, completing your Bachelor’s degree will have two important effects. First, it will improve your marketability among entry-level employees when fewer open positions will create a competitiveness that ensures that the best qualified candidates will win. A Bachelor’s degree is a gateway to at least the middle class, and that’s going to be more important than ever.

Second, finishing college now will keep you out of the worst of the recession. This will allow you to stay out of the worst fight for jobs, but it has some drawbacks. Delaying the start of full-time income can also have detrimental effects on your long-term income — but if you wouldn’t be working anyway, this isn’t much of a disadvantage. Also, if you are relying on student loans, you will be amassing more debt that will require payoff down the road, perhaps shacking you to a job or career that is not best for you. New student loans have higher interest rates than they have in the past, adding to the pain of debt.

If you have your Bachelor’s degree, consider spending a few years to earn your Master’s or Doctorate degree. Are you worried about being overqualified? Don’t be. As we’re seeing in the recession where many workers are competing for few jobs, anything that helps you stand above the rest will be an advantage rather than a disadvantage. You might want to consider adapting your desired career to one better suited for an advanced degree, however.

2. Become an apprentice

In general, apprentices earn more throughout their careers than those who don’t hone their skills in a formal training program. Traditionally, apprenticeships are common for certain crafts and trades. Electricians, plumbers, and carpenters often get their starts through apprenticeship and there is significant income potential in these fields.

One creative answer is to become an apprentice for a career that does not traditionally fit this profile. For example, if you have musical talent and would normally consider performing or teaching in a better economy, consider composing music for films or television. You can contact a professional currently in the field and contact them about becoming an apprentice. One key to successfully finding an apprenticeship is the willingness and the ability to work for free.

3. Start your own business

I’m not talking about selling your possessions on eBay, but padding your savings account with cash rather than padding your home with useless objects is never a bad idea. Everyone has at least one marketable skill. It may require some time brainstorming to determine exactly how you can turn your skills into a service you can offer people or other businesses.

A recession is perfect timing to start a business, particularly if you can dedicate all your time to making it work (that is, you are otherwise unemployed). Many new businesses suffer because the owner needs to devote his or her time to the day job, a spouse, and perhaps even children. For young workers, the time will likely never be better for starting a business with the ability of giving it your full attention.

4. Save money

As a recent graduate or drop-out, you may have the option to move back in with your parents for a short time. After all, there is a recession and being able to save money on rent or a house payment is worth the temporary shame you might feel for going home with your tail between your legs. This is most likely the biggest opportunity for savings, but you don’t want to take advantage of the situation. Show your parents that you’re working hard to make the recession work for you, and they’re more likely to give you a break. And don’t forget to express gratitude.

Consider frugality as a way of life. In an economy where you have less control over your income thanks to fewer employment options, you can still control your expenses to a point. Take the extra time to determine what you are willing to cut back in order to help your money go farther. Occasionally, generic brands and store brands are good compromises.

Creativity leads to success

Surviving in a recession where it’s difficult to find a job relies on creative thinking. Use the opportunity to rethink your career path. If the acquisition of money has been your ultimate goal, realize that money by itself is not a goal. You may use the opportunity to break into a less popular field with a lower income potential but with a greater satisfaction potential.

Accept that the odds are against you if you want to compare yourself and your bank account against people who began their careers in the height of the economy, people who, on average, will out-earn those entering the workforce right now.

Photo credits: CarbonNYC, roland
The Lost Generation, Peter Coy, BusinessWeek, October 8, 2009

Updated January 16, 2010 and originally published October 19, 2009.

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About the author

Luke Landes is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about Luke Landes and follow him on Twitter. View all articles by .

{ 12 comments… read them below or add one }

avatar 1 Anonymous

Glad to see “Finish your education” was first on the list. I retired from the USAF in 85 and went to work for an aircraft manufacturer. I had just completed a BS, but was hired on the basis of aircraft maintenance and logistics experience. Throughout the 22 years the BS has paid big dividends. Through periods of expansion and contraction, it put me on the right side of the curve. That is to say: the top of the promotion consideration list and the bottom of the lay-off list. Other than doing a good job for your employer, education will be the biggest factor in your long-term success. Finish your education for the long term benefits; endure the short term hardships caused by the present economy if you possibly can.

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avatar 2 Anonymous

How exactly do you expect a new grad, most likely with 20k+ in student loan debt, to get any sort of capital to start a business. I have seen some recent grads trying to do this for the last 6 months and noone will give a business loan without significant collateral, which recent grads just don’t have. Good article, but this one point is off the mark.

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avatar 3 Luke Landes

Obtaining capital is certainly difficult but not every business idea requires a significant amount of start-up capital.

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avatar 4 Anonymous

Interesting question, RW. I’m a new graduate with over $42,000 in student loan debt, and right now the only work I have is my own business. I blog and I do blog consulting, and that’s where all of my income comes from. So Flexo is right, not all business ideas require start-up capital. I’ve been running my business on shoestrings and popsicle sticks for almost three years now!

But I’m glad the article covered this idea – I’m still trying to find a “job job,” but I love my work and I am grateful to have the income, even if it’s small.

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avatar 5 Anonymous

There’s a great post on starting your own business for $100 by Chris Guillebeau. Not off the mark at all, it just depends on the business. :)

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avatar 6 Anonymous

I am a recent graduate and have several friends in this demographic and unfortunately several friends who are unemployed. My top piece of advice is always Network! Network! Network. Remember it is often not what you know that lands you a job but who you know. Call on any contacts you have to see what is available out there. Do not just try close friends and relative, but also try their friends and relatives. Also brush up on your communication skills. Take an interpersonal communications course at a community college, or join a public speaking group such as Toastmasters. Anyone you meet in the future could be the one that helps land you a job, you do not want to miss an opportunity because of poor communication skills.

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avatar 7 Anonymous

Whoa, I’d place a severe “think before you leap” on the idea of going to graduate school just because there’s a recession. Unless by that you’re thinking of a one-year trade-type program, going through graduate school can also easily make you a member of your own financial “lost generation” with the lost income opportunity. It’s not an easy road. I’d probably say, try to start your own business instead.

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avatar 8 Anonymous

Make your own way guys! Like Flexo says, be creative. Anyone can get the job they want if they passionately pursue it. Figure out exactly what job you want to do, then go offer to work one month for free and in return they simply have the option to hire you on at the end of the month. Very few perspective employers are going to turn down that offer.

Always live below your means, and for heaven’s sake… figure out what makes you happy before you start looking for a job!

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avatar 9 Anonymous

It’s definitely tough out there for new graduates. I have one position open at my company which will probably pay 55-90k all in the first year and we’ve received over 800 resumes!

I think folks need to network, bc that’s the only way to get your resume into consideration. Frankly, there are a lot of qualified individuals. It’s the individuals who know someone who get ahead.

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avatar 10 Anonymous

You guys should all read (if you haven’t yet) a book by Tamara (forget last name) called “Why Today’s 20- and 30-Somethings can’t get Ahead.” I don’t agree with all of her logic, and it’s a bit of a “pity me” type of attitude, but it does present a lot of very interesting facts facing my generation and the one younger than me – but if you’re big on personal achievement/responsibility you probably won’t sit easily with her general attitude – nevertheless, the facts are there.

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avatar 11 Anonymous

I like Charlie Hoehn’s e-book for recent grads.
It’s applicable to everyone though.
Best takeaway, work for free so you can make connections. I’m doing it now, and it’s well worth it.
I don’t have a degree, but I’m not motivated to go back to school, I have other things I’m pursuing.

Great post. I’m not in that age range, but I’m starting from scratch after raising kids for 12 years.

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avatar 12 Anonymous

My wife and I are 22 and 24 respectively, and are co-owners of a business that I started as a senior in college. I started it originally because I knew there was opportunity for me to work on commission for an employer that I’d been interning at over the summers. Working from my dorm room as a senior, my business was launched suddenly when I landed 6 figures in commissions from negotiating high value patent deals. So while the economy was collapsing (and my grades were suffering), I was hitting a unique opportunity to profit as hard as possible and getting lucky (a dose of luck always helps). This was a rare opportunity of course, but it was one I’d gotten through interning twice while in college, and constantly staying in touch with people in my business network.

People in this age range need to understand that our generation was spoiled by free-flowing credit and the perception that education would entitle us to comfort. A degree doesn’t entitle you to anything – it’s supposed to fundamentally change how you engage the world, so you’ll be driven to create value for others – today’s educational institutions rarely succeed at this. Knowledge is power, but applied knowledge and hard work will carry us through. Stay smart, stay strong, and stay self-reliant.

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