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Tom Barkin

What Happens to Young Workers?

Tom Barkin

Aug. 24, 2020

Tom Barkin

President, Federal Reserve Bank of Richmond

I’m hesitant to make a strong prediction about which jobs will disappear or which will grow once we’ve weathered the pandemic. After all, in the wake of 9/11, people thought we’d never travel again, and then we did. But it seems quite possible that — even with a vaccine or treatment — we will be in a world where highly exposed personal service sectors, such as restaurants, retail, and entertainment, continue to operate at reduced capacity, which would mean fewer jobs in those sectors. That leads me to ask, who works in these jobs, and what happens to them if some percentage of them don’t return?

Workers in these highly exposed jobs are generally hourly employees, working part time, and they tend to be younger than the workforce as a whole — just over 1 in 4 are between the ages of 16 and 24, twice their representation in the workforce overall.1  These jobs offer low wages and few, if any, benefits. Still, some younger workers take these jobs (43 percent of workers between the ages of 16-24 work in retail trade and leisure and hospitality alone) because they’re a great way to get a start in the workforce and gain experience and soft skills. (I got my start in my uncle’s bagel shop.) Others appreciate the flexibility that allows them to work while they’re in school. And for workers who lack the resources or academic preparation for postsecondary education, these jobs might be the only path that’s open to them. Another attraction is that you can move nearly anywhere and count on finding a job in a restaurant or retail.

Those in these customer-facing service roles have been disproportionately affected by the pandemic, and younger workers in them have fared worse than older workers. Between February and April, nearly 50 percent of “highly exposed workers” aged 16-24 lost their jobs, compared to 36 percent of highly exposed workers aged 25-54. While the unemployment rate for the population as a whole has increased to 10.2 percent (net negative 6.7 points since February), the unemployment rate for workers aged 16-24 is still 10.9 points up from where it was in February, currently sitting at 18.6 percent.

What happens to a server or cashier who has lost his or her job? Chances are, they can’t get a job at another restaurant or store because so many other highly exposed, high contact jobs are going away at the same time. So where can young people who have yet to enter the labor market go to get a foothold in the labor market and start building experience and savings? Maybe we’ll see new entry-level jobs delivering groceries or meals, but I’m doubtful these segments will grow quickly enough to immediately replace the millions of jobs that have been lost.  In the interim, young people will face substantial uncertainty and will be set back. And if young people have a harder time starting out, what does this mean for them decades from now? We know that early circumstances matter: Research suggests that well over half of income and wealth inequality is determined by a person’s circumstance at age 23. And research has shown that graduating from college during a recession has persistent negative effects on people’s earnings and health.

What can be done? The most powerful lever would be to retain as many of these jobs as possible. Temporary relief has helped. But looking ahead, we need to ensure that incentives for locating and pursuing new operating models are in place. We can count on continued innovation of the kinds we’ve already seen,  like constructing more outdoor seating at restaurants, pivoting to takeout and delivery, turning retail stores into e-commerce fulfillment centers, investing in online platforms that are helping small businesses get their products to customers, and creating virtual options for traditionally in-person personal services like live fitness classes. Each of these innovations has created demand for employees to perform new and different tasks — and jobs. The economy will need even more.

The economy also needs smart, flexible and concerted training efforts to prepare people, particularly displaced workers and young people with less education, for other in-demand fields. Policy can help by allowing students to use Pell Grants for certificate programs and giving community colleges the funding they need to teach online. For this group of younger workers, in particular, who are digital natives, the innovations in online learning could pay real dividends.

This type of retraining won’t be effective without businesses investing as well. New jobs are being created in this pandemic. And a number of sectors, such as trucking, nursing, technology, and skilled trades, continue to struggle to find qualified employees. We are starting to see innovative approaches in recruitment as employers look to this pool for talent. But the economy will require even more aggressive and targeted recruiting efforts, such as community college partnerships and generalist training programs, to redeploy these workers into new careers.  

The challenge seems daunting, but we have done this before when a large pool of workers needed education and training. In the 1800s, we created a system of land-grant universities to provide farmers and other rural residents with access to higher education. When World War II veterans returned home, we created a pathway for them to earn college and technical degrees. These efforts weren’t perfect, particularly with respect to their treatment of minority groups, but they demonstrate the potential upside. In the aftermath of this crisis, we have the opportunity to do so again.

 
1

“Highly exposed jobs” refers to workers in “highly exposed census industries,” a classification of sectors by their exposure to employment losses. For a complete look at the industries included in the “highly exposed” group as well as further data on workers in this category, see Dey et al. (2020).

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