Friday, October 28, 2011

20 Big Ways The Recession Is Changing Young Adults

It’s tempting to assume that young adults, much less settled into their lives than older adults, would be less hard hit by the recession. Yet new research has demonstrated that young adults are taking a particularly damaging hit in this economic downturn, and that the effects of their experiences during these formative years could cause long-term changes in their beliefs, values, and career choices.

Whether they’re delaying quintessential rites of passage, altering their attitudes towards consumption and spending, or forgoing college to start a career, it’s clear that many young adults are feeling some serious pressure from the recession. Here, we’ve collected some of the biggest and sometimes most surprising ways the poor economic situation is changing how young adults think and act, with repercussions that could resonate for decades to come.

Young people are spending less, saving more

While the millennial generation is often labeled as being materialistic, many young people hurt by the recession are learning how to live well with less. Whether or not this restraint will last after the worst of the economic crisis passes is yet to be seen, but researchers think there could be similar societal shifts to those during the Great Depression, especially since many young people are still in the formative years of their lives. Further influencing young adults to embrace the virtues of simple living is the strength of the green movement, which has made it much cooler to use, waste, and spend less.

Moving back in with parents is much more common

The phenomenon known as boomeranging has grown substantially over the past decade, largely due to the poor economic climate. Since 2000, a growing number of people in the 25-to-39 age group have been moving back home, and by 2008, the percentage of those living at home grew by double digits. Nationwide, numbers have increased by 32% since 2000, with one of the biggest increases being seen in college grads. Of those who moved back home, 10% say they moved back with their parents because of the recession, two in 10 are full-time students, a quarter are unemployed, and about a third had lived on their own before returning home. If the job market stays as it is, experts believe there could be a major shift in the typical American household, and a return to the multi-generational home.

Driven out of the job market, young adults are increasingly becoming entrepreneurs

Becoming an entrepreneur isn’t easy, but many young people today see it as one of their only options to get ahead in an already oversaturated job market. A full 25% of young adults say that if they have trouble finding a job, they’d be interested in starting their own business. Statistically, more entrepreneurs do often emerge in a down economy, perhaps because it spurs on creativity and innovation. Some successful entrepreneurs, like PayPal co-founder Peter Thiel, are even willing to help give young entrepreneurs a leg up if they skip college and go right into business, to the tune of $100,000 if they have a great idea. With jobs scarce, college tuition out of reach for many, and little hope of getting ahead, more and more young adults are turning to the business world for potential success.

More young people are working outside of their majors

For some majors (i.e. the humanities), it’s never been easy to find a job that directly relates to a college program of study. Yet today, it’s difficult for young people to translate a much wider range of college degrees into successful and satisfying careers. Often, there simply aren’t enough jobs in a given field to go around, and with increased competition from laid-off employees with more experience, getting a foot in the door can be next to impossible. While working outside of your program of study can be beneficial, for those who long dreamed of a career in a field that only a few years prior would have been flush with jobs, it can be devastating. New grads and young adults are often faced with frustrating, long job searches that more often than not result in settling for jobs that aren’t ideal, breeding a generation of dissatisfied, disenchanted workers.

Young adults are delaying marriage longer than any previous generation

Young people aren’t in any rush to the altar, new studies reveal. Today, the average age for tying the knot is 26 for women and 28 for men. While social factors like greater acceptability of sex before marriage and an increase in unmarried cohabitation play role in this delay, the recession isn’t free from blame. Last year, marriages fell to a record low, with just 51.4% of adults 18 and over being married. Compare that with 57% in 2000, and you can see that there’s been a pretty substantial drop overall. Within the young adult age range, marriage rates also dropped to a new low, with only 44.2% being married. With the average wedding running upwards of $26,000 and jobs scarce, for many young people it just makes good financial sense to wait.

They’re also having fewer children

Kids are notorious for their ability to drain their parents’ bank account, and for many young adults, there already isn’t enough to go around. Fewer young people are choosing to have children, and the U.S. birth rate as a whole has seen a major drop in the wake of the economic crisis. The share of the population under age 18 has dropped in 95% of U.S. counties since 2000, and the share of households with children dropped from 36% in 2000 to 33.5%. How do we know the recession is to blame? In 2007, just before the recession began, more babies were born in the United States than any other year in the nation’s history. With the economic crisis came a drop in not only jobs, but also births. Young people aren’t entirely shunning care taking, however, and today more households have a dog (over 43 million) than a baby.

Sticking close to home has become the norm

For new college grads, moving to a new city to follow a job has long been a rite of passage and a way to officially declare one’s independence from parents. The recession is changing that, however. Not only are more young people moving home to live with parents, more are staying within the communities where they grew up or in cities nearby. Among adults 18-34, the number of long-distance moves across state lines fell last year to roughly 3.2 million people, or 4.4%, the lowest level since World War II. For college graduates, who are historically more likely to relocate out of state, long-distance moves dropped to just 2.4%.

Smaller numbers of young adults are buying homes

There are some positives to the recession when it comes to young adults buying homes — 44% say they might actually be able to afford a house now that home prices have plummeted. Overall, however, home ownership is simply out of reach for many young adults. Among young people, home ownership declined for a fourth consecutive year to 65.4% on the heels of a peak of 67.3% in 2006. Despite low interest rates and relatively inexpensive home prices, the age of first-time homeowners has remained high. A number of factors may account for this, including stricter mortgage requirements, fears of plummeting home values, and worries about job loss. And the issue isn’t just popping up in the U.S., however. Young adults in Europe, especially the UK, are facing similar challenges with becoming first-time homeowners.

Greater numbers are struggling with chronic unemployment

If you graduated before the recession began, count yourself immensely lucky. The unemployment rate for young adults is at its highest since World War II, currently sitting at a whopping 17.4% for those 16 to 24. It doesn’t get better when you move into the slightly older 25-34 age group either. Total employment in this age group stands at just 55.3%, a decline from 67.3% in 2000. Many college graduates can’t find work at all or have to get by on odd jobs and hourly work. Even worse, those struggling to find work have to compete with new graduates for entry-level career positions when the job market does eventually improve. This record high rate of unemployment is particularly disconcerting both because it has held steady for three consecutive years and also doesn’t show signs of changing anytime soon.

As a result, more young adults than ever are living in poverty in the U.S

Prolonged unemployment can lead to some serious financial problems, especially with heavy college debt. Today, nearly one in 5 young adults lives in poverty — a saddening statistic though not a particularly surprising one. Currently, the nation’s official poverty rate is at 15.1%, the highest since 1993. Of young adults living with their parents, over 45% have incomes that would put them below the poverty threshold without parental help (which six out of 10 parents with adult children living at home say they provide). Even more worrying are the young adults who don’t have parents to fall back on and have to make do with skipping meals, struggling to pay bills, and perhaps even falling into homelessness.

More young people are holding part-time jobs in addition to a full-time job

For young adults who can find jobs, one often isn’t enough. Mounting debt and falling entry-level wages have made it difficult for a large number young people to get by with only one job, so many are seeking out additional part-time work to help make ends meet. Others, who aren’t as lucky, may have to take on multiple part-time jobs to cover rent, bills, and loan repayments. And things aren’t looking great on the horizon. Hiring of this year’s graduates was down 22%, according to the National Association of Colleges and Employers.

It has become necessary for many to take on unpaid or temporary positions to get ahead

Internships are more important than ever for young adults, even if they may not always be a way to make money in the short term. When young grads can’t find jobs, they are increasingly turning to internships to get experience and give them a leg up in the job market. Of course, as more young adults vie for internships, fewer positions are available, and competition is fierce. Studies show that the number of internships has grown rapidly over the past decade. In 2008, 83% of graduating students held internships at some point in their college career, up from just nine percent in 1992. Unfortunately, many of these internships, especially the unpaid kind, may be illegal as employers take advantage of free labor without offering much in the way of education or experience in return.

A growing number of young people are making do without health insurance

Access to health care has been a divisive issue in this country in recent years, and many may not realize how many young adults are affected by lack of health insurance. A recent survey revealed that 23% of young adults had lost their own or their family health insurance within the past year and more than half of those surveyed have lost their coverage at some point in the past five years. While young people are generally the healthiest segment of the population, illness and accidents can strike anyone at any time, and medical bills can be a scary prospect for those already struggling to get by.

As college costs rise, young adults are managing increasing levels of debt

It’s no secret that college comes with a pretty hefty price tag these days, but what you may not know is how hard it is for many young adults to shoulder the burden of the debt incurred while in college once they graduate. A burden that has gotten even more difficult to bear in light of the recent economic crisis, as average starting salaries have gone down and tuition debt has gone up. A recent survey found that most young adults have the same amount or more debt than they had a year ago and nearly one-third have paid a late fee on a credit card in the last year. Even worse? 17% have fallen behind on their mortgage payments and another 18% have not kept up with their student loans. These figures document a slide into financial insolvency, which can haunt young people for the rest of their lives.

Young adults hold more doubts about their control over their careers

Young people today may be feeling pretty out of control when it comes to their career success. A National Bureau of Economic Research paper reported that young people who live through downturns tend to doubt that they have much control over their careers, viewing career success as luck rather than a result of personal action. Those studied were found to be even more pessimistic if they had lost a job sometime during their careers — a reality for many young adults today.

A poor market has made them less likely to take risks in investments

The Merrill Lynch Affluent Insights Quarterly Survey revealed that 52% young adults between 18 and 34 have a low tolerance for risk when investing ad prefer safer, more conservative investment options. While it’s great that young people are saving money and being cautious with spending, experts worry that this risk aversion, most likely a product of the tumultuous markets over the past few years, will not enable young adults to be as aggressive as they need to be in order to prepare for retirement. And they’ll need to be aggressive to make up for entering the job market at one of the worst times in the past two decades. Studies have shown that those graduating into a bad job market will make less over a lifetime for every one-percentage-point increase in the national unemployment rate, adding up to about $100,000 less over a lifetime. Need proof? The starting income of new graduates has fallen by as much as seven percent in some fields.

Fewer jobs means less job flexibility

Young adults today are much less willing to take risks than their predecessors, often staying in low-paying, low-prestige jobs for much longer. This can have some negative long-term effects on a career. Starting work in a particularly low-level job or unsexy career can make it easier for employers to dismiss you as having low potential and can put a serious damper on your earning power. Once stuck in these jobs, it can become very difficult to move up or move on. Those who enter the job market in a recession have been found to be much less likely to pursue professional occupations or enter other prestigious spheres. For a millennial generation known for their job-hopping, the recession could have a major effect on the careers of tens of thousands of young adults.

More young adults feel pushed into graduate and professional degrees

While statistics from the Council of Graduate Schools show graduate school enrollment dropping ever so slightly from 2009 to 2010, applications for school increased 8.4%. With job competition tough, many young people feel pressured into heading back to school as a means of standing out and gaining more experience in their field. While it can saddle many with more debt, it can also open doors. Experts caution returning to school solely to improve job prospects, however, as there are no guarantees that a graduate degree will help in a market already crowded with experienced professionals.

Many will suffer long term psychological effects

Think the recession is a mere blip in the lives of young adults? Think again. Krysia Mossakowski, a sociologist at the University of Miami, has found that long bouts of unemployment provoke long-lasting changes in the behavior and mental health of young adults. Extended periods of unemployment during the teens and early 20s can have some serious effects, with the chronically unemployed more likely to develop a habit of heavy drinking or depressive symptoms by middle age. Mossakowski asserts that prior drinking behavior and psychological history do not explain these problems, and they are the result of the stresses associated with long-term unemployment. Even if young adults later find steady work, they are still more likely than others in their peer group to develop these psychological effects, showcasing the true lasting impact the recession may have on many young people.

Young adults could be saddled with potentially shorter life expectancies

Another effect of the recession that has been revealed by research is that physical health tends to deteriorate during periods of unemployment, most likely the result of high stress and lack of health care resources, or the funding to pay for preventative care. The most recent research suggests that poor health is prevalent among the young who are unemployed and that the effects can last for a lifetime. A look at past recessions can be telling as to what long-term effects this one might have. Economists studying layoffs during the 1970s and 1980s found that regardless of age, unemployment increased mortality rates — and not just in the short term. The men who had lost their jobs had shorter lives, on average dying a year and a half sooner than those who had never lost a job. In fact, the younger the person was when he lost a job, the more pronounced the effect on life span. A sad finding in a time when so many young people are out of work.

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