Coronavirus: New graduates likely to be hit hardest by recession brought on by lockdown, IFS warns

Graduates entering the labour market this year are likely to be hit hardest by the developing recession brought on by measures to control the spread of coronavirus, according to the Institute for Fiscal Studies (IFS).

The IFS has warned evidence from previous recessions suggests young people graduating this year are likely to find it harder to find employment and even harder to find well-paid employment than their immediate predecessors.

If the economy struggles to recover quickly, they may also earn less than they would have previously expected for a considerable period of time.

The IFS added that the labour market this year is likely to be “substantially more difficult” than it was in 2008-09, following the global financial crisis.

The prediction came after a separate IFS study found young workers, those on low-pay and women would be most affected economically by Covid-19, as a “remarkable concentration” of those groups were employed in sectors which had been forced to shut down.

“Young people in work are suffering more than others as a result of the economic consequences of the lockdown and those still at school will see their education interrupted,” Paul Johnson, director of the IFS, said.

“Previous experience suggests that university graduates will start off in lower paying jobs than otherwise and will suffer 'scarring' effects such that they will be more likely to be unemployed several years after graduating.

“It will take several years before their earnings catch up with what they otherwise would have been.”

However, Mr Johnson said calls to reduce outstanding student loans to help graduates were “misplaced” as loan repayments are already set by income levels.

“Forgiving part of the loans will only benefit those graduates who in any case do very well in the labour market,” he said.

IFS analysis has previously shown the median earnings for graduates in their late 20s fell by nearly 20 per cent between 2008 and 2013, and only just started to recover by 2016.

On Tuesday, the Office for Budget Responsibility (OBR) warned UK GDP could fall by 35 per cent in the coming months due to lockdown measures, while unemployment could rise by more than 2 million.

A recent report from the University of Warwick has argued that young people - between the ages of 20 and 30 - who do not live with their parents should be released from the lockdown first.

“The rationale for lockdown is to save lives in the short to medium term,” Andrew Oswald, professor of economics and behavioural science at the University of Warwick, said earlier this month.

“However, severe damage is being done to the economy, future incomes, unemployment rates, levels of national debt, and the freedoms we enjoy as a modern society. Before long, some balance will have to be struck.”

Researchers have argued young people have been found to be less likely to develop severe coronavirus symptoms, but are likely to be among the hardest hit members of society economically from strict lockdown measures designed to slow the spread of the virus.

The report estimated the proposed strategy would result in between 600 and 700 additional coronavirus deaths.