Entering the job market during a recession can leave lasting scars on a worker's career and earnings: report

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Getting your first job during a recession can have a long-lasting effect on young workers trying to break into the labour market, with earnings impacts persisting for years, according to a report from TD economists.

The report released Thursday combines data from Statistics Canada and TD Economics, and argues that work-integrated learning (WIL) programs are a bridge that can help students get work experience without leaving them as vulnerable to an unstable labour market.

“The stakes are higher for diverse students such as women and visible minorities, groups that face greater career obstacles even in the best of times,” authors wrote. “While there is no cure-all for graduating into a recession, work-integrated learning (WIL) programs offer a way to improve labour market outcomes.”

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One of the things authors looked at was the impact of graduating during the 2008 recession. They found that the percentage of university graduates in high-skilled jobs dropped by 20 percentage points in this time period compared to the pre-recession peak.

“This disruption took more than three years to recover,” the report stated. “When opportunities are hard to come by, workers often settle for less, and that affects the skills and earnings they are able reap.”

While COVID-19 caused a similar disruption, the rebound was quicker, according to the report.

While recessions damage the ability of all workers to find high-paying jobs or opportunities that will lead to a steady career ascension, the impact is much stronger for younger workers, researchers found. Canadians aged 20-24 were the group impacted the worst by joblessness during the last three recessions—2020, 2008 and the 1990 recession.

Students who graduate during a recession can still be earning less than peers who graduated at a time of financial calm, even years later. Researchers found that the loss of wages amounted to about nine per cent of annual earnings, and that this deficient persisted up to 10 years after graduation.

The issue of workers suffering from lower earnings due to a recession is particularly serious for women and Canadians who are a racial minority. Before factoring in graduating during a recession, these groups already earn less than their peers after graduation, with the gender wage gap only widening as workers age.

“People who start out behind are more prone to stay behind, and women are more at risk,” the report stated.

The report cited recent StatCan data which showed that visible minorities earned around eight per cent less than their peers after graduation.

A graph displaying the employment income gap for racialized Canadians found that West Asian and Arab women were earning the least in comparison to the baseline, approaching 15 per cent lower wages. Chinese men, Black men, Filipino men, Southeast Asian women and Korean women also all earned 10 per cent less than the baseline, on average, the graph showed.

One way that workers can mitigate the impacts of entering the workforce for the first time during a recession is to take part in WIL programs while still at school, in order to build up more experience and contacts, the report suggested.

Recent StatCan data showed that bachelor’s graduates who took part in WIL programs went on to have seven per cent higher earnings than those who didn’t, authors noted.

“This is most relevant for students as their first job after graduation can either become a solid ground or stumbling block for their career in the long run.”

The report added that WIL programs can help women and those in visible minorities to close some of the gap they will be faced with when they enter the labour market full-time. Co-op programs have been shown to help students go on to have higher wages than peers who did not take part in them, the report said.

The unemployment rate in Canada was 5.8 per cent in December, a rise since the low of 4.9 per cent in July of 2023. With job searchers feeling the pressure, it’s Canadians from disadvantaged groups who stand to lose the most if a recession hit.