I recently watched a video on YouTube from CNBC Make It entitled “What It’s Like To Graduate Into A Recession” and it got me thinking about my own experience graduating into a terrible recession. These students from the class of 2020 described the troubles they were facing. Many of them were moving back home with their parents. They had no money. They were unemployed. And perhaps most devastating for them, employers had rescinded their job offers.
It’s a testament to how good the economy has been that these kids already had jobs waiting for them. When I graduated from college in 2009, no one I knew had job offers. At that point, the financial crisis was in full force. Lehman Brothers had collapsed a year earlier. The S&P 500 had dropped nearly 50% over the past 18 months. Most of us ended up moving back home, grabbing whatever low-wage jobs we could get. If we were lucky, we got unpaid internships to try to make our resumes look better. And I thought this was all completely normal for a new college graduate – after all, I’d never graduated from college before.
Anyway, I can old-man shake my fist at these young rugrats and tell them how much harder things were in my day and how I had to trudge 2-miles to class up snow-covered hills with no iPhones, or Uber, or Spotify to listen to. But this isn’t a competition about who had it worse.
The truth is, we’re in the same boat. In 2009, I dealt with a world that ruined my start into adulthood (or whatever you call those first few years out of college). It was tough being in the class of 2009. It’s just as tough being someone in the class of 2020. But there can be benefits too.
The Things That Will Be Bad About Graduating In 2020
First, let’s get into the bad stuff. Things are going to be rough for these new young people entering the world. Here are some of the negative impacts that will result from graduating in 2020 – some obvious, some perhaps less obvious.
You’ll be unemployed or underemployed.
Unless you get lucky, more likely than not, if you’re in the class of 2020, you’re going to end up being unemployed, or at best, underemployed. Interestingly, underemployment is going to look very different right now. You’re probably not going to have an easy time grabbing a job as a waiter or bartender or barista or lifeguard at a pool.
Instead, the new path to underemployment is going to be doing things like working in a grocery store or packing boxes at an Amazon warehouse or doing stuff in the gig economy (relying on the gig economy might not be the worst thing though – more on my take on that in the next section). My guess is that if the economy continues to drag on, you’re going to see companies start pushing unpaid internships. The people that don’t need the money will take these internships too, if for no other reason than to avoid the resume gap.
A lot of you are going to end up with massive student loan debt.
When you’re unemployed or underemployed, a natural instinct is to ride things out in school. This is essentially what I did in 2009 – I didn’t have a real job and didn’t have any real prospects, so I took the LSAT and went off to law school. Law school is one of those professional programs that a lot of people stumble into simply because there aren’t any prerequisites to get in – you can literally study anything in college and still go to law school.
Even though I had a 50% scholarship, I still had to take out $87,000 worth of student loans. Most of my classmates came out with much more than that. By the time I got out of school, the recession was subsiding. But now instead of having no money, I now had no money and was in the hole for almost 100 grand.
Law school and other graduate school applications reached their peak in the years right around the financial crisis. I’m willing to bet that in the coming years, law school and business school applications will see another peak as more people apply to them in order to ride out the downturn.
I like school – if I could, I’d be a student forever. But going to grad school just to avoid a recession is likely going to be a mistake. The problem is, most people in a recession head off to grad school for the wrong reasons – not a passion for anything, but really just because it’s something they think they can do. Along the way, they take out six-figures worth of student loans, then find out years later that it wasn’t worth it.
My advice, if you’re going to go to grad school, you better really have a good reason to go.
You’re going to hit life milestones later.
This is a common talking point whenever you talk about millennials and younger generations – how we’re hitting life milestones later. In the past, people would talk about all the traditional markers of adulthood that people are supposed to check off. Things like getting your first job, buying a house, having kids, etc.
A lot of these life milestone things, I think, aren’t really that important – more a product of an earlier generation that didn’t have as many options. Even with a good economy, many of us would choose to push these life milestones back simply because they’re less important to us. Still, if these life milestones are things you care about, it’s likely you’ll be behind on them simply because your adult life started later.
Your lifetime earnings are going to be lower – and you might never catch up.
When I graduated from college in 2009, I found myself with a very skewed view of what I thought was a good salary. In bad times, salaries – especially starting salaries – see marked declines. And those first numbers you see impact you for the rest of your life. I remember being excited for the chance to get a job paying $15 per hour (or about $31,000 per year). One of my best friends – any Ivy league graduate – got a job paying around $40,000 per year. We all thought he had hit the jackpot.
Studies show that graduating into a recession has large, negative, and persistent consequences. This all makes logical sense. Your starting salary is likely to be lower. You have to take out more student loans and get more education just to get the same jobs that others were able to get before. This lower starting salary means that your future salaries will be lower too – based around the base salary you began with. The impact of this lower starting salary extends far into your working career, to the point that you might never catch up to peers that graduated in more fortunate times.
The Class Of 2020 Has Things That Previous Generations Didn’t Have
That concludes the doom and gloom portion of this post, and while there are real issues for this class, I’m optimistic about some of the things that exist today that didn’t exist when I was a 22-year old college graduate in 2009.
The first is the internet. Of course, the internet did exist during the financial crisis, but it really wasn’t the same thing as it is today. I didn’t get high-speed internet until I was in high school. By the time I graduated from college, high-speed internet had really only existed in my life for 6 or 7 years. The things that are ubiquitous today – sites like YouTube, Facebook, Twitter – were still in their infancy and people were still figuring out how these sites worked. Netflix wasn’t even a streaming service yet – I’d go over to friend’s houses to watch DVDs that came in the mail.
Given how new the internet really was just a decade or so ago, the idea that you could somehow make a living for yourself using the internet wasn’t a reality for most people. Only the most forward-thinking people could really understand what you could do with it. Contrast that with this new crop of graduates and what they have to work with. They might not be able to get jobs – but they have far more opportunities to create their own jobs.
Smartphones are another technology that didn’t exist during the financial crisis – at least not at the level it is at today. We kind of take it for granted that phones really only become a big deal in the past 5-7 years. I didn’t get my first smartphone until 2013!
The smartphone might go down as the most important invention in the past 100 years, literally putting the entire world into your pocket. And when you have the world in your pocket like this, you have many more opportunities to create something and get it out there.
The last big thing that this new generation has that I didn’t have is the ability to earn money via on-demand gig economy or sharing economy apps. When I graduated from college, my only option to make money was to find a job that paid me a set hourly wage – typically somewhere close to minimum wage. There was no way I could increase my hourly earnings except by trying to find another job that paid me more (which isn’t easy to do when you’re in a recession). These jobs also had no flexibility. I had to work based on a schedule, which meant I couldn’t use my time in the way I thought would be best.
The gig economy changes that completely. It’s possible to work in small chunks, whenever you want. If you’re good at what you do, you can increase your earnings as well. I’ve always considered myself better than most people at earning money with gig economy apps, and part of the reason is that I’ve been doing them for a long time and know the best way to use them to earn the most money. A lot of people think of apps like Uber and Doordash as time-for-money type jobs, but that’s not exactly right. You’re not exactly trading hours for dollars.
The point is, even though times are tough, those of you in the class of 2020 have more opportunities than people had in earlier generations. The entire world is literally at your fingertips. You don’t need to wait for someone to pick you. As Seth Godin says, you can pick yourself.
Potential Benefits With Graduating In Tough Times
I wrote about this in another post last year when I was reflecting on the possible benefits of graduating during the financial crisis. As bad as things will be, I do think that graduating during the financial crisis is partially what set me up on the path to financial independence. Think of these benefits that come with graduating during tough times:
1. You’ll be scrappier. I define scrappiness as the ability to make things work, no matter the situation. Those of us that graduated during the financial crisis really didn’t have a lot of choices. We had to figure something out or we were going nowhere. If you’re graduating now, you’re going to get much better at making things work.
2. You’ll be much more humble – and perhaps happier because of it. I’ve always thought there’s a lot of benefit in understanding how to be humble and becoming a big shot right out of the gate can really take away that sense of humbleness. I know that I had this issue when I landed my first real job as a big shot lawyer at a large law firm. My sense of self became tied to my job and the prestige that I thought it gave me. All I did was compare myself to others.
Doing these gig economy jobs helped me to see things differently. It humbled me and gave me more of a level head. After all, it’s hard to be full of yourself when you’re out there being a simple deliveryman.
You should be confident in your abilities. But being successful with money often requires being happy with the things you have and not necessarily always striving for more. Getting knocked to the ground early on might be a good thing – at least in this sense.
3. You’ll have less lifestyle inflation. Lifestyle inflation is the big killer when it comes to money. When times are good, it’s easy to see how fast your lifestyle can inflate. But if you have to move back home and work jobs that are beneath what you thought you’d be doing, you’re probably going to be less likely to fall into the lifestyle inflation trap. This can have huge benefits for your life going forward.
4. You might be more inclined to make the move towards self-employment and entrepreneurship. I think one of the best ways to create a lifestyle you love is through self-employment and entrepreneurship. A lot of financial independence rhetoric seems to focus on grinding through a job you aren’t very fond of for a decade or more, then once you’ve set aside a large enough nest egg, quit that job and do the thing you really want to do.
That just seems backward to me. Work is such a big part of our life. You shouldn’t just tolerate it. Instead of running towards financial independence, why not create your own financial independence?
In a world with no jobs, the class of 2020 might have no options but to try to make something of their own. I think this could be a huge benefit. Back in 2009, I wish I had realized the opportunity I had in front of me to take a chance creating something out of nothing. The time to take risks is when you’re young. And there’s probably nothing less risky than a 22-year old trying to create something for themselves.
5. You’ll discover the worst-case scenario isn’t as bad as you thought it would be. One of the things most of us do is we assume the worst-case scenario when it comes to our decisions. The truth is, though, very few decisions or actions in our lives are truly life-ruining.
If you feel like you have to go to grad school right now or that you can’t risk taking a few years to try to create something of your own, just take a step back and realize how long life really is. You most likely aren’t going to end up homeless or in the streets. Things might be tough, but whatever you think is the worst thing that can happen, more likely than not, it won’t really happen.
To the class of 2020. This sucks. That’s probably the most succinct way to describe the situation that you’re entering into. I feel for you. But remember that life is long. You have so much time on your side.
A year ago, I wrote about the benefits of graduating during the financial crisis. I said that I couldn’t read the future, but eventually, there was going to be another class of graduates that enters into a job market at the absolute worst time. It won’t be a happy time. But even during the crappiest times, there are benefits that’ll make you stronger. I have no doubt that this class, like the class of 2009, will do some great things.