Gen Z Is In An Underemployment Crisis — The Consequences Could Be Long-Term

The coronavirus pandemic has left the economy and job market in shambles, as entire industries came to a sudden stall beginning in March. Around 12.6 million Americans remain officially unemployed, seven months after the shock of COVID-19 first hit. In April, the overall unemployment rate shot up to 14.7%, while in February it was around 3.5%. 

But a new report by the Economic Policy Institute gives us a closer look at just how much of a mess things are for Gen Z in particular. For people between the ages of 16 to 24, unemployment was around 24.4% this past spring, hitting a high of 26.9% in April. As of September, youth unemployment remains elevated far above the rate for the general population. For those between 16 to 19, it was 15.9% last month, and for those between 20 to 24, it was 12.5%. The national unemployment rate in September was 7.9%. An analysis by the Brookings Institution found that 16 to 29-year-olds make up under a quarter of the whole labor force, yet “they accounted for about a third of the rise in the unemployment rate between February and April of this year.”

While youth unemployment has typically been higher than that of older people, COVID-19 has widened the gap stunningly. The situation is especially grim for non-white Gen Z. In the early months of the pandemic, the unemployment rate for young Black people was 29.6%; for young Asians, 29.7%; for young Latinx, 27.5%. Black Gen Z had the highest unemployment rate in spring 2019 (14.5%), while Asians saw the highest jump, from 6.4% pre-COVID to almost 30% by spring 2020.

In part, the high unemployment rate is due to the fact that young workers tend to be concentrated in retail, hospitality, and leisure industries, which suffered some of the heaviest blows from COVID-19 lockdowns. Younger people are also more likely to be doing precarious work, like taking temporary gig economy jobs with uncertain hours, rather than holding full-time salaried employment.

But the unemployment rate doesn’t tell the full story of Gen Z’s job struggles — a more expansive measure to look at is underemployment, which includes not just people who are seeking a job but haven’t found one, but also those who have given up actively job hunting and those who work part-time yet need additional employment. This kind of “involuntary” part-time worker is becoming increasingly common in our economy, as there’s plenty of low-paying gig work but a relative scarcity of secure, well-paying jobs that also offer necessary benefits like healthcare. A full 35% of Gen Z people are underemployed, and that number rises to about 40% for non-white Gen Z. It’s highest for Black and Asian men, at 44.4% and 46.3% respectively.

Sometimes, youth unemployment is shrugged off as if it isn’t a big deal — there’s a perception that they’ll be okay because they’re young. It’s okay to be destitute when you’re in your late teens or early 20s, working awful jobs that pay little, because one day you’ll make it. There’s even a sense that this is how it should be; young people subsist on a Cup O’Noodles diet and live with ten roommates, because this is the kind of character-building struggle you’ll need as a more mature adult.

It’s time to let go of these myths. The underemployment crisis will have long-term effects on the young people it’s disproportionately affecting even after they find a job. Those who should be building up their résumé with valuable, relevant work experience are instead starting off their career in low-quality jobs that won’t advance them to higher-paying opportunities. According to the EPI, research shows that millennials during the Great Recession did not fully “catch up” after the recession ended and the economy recovered. The report notes that “exposure to the recession led to continued earnings losses as late as 2017,” and found that millennials lost an average of 13% in earnings between 2007-2017, compared to a 7.1% loss during that period for Baby Boomers. Underemployment for young workers facing a recession also contributes to a ripple effect; millennials who struggled through the Great Recession are staying longer in the lower rungs of their careers, which can mean fewer entry-level opportunities are available to Gen Z workers now.

The solution, according to the EPI, is not to tell Gen Z to just walk into businesses to hand out their résumés, giving everyone a firm handshake — their recovery requires investment, whether in the form of additional COVID-19 relief, raising the federal minimum wage (which was last raised over a decade ago), or efforts to lower the cost of college and the enormous student debt that young people face today.