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The Econo Miss

by Archives March 25, 2008

It has been called the worst financial crisis since the Great Depression. There is a housing recession, consumers are cutting back, the American dollar has collapsed and major banks are having a meltdown. As university students across North America graduate this year, the effects of recession will be felt far into their careers.
The economy has an important role in deciding the quality of jobs available to students right out of school. When times are good, graduates have a variety of jobs to choose from and can expect a higher paycheck. During recession, graduates who are just entering the workforce may have to settle for less than ideal jobs or decide to get post-graduate education.
Research presented by Phil Oreopoulos of the University of Toronto, Till von Wachter of Columbia, and Andrew Heisz of Statistics Canada on university graduates entering the workforce during recession paints a bleak picture for those looking for their first job.
Their data covers 20 years of students graduating within two large recessions of varying strength across 10 different regions in Canada and the United States. They found that young grads experienced significant initial earnings losses during a recession. This earning loss only equaled out after eight to 10 years of working, and after grads had worked in inferior environments and had bounced around from job to job.
Recession hits distinctive sectors differently. Students with general diplomas and low skills reported larger and longer lasting earnings losses. Those with highly specialized degrees were the least affected and their earnings losses were relatively small and short lived.
During the first 10 years after graduation, alumni experience a 70 per cent overall wage growth if they enter the job market when the economy is robust; eventually settling into a certain industry or field.
During recession, students may have to start at smaller and lower paying firms and switch jobs more frequently. The study found that switching jobs was more productive and allowed grads to catch up on their earning loss quicker.
Newly graduated MBAs, banking and finance students will be the hardest hit. Paul Oyer, wrote in the Journal of Finance that stock market conditions greatly affect whether finance and business students went onto their fields of choice or not. Oyer found that a graduate’s first job has a strong impact on their career path and total earnings over a lifetime. Someone who graduates in a bull market and works in investment banking earns an additional 1.5 to 5 million than what that same person would have earned during a bear market.
Recession-proof jobs include medicine and anything related to healthcare; doctors are always in demand and because it takes so long to finish medical school, they may miss out on the recession. Nurses, medical assistants and physical therapists should also feel few bumps this year. Jobs related to energy, oil and gas, and alternative energy sources should also be safe bets.
Many students stay in school to avoid graduating during a recession. As seen during the last economic downturn in 2002, there was an increase in applications at law, business, journalism and education schools. Laid off workers and undergrads preferred to avoid the recession by furthering their skills.
Those who decide to enter the job market during recession must be prepared to be flexible, possibly working for smaller companies, for less pay, and in a less than ideal field. If graduates do find a job, and if the economy worsens, they should be prepared to lose it. They should also negotiate a suitable salary, because when the market is bad, companies will try to underpay. Graduates should also be prepared to take on a different job if something better comes along. Most importantly, students should try to stay out of personal debt.

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