The high-employment generation

The lives of Americans my age are overwhelmingly defined by a single formative experience. Not the September 11 attacks, which happened at the beginning of my junior year of high school, but the global financial crisis. Obviously both events affected Americans of all ages old enough to remember them, but people my age had the unique privilege of entering the workforce during the highest period of unemployment since Reagan’s first term.

After spending a year teaching English abroad, I returned to the United States in July, 2008, when the unemployment rate had just reached 6%. It would continue to rise before cresting in January, 2010, at 10.6%, and beginning the long, slow decline which has brought it down to 4.5% today.

For 18 months new college graduates were looking for work in an environment where more jobs were being destroyed than created. And college graduates had it lucky compared to the high school graduates they were suddenly competing with for low-wage work.

I say all this by way of background, since it’s essential to understanding why people in the brief cohort that came of age between roughly 2007 and 2013 (when unemployment dropped to 6.5%, its previous post-9/11 peak), turned out the way we did, and because it gives a framework for insight into the generation coming of age today.

What will the high-employment generation look like?

Coming of age today means rather than entering the workforce at at time of historically high unemployment, new workers are seeing unemployment low and falling, while wages continue their slow but steady trot higher.

By analogy, I’d like to suggest a few consequences this has for 18-to-22-year-olds entering the workforce today.

• Less education. Many folks of my generation were able to hide out in the universities while the recession raged around us. Besides a modicum of debt-financed financial security, a by-product was more education. Between 2005 and 2015, the percentage of advanced degree holders rose by a full 25%, from 9.6% to 12%. With plentiful jobs and rising wages, fewer people will be inclined to sit out of the job market, and I expect the number of advanced degree holders will flatten or decline in the coming years.
• Less entrepreneurial. Just among my friends from high school and college, I know two app developers, one bitcoin millionaire, one event photographer, and one acrobat. Plus one blogger, if you want to count me. And I didn’t have many friends! We started businesses because what else were we going to do? Today’s graduates don’t have that problem, and I expect the high-employment generation will start somewhat fewer businesses since the tradeoffs between formal employment and self-employment will be concrete in a way they weren’t for my generation.
• Less radical. The radicalism of my generation is based on the fact, manifest everywhere you looked, that the system of global capitalism had proved itself yet again incapable of providing stable growth. A system prone to the periodic immiseration of a broad swathe of society based on accidents of timing was a bad system, it needed to be destroyed and replaced with a system that was more resilient. That’s as true today as it was in 2008, but with the passage of the radicalizing moment, I expect today’s generation to have much more incrementalist views on change. For example, in a period of high unemployment and marginal work, the absurdness of employer-based health insurance was obvious, and enormous effort was expended making health insurance less dependent on employment. In a period of high employment and steady work, most people will be mostly satisfied with the insurance they get through their employer, and radical changes will be harder to mobilize young people around.
• Less gig employment. Companies like Uber and AirBnB have been able to survive for three reasons: the low cost of capital; the weakness of state and local regulators; and the labor surplus. While I don’t foresee states and localities stepping up their regulation, rising interest rates and wages will make it harder and harder to continue operating unprofitable businesses. Such firms are only ever one funding round away from insolvency, and it’s impossible to predict when investor sentiment is going to swing away from them. But any attempt to extend their funding by cutting the income of drivers and renters will push people out of the gig economy into the formal labor market. That’ll be especially true as attacks on the Affordable Care Act like we’re seeing in Idaho make comprehensive health insurance unaffordable to gig economy workers.
• More family formation. Whatever the underlying long-term trend in marriage rates, superimposed on that trendline is the overall economic well-being of young people, and I expect the current generation will see both earlier marriages and more marriages as they enter the workforce with stable, long-term employment.
• Higher lifetime incomes. It’s frequently observed that people who enter the workforce during a recession have lower lifetime incomes, as their future raises are “anchored” to the relatively low base they began their careers with. The flip side of that is also true: if my generation saw a lifetime earnings hit due to an accident of timing, the present generation will see higher lifetime incomes as their future income is anchored to a higher starting point.

Conclusion

There are only a few periods in post-World War II history when unemployment has been as low as it is today, and the key unknown is which of those periods our present moment will most resemble. Will it be 1964, when unemployment stayed low for another 6 years? Or will it be more like 1973, 1997, or 2006, when low unemployment was followed by long, grinding recessions? The answer to that question will determine how long the high-employment microgeneration lasts, and how many of the predictions I made above will bear out.

Meanwhile, it’s possible to pursue policies that encourage the best results of low employment (higher lifetime incomes, more family formation) while mitigating the worst results. For example, simplifying the tax code is always worth doing, but it’s especially worth doing in a period of declining entrepreneurship in order to offset the appeal of formal employment. Reducing the burden of tuition is always worth doing, but it’s especially worth doing in a period when advanced degrees are relatively more expensive due to the more lucrative job opportunities available.

And finally, if the relative ease with which young people could be radicalized against global capitalism in a period when its failures were obvious made radical organizations lose their rhetorical edge, then the relative prosperity of the current generation will quickly marginalize organizations that do not have a message that continues to resonate under today’s actual existing economic conditions.