Why the Covid-19 financial crisis will leave lasting scars on Gen Z

Graduation was supposed to be one of the best moments of Stephany Torres’s life.

As a first-generation student at the University of California Los Angeles, Torres was looking forward to celebrating her new degree with friends and family. After graduation, she was supposed to have an internship at a law firm in Los Angeles, making new connections and getting more insight into the type of law she wants to study.

Instead, graduation and the internship were cancelled. Torres, 21, who is from South Central Los Angeles, was laid off from her on-campus job that was helping her pay her rent and support her mother. She moved back home, and while she is planning on taking on a research position at UCLA, she has been trying to look for paid positions in the legal field.

“I had built up my resume to land an internship like this,” Torres said. “When that was taken from me it was really hard because I just feel so much uncertainty right now.”

The coronavirus pandemic has hit every generation hard, disproportionately killing older Americans and spreading economic fear across the entire country. For Gen Z, people born between 1997 and 2012, life has practically been upended and the ramifications of the virus and the financial crisis it has engendered threatens their livelihoods for years to come.

The unemployment rate for teens ages 16 to 19 peaked at 31% in April, more than double the national rate of 14.7%. College graduates who only months ago were on track to enter one of the best job markets in US history have instead landed in one of the worst. A slate of summer internships and jobs have been cancelled and they are worried about their parents struggling to pay bills.

A good chunk of Gen Z is still in school – the youngest are just eight years old. But for older “zoomers”, the effects of this economic downturn will likely be felt for years as they try to start careers and build savings with an economy that was struck to rubble.

“Early career events like this tend to have scarring effects, they tend to persist over time,” said William Gale, a senior fellow at the Brookings Institution. “The jobs available or the wages available won’t be as good as they would have been otherwise.”

Grace Miller, 20, who will be a junior at Penn State University in the fall, emailed a local newspaper about potential internships before shutdowns began. She was told that she could potentially take on a paid position instead of an internship, but the publication stopped responding to her inquiries once shutdowns began.

Instead Miller is working at a restaurant this summer, trying to build up savings for rent and textbooks for the next school year. Her dream is to eventually work in a city like New York or Los Angeles, but she is unsure whether that dream will be a reality in a post-pandemic world.

“With journalism, there are so many newsrooms that are already struggling for money that are already cutting jobs. [Getting a job] was already going to be difficult in the first place, but add in this whole new situation and it’s concerning,” Miller said. “I’d like to think that by the time I graduate, maybe this will all be over, but I really highly doubt that.”

The US has already seen how a recession can undermine a whole generation’s ability to navigate their careers and build wealth: millennials, the group of people born between 1980 and 1996, have pretty much been defined by the effects of the last recession.

Research shows that the oldest millennials never fully recovered after the last recession hit the job and housing market. Millennials lost an estimated 13% of earnings from job cuts and reduced wages during the recession that they never got back.

A reduction in earning creates a cascading effect, especially since millennials are likely to have thousands of dollars of student and medical debt. And while those without a college degree may not have student debt, they are making far less than those with a college degree – a gap that has widened over the last few decades.

Debt makes it harder for a person to save and accumulate wealth in the form of assets. Young Americans have delayed buying homes, the most common way the average American builds wealth, due to debt and rising housing costs. Millennials have also delayed major life events, like starting families.

“Wealth inequality has worsened over the past 50 years, and you start to look at what groups are affected, and its young Americans,” said Signe-Mary McKernan, a vice president at the Urban Institute. “They’re barely breaking even with their parents. It used to be in America that every generation did better than the previous generation, but that’s no longer necessarily the case.”

The burden of debt and lack of wealth in the millennial cohort has had major health consequences. A report from the Stanford Center on Poverty and Inequality found that from 2008 and 2016, the mortality rates of people between the ages of 25 and 34 increased 20%, largely because of suicides and drug overdoses. These kinds of deaths, often called “deaths of despair” are closely tied to the economic troubles a person experiences that leads to hopelessness.

Gen Z is, of course, different from millennials, as members of the former love to point out. But David Grusky, a professor who put together the Stanford report, said millennials are the “canaries in the coal mine who reveal just how toxic these problems are”.

There is some hope that Gen Z is learning something from its elders. A study from earlier this year showed that Gen Z was increasingly careful with money and less likely to take out student loans than millennials.

Cyril King, 18, of West Haven, Connecticut, unenrolled from his dream school because the university was asking him to pay too much tuition – $35,000 – out of pocket. Losing a job he had in the spring hurt his finances, so King decided to enroll at Colgate University, which provided more financial aid and guaranteed that he would graduate debt free.

“I have dreams and aspirations. I want to help people. I want to be a lawyer, hopefully representing people who are unrepresented. Going to law school is another thing as well, so getting to leave without being in debt is perfect to me,” King said.

Many in Gen Z are also watching their parents struggle with unemployment or reduced hours at work amid shutdown orders and are aware their families cannot handle a big expense like college.

Taylor Pittman, 17, of New Orleans, Louisiana, said getting a full-ride scholarship to a college is the goal motivating her into her senior year of high school. Pittman has four internships this summer, all while helping care for her younger brother as her parents continue to work.

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“I really just want [college] to be free so my mom and dad don’t have to stress out about paying for anything related to school,” Pittman said. “My mom and dad’s pockets can only stretch so far.”

When it came to deciding what college to go to, Jonathan Donis, 17, of Los Angeles made a list of schools that provided him with enough financial aid to graduate debt-free. The pandemic hit his family hard. His parents, essential workers who cannot work from home, have been working reduced hours and are seeing lower wages.

By going to college, Donis, who is going to Stanford University in the fall, hopes he can use his education to eventually help support his parents and his younger siblings.

“My parents always joke around like ‘you’re going to buy me a house when you graduate, right?’. I’m like, yeah, I want to own a house. I want to have a nice car. All those things that you see other people have that you don’t. I think that’s one of the things I want to do, help my parents and also help my siblings,” Donis said.