Youngest workers facing financial crisis

The youngest members of America’s workforce face financial challenges that are impacting their ability to live independently and build financial stability. Pressures that have existed for years have been exacerbated by the COVID-19 pandemic, which has added job market uncertainty to the mix. Add to that crippling student debt loads coupled with skyrocketing housing costs, and many new college graduates and young workers find themselves not only overwhelmed, but unable to live independently.

‘Disconnected youth’

During the past decade, young Americans had made strides to recover from the impacts of the 2008-2009 recession, according to the Social Science Research Council’s Measure of America, which tracks the rate of disconnected youth — those between the ages of 16 and 24 who are neither in school nor working.

According to SSRC’s research, the national youth disconnection rate fell for 8 consecutive years, from 14.7 percent in 2010 following the Great Recession to 11.2 percent in 2018. That translated into roughly 1.5 million fewer young people “cut off from pathways that lead to independent, rewarding adulthoods,” said the report.

However, SSRC expects the pandemic to erase those gains, causing the disconnected youth rate to spike to levels higher than during the Great Recession. The number of disconnected youth could easily top 6 million and may even swell to nearly 25 percent of all young people, SSRC said.

Too costly to live on their own

One indicator that young Americans are suffering under the weight of the pandemic and other financial burdens is the rate at which they are moving home to live with parents or grandparents. According to real estate marketplace Zillow, nearly 3 million young adults in the U.S. moved in with a parent or grandparent last spring as the pandemic began to take hold, the majority of which were Generation Z, or those between ages 18 and 25.

While the percentage of young adults who live at home typically fluctuates from season to season as college students move between living arrangements at school and home, the pandemic triggered an unusually dramatic 9.7 percent year-over-year increase in adults living at home.

About 32 million adults lived with a parent or grandparent during the height of the pandemic, an all-time high, according to Zillow.

In addition to the surge in students returning home after nationwide closure of college campuses, Zillow said young adults were overwhelmingly driven back home by the major labor market swing caused by the pandemic.

The number of employed young adults dropped by at least 5.9 million and a large percentage of those were struggling to find work several months into the pandemic, Zillow said.

While the numbers rose sharply as a result of the pandemic, young adults living at home was already a common situation. Prior to the pandemic, 46.5 percent of employed young adults were already living in a parent’s home, a number that rose to 49 percent as the pandemic took hold.

Unusual challenges for Class of 2020

Perhaps it’s not surprising that many young adults are living with their parents. Class of 2020 college graduates faced an unstable job market punctuated by unusual remote interviewing processes and work-from-home arrangements last year.

In addition, some graduates found that jobs they thought they had secured prior to the pandemic were no longer theirs.

According to a poll completed last summer by the National Association of Colleges and Employers (NACE), nearly 8 percent of employers revoked or planned to revoke full-time offers to class of 2020 college graduates, a figure on par with levels reached during the Great Recession of 2008-2009. Nearly a third of those polled planned to delay start dates for full-time hires from the Class of 2020.

The prospects for Class of 2021 graduates are a bit more positive, said NACE, pointing to industries like chemical manufacturing, support services, information and wholesale trade that are planning to increase college hiring.

However, more than half of employers surveyed by NACE said they plan to maintain college hiring levels, and nearly a third said they will decrease college hiring.

Student loan debt increases financial pressure to crisis levels

The fluctuating job market brought on by the pandemic is adding to financial pressures college graduates and young workers have been facing for years, including increasing student debt loads and out-of-reach housing prices.

More than half of public and nonprofit college students in 2019 graduated with student loan debt, according to data compiled by Student Loan Hero. Average debt was $29,900, including both private and federal debt. All told, Americans owe more than $1.71 trillion in student loan debt, more than the entirety of U.S. credit card debt.

The student loan debt situation is so alarming that it is often referred to as a crisis for young Americans, and employee benefits professionals are looking at student loan repayment help as a potentially important benefit to provide to employees.

Add to that skyrocketing housing costs

Meanwhile, young Americans entering the workforce already struggling to pay their student loan obligations are finding it difficult to afford housing as prices are increasing at a much higher pace than salary growth. In some markets, young adults are unlikely to be able to afford even basic housing.

For example, a studio apartment in San Francisco now costs more than half a million dollars, while a one-bedroom house will set buyers back close to $900,000 on average, according to research compiled by eachnight.com.

The research determined that single buyers are priced out of 32 percent of U.S. cities, including Boston, Denver, Las Vegas, Los Angeles, New York City, San Diego, San Francisco and San Jose.

In San Francisco, New York City, Boston and San Jose, a single buyer would need a six-figure salary to afford a one-bedroom home, a situation that paints a bleak picture for young professionals dreaming of home ownership, according to the report.

Smart decisions about stimulus money

Pandemic-related stimulus money has provided some relief for young working Americans, many of whom are making smart decisions about how to use that money.

According to a survey by Axios, the majority of college students (62 percent) plan to save or invest the $1,400 stimulus payment, while 44 percent plan to use it for essentials and 27 percent plan to pay down debt. Lower on the list was paying for clothes (7 percent) and traveling or entertainment (8 percent).

Kristen Beckman is a freelance writer based in Colorado. She previously was a writer and editor for ALM’s Retirement Advisor magazine and LifeHealthPro online channel. She also was a reporter for Business Insurance magazine covering workers compensation topics.

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