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Economic factors shaping young workers

The GFC and Covid-19 have impacted how millennials and gen z approach potential employers.

How do we attract the best talent of tomorrow? It’s probably a question you’ve asked or heard someone else ask before. No matter what your business does, talented employees are bound to help it progress. Finding the best talent for the future is imperative to success.

In the past, good pay has been what employers relied on to attract the right people. The more they were able to pay, the better candidates they were likely able to reach. While pay is obviously still important, there are other factors that younger workers think about when making decisions about what roles they will take – particularly in the wake of two recessions within recent memory.

With that in mind, forward-thinking employers are looking at what they can do to set themselves apart from others.

Here is a look at 3 of the economic factors shaping the perspectives of young workers.

1. Entering the workforce in a recession

The global financial crisis of the late 2000s had lasting impacts on millennials (1980-1996) and the generation after them, known as generation z (1996-2010). 

When the financial crisis hit in 2007, the ‘oldest’ millennials were in their late 20s – relatively new to the workforce. Their younger millennial siblings were at school considering what they would study. Or, they were at university, considering what jobs they would take in the future. Those who had finished their degrees were looking for full-time work in what had quickly become a very tight job market.

Millennials who entered the workforce during the global financial crisis experienced less economic growth in their first decade of work than any other generation.¹ They have lower incomes and fewer assets than previous generations at comparable ages.² 

What’s more, a Yale study found that starting from a lower base income has significant effects in each subsequent year of an earner’s lifetime.³ For a typical worker, the loss amounts to roughly $80,000 over a 20-year period.

Now, gen z is placed to enter the workforce at yet another economic downturn. While those who are able to land jobs in the short-term will be better positioned to make ends meet, these same young people can rightly be concerned about their financial futures. 

The research suggests they are worried. In late November 2019, consultancy Deloitte surveyed millennials and gen z from across the globe to understand how they think and feel.⁴ Of course, the world changed dramatically in the months that followed with Covid-19, so Deloitte took a second ‘pulse survey’ in April 2020 to see how the results had changed. 

The survey found that family welfare, long-term financial futures and job prospects were the top concern of both millennials and gen z in 2020. It also found that 41% of millennials and 43% of gen z experience anxiety or stress about their financial futures. 

As of April 2020, the pandemic had greatly impacted millennials and gen z’s income. 30% of gen z and a quarter of younger millennials (25-30 years old) had either lost their jobs or been placed on temporary unpaid leave because of the impacts of Covid-19. 

Across the globe, about 1 in 5 millennials were put out of work due to Covid-19. Just one third of millennials who took the pulse survey said they had been unaffected. It’s likely that millennials and gen z will need to pay for the measures taken over the next few decades, which could see wage growth stagnating for the foreseeable future.

2. Student debt is high while credit cards are avoided

So, young people are concerned about their financial futures and many are putting measures in place to stay in control – in particular, many are avoiding personal debt.

Even before the pandemic, many millennials had an aversion to credit card debit, likely because this kind of debt put their parents at risk when the global financial crisis hit.

  • In Australia, millennials are 37% less likely than older Australians to own a credit card. Those who do own credit cards are found to use them more conservatively, holding 45% less credit card debt than older Australians, as a percentage of their income.⁵ 
  • In the US, the Centre for Generational Kinetics found that 1 in 4 of gen z and 1 in 5 millennials believe personal debt should be avoided at all costs. 1 in 3 of both generational groups think personal debt should only be used for certain items.⁶
  • In the UK, YouGov research found barely half of the 13 million millennials own a credit card and 93% of those who don’t own one do not plan on getting one soon.⁷

While personal debt is avoided where possible, millennials carry far more student debt than other generations. In the US in 2020, there were 45 million people who owed a collective total of $1.5tn in student loan debt.⁸ 

According to Gallup, even though they are highly educated, millennials have a tough time landing the jobs they want as they are often overqualified for the ones they find.⁹ 

Lower wages, coupled with unemployment and underemployment have caused financial constraints for more millennials, the same Gallup report states. These levels of employment, plus lower wages and student debt are likely to hurt their levels of financial wellbeing.

3. Long-term thinking impacts loyalty

Planning and saving for the future are key components of financial wellbeing, along with having financial goals or aspirations to help sacrifice spending now to save for later. When employees can rely on their employer to support them in the long-term, they are better placed to make positive decisions to help maintain their long-term financial wellbeing. 

They are also more likely to be loyal to their companies who have looked after them.

But loyalty doesn’t come naturally to the millennial generation. Unfortunately, the financial instability of the global financial crisis seeded a pessimism in millennials regarding whether they could trust their employer to support their long-term futures.  

This led to less loyalty and a cynicism about whether the kind of bright future their parents enjoyed would be attainable for them as well. Many millennials have decided to take matters into their own hands – resulting in regular job changes. 

Millennials change jobs more often than those do of any older generation and six in 10 say they are currently looking for new employment opportunities.¹⁰ 

Known for their job-hopping and desire to achieve work-life balance, millennials made a bad name for themselves as idealistic and flighty. Advertising executive and author Simon Sinek suggests the financial collapse of 2007 had a role to play in this.

“Millennials see their parents as working hard and putting their blood, sweat and tears into the company and then simply get sacked at the end of the year because the company missed its arbitrary projections. They form a view: business doesn’t take care of people. And so when people complain that millennials aren’t loyal and only give 18 months then they quit – well, of course! Why should they give you loyalty?”

The emergence of financial wellbeing and financial inclusion

Covid-19 has highlighted the vulnerable financial situations many are in and the fact that even those who are employed may not have the resilience to withstand a financial emergency that lasts for too long. 

Supporting financial wellbeing in the workplace is more important than ever. A PwC survey shows that financial stress is the top concern of millennials in the workplace and 62% are worried about not having enough emergency savings for an unexpected cost.¹¹

Financial inclusion – having access to appropriate and affordable financial services and products – is important to financial wellbeing. Income is also central to shaping financial wellbeing and studies have found that the value of income (how much is coming in), the stability of income (how regular and secure it is) and where income comes from all contribute to an individual's financial wellbeing – objectively and subjectively.

Young people are looking for employers who not only support their financial wellbeing, but are committed to reducing income inequality and creating fair distribution of wealth. 

This could stem from first-hand experience with financial hardship due to the global financial crisis and/or Covid-19. It could also be due to the fact that technological advancements have paved the way for more upward mobility, which has exposed the cracks in systems that have held people back from achieving high levels of wellbeing. 

Whatever the reasons, younger workers don’t accept ‘that’s the way it has always been done’ as a viable answer and are pushing for change in the world – the marketplace and the workplace included.  

Community standards have changed and employees look to their employer for their duty of care as most often the sole provider of income to an employee. These employees look for their employers to support them with their personal finances, which is of crucial importance to the youngest of these generations who are most in need of financial resilience.

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