How are young people economically hit by the coronavirus?

NOS op 3
Erasmus School of Economics

The corona crisis hits all groups in society. Among young people, the effects are starting to become noticeable as well. This is partly because many young people work in vulnerable sectors such as the hospitality industry, a sector in which three quarters of the working population is 35 years or younger. Anne Gielen, Professor of Labor Economics and Policy at Erasmus School of Economics talks about the long-term effects for young people on the labor market. 

First hits 

Many young people in the labor market have flexible contracts, and with such contracts, you're one of the first down the line, explains Gielen. ‘What we've seen in the past during crises is that temporary contracts often take the first hits. Flexible contracts are then no longer extended, or even dissolved prematurely. And it is mainly young people who have these flexible contracts. That's why the vulnerability a country experiences in times of economic crisis is often concentrated among the younger groups.’

Little influence

Fortunately, the companies are not left in the cold and receive support from the government. The government has drawn up three support schemes. The first one, the NOW, is a wage compensation scheme under which the government pays up to 90% of a company's wage costs. In exchange, the company is not allowed to fire any of its employees. According to the Dutch student union, however, this often turns out to be difficult in practice. No emergency measures have been arranged for employees. The measures taken by the government are all for the employer and the employee has only little influence on his or her employer in most cases.

Long-term problems

The other two measures are designed to help the self-employed. One of them is the TOGS, which involves a one-time gift of 4000 euros which entrepreneurs can use to cover their monthly expenses. The second, the TOZO, is a supplement to your income. The government supplements your income up to the social minimum. This minimum depends, among other things, on your age. The government has also come up with something for students who experience acute financial problems because they are no longer able to pay their rent, for example. They are now allowed to borrow extra money from the government. This can help a lot of students in the short term but in the long term, many students will experience problems after graduation when their student debt has run into tens of thousands of euros. 

A different price to pay

Gielen explains that in the long term young people also pay a different price. 'The first 10 years on the labor market are very important years. They are years in which you are going to experience most of your salary increase of your entire working life. You also see that in those first 10 years, young employees switch jobs quite regularly in order to shape their careers and to end up in a position which suits them. You can imagine that if there is a recession, those opportunities are very limited.'

Light at the end of the tunnel

But there is still some ray of hope, says Gielen. ‘Of course, it's a bleak situation if you enter the labor market now. Still, we know that if the economy improves, the unemployment rate will decrease strongly again among young people. So as far as that's concerned, there's light at the end of the tunnel.

More information

The full item of NOS op 3 from 14 April 2020, can be found here (in Dutch).