Economic Scars for Decades to Come

By Markus Dettmer, Frank Hornig, Anton Rainer, Thomas Schulz, Gerald Traufetter and Robin Wille
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Perhaps it's just this diffuse fear of the future that seems to lie over the country like a fog, but sometimes Yavuz Dașkin worries that everything was in vain: the six years of study at universities in Giessen and Hamburg, the semester abroad in Oslo, half a dozen internships. He finally wanted to start his career and write his master’s thesis while working in a company this fall. He has written application letters to a number of companies, but has received one rejection letter after the other, and the response is always the same: There are no more jobs for students because of the coronavirus pandemic. "I have to completely rethink things,” Dașkin says.

Similar stories from students leaving high school or university are everywhere these days. Of the cancelled traineeship at the travel agency, the cancelled trainee post in event marketing, of the future hotel management trainee who nobody needs right now. Or of the engineer trainee who isn’t getting that dream job at German flag carrier Lufthansa. Of the non-university prep high school graduates who are in a state of panic because very few of them are landing training positions.

This year, a half-million students will graduate from university in Germany. They are entering a labor market that is "essentially frozen,” says Detlef Scheele, the head of the Federal Employment Agency. At the end of the summer, more than a half-million vocation trainees were hoping to begin apprenticeships, but nobody knows how many spots will still be available. Scheele is urging companies to continue with their trainee programs at all costs. "We can’t have a lost corona graduating class of 2020," he says.

But in the face of the biggest economic slump seen in Germany since World War II, that will be extremely difficult to avoid.

It’s a seemingly absurd turn of events for a generation that grew up in an era of what appeared to be a never-ending economic boom, a golden decade in which the German economy never stopped growing. An economy that had the lowest unemployment rate in history, a shortage of skilled workers and a surfeit of jobs. Prospects looked a lot better only a few months ago: You could head abroad after graduation and travel around the world and then, at some point, find a job, maybe even just a half-time one.

Or why not take the risk of founding a start-up? Or just earning a little bit less and having more fun at work? Or creating a new working world - one more mobile and more global? Why not do that online marketing job from a co-working space in Shanghai? The world was open.

Corona Has Hit all Industries and Workers

But that’s a thing of the past now. The coronavirus crisis is hitting all industries and all workers. In the long term, it will likely be the young who suffer the most in the aftermath. That was true once before during the financial crisis of 2009, but it is even worse this time around: Around 750,000 companies have already placed employees on government-subsidized work furlough programs. In that environment, who is going to create apprenticeships and take on trainees? How many companies are going to hire inexperienced newcomers when they are in the process of eliminating jobs? Almost one-third of all 20- to 30-year-olds in Germany are employed under limited-term contracts. And they are often the first to be shown the door.

There still isn’t any final data from government job-placement agencies or personnel departments, but there are clear indications of what’s happening. According to one recent survey, one out of four skilled craft enterprises plans to offer fewer trainee spots. An analysis from the Boston Consulting Group found that the number of entry-level job offers for "young professionals” shrank by almost 40 percent between the beginning of March and the end of April. Almost 10 percent of workers under 25 have lost their job because of the pandemic in the last four weeks, a study by Cambridge labor market researcher Christopher Rauh found.

We’re also experiencing a moral crisis. It affects millions of young people who, only weeks ago, had defined saving the planet as their primary goal. They called for a more sustainable economy, fairer capitalism and climate-friendly companies, even if that meant it might cost a few jobs here and there. They strove to become the Greta Thunberg Generation. But now they may be doomed to becoming the Coronavirus Generation, one that can no longer afford to radically curb growth. Who’s going to protest for less prosperity if they have to sacrifice their own professional future for it?

"The Young Pay Double”

Especially given that it’s not just a matter of one or two difficult years. Past crises have shown that people who enter into the labor market in a recession have to expect low wages and a slower career over the long term. Economists call this effect "economic scarring,” and it has been the subject of considerable research since the last financial crisis. That research has shown that the traces are still visible in the people affected for decades to come.

This is also the danger that Hamburg college student Yavuz Dașkin is facing. If he isn’t able to write his master’s thesis from a position inside a company, it will diminish his qualifications, decreasing his chances of getting hired and place downward pressure on his starting salary. He’s already thinking about taking "any job,” regardless of his major. "The main thing is security,” he says.

Prospects are similarly bad for the next graduating classes. If school is cancelled for several months, students usually can’t make it up. Education researchers speak of a "reduced living income.”

At the same time, the very generation that is getting caught up in the consequences of the crisis is the one that is going to get stuck paying for it. This year alone, the German state will incur 366 billion euros in new public debt. "The young pay double,” says 31-year-old entrepreneur Tarek Müller. "The crisis now has the potential to set in motion a an even bigger movement."

Because how is this all going to end well? On the one hand, there are the golden years experienced by the baby boomers with their steadily increasing prosperity, who are leaving behind a planet shaken by climate change and huge mountain of debt. On the other, you have the Greta/Coronavirus youth, who will have to pay everything off with lower overall incomes while at the same time trying to maintain sustainability to keep the planet from hitting the tipping point. In other words, there is plenty of fodder for the kind of conflict between generations that hasn’t been seen in Germany in decades.

Robin Ewald is a hero in the crisis, even if he isn’t feeling any advantages yet. The 19-year-old is in a training program to become an employee at a supermarket near the German city of Bielefeld. He has been preparing for his final high school graduation exams for weeks now, but he should actually have graduated already. The problem is that those examinations have been postponed until the end of June because of the coronavirus. And that’s at the earliest. Ewald now finds himself waiting, working and attempting to cram his studying in on the side. "On the one hand, we don't have time to study, and on the other, we don't even know when our exams will take place."