Will the Scarring Show? Graduating in the Time of COVID-19

By Nicole Smith

2020 will forever be remembered as the year of COVID-19, the illness caused by the novel coronavirus. This year, the term “social distancing” became part of our vocabulary, and virtual proms and online commencement ceremonies became commonplace. According to Georgetown University Center on Education and the Workforce analysis of HIS Markit Forecast Summary of May 2020, on the economic front, 2020 is the year that the gross domestic product (GDP) is predicted to fall by more than 37% and that unemployment will rise to its highest level since the Great Depression.

NEJHE on 2020 College Grads and the Complex Job Market

When fear of the coronavirus shut down all but essential businesses in March, The New England Journal of Higher Education invited economists and other experts on “employability” to weigh in on how #COVID19 will affect 2020’s college grads in New England.

Job postings as estimated by EMSI are down 32%, and more than 38 million Americans have filed for unemployment—so far, according to the Department of Labor. Every economic sector has been affected, although some have lost more jobs than others. Notably, four sectors accounted for close to 70% of the jobs lost even though they account for just over half of the jobs in the economy. Leisure and hospitality, wholesale and retail trade, healthcare, and professional and business services make up 70% of job losses in April 2020, but those sectors had accounted for only 53% of jobs overall. Leisure and hospitality has been particularly hard hit, shouldering almost four times as many job losses compared to its size in the overall economy, according to Georgetown University analysis of government data.

Though leisure and hospitality is shouldering the majority of the burden of job losses, personal services (such as hair stylists, fitness trainers, and tour guides) also lost relatively higher fractions of jobs as well.

Table 1: Leisure and Hospitality’s Share of Lost Jobs

2020 Job Losses by Industry Sector Proportion of Job Losses Proportion of Jobs
Natural resources 0.2% 0.5%
Construction 5% 5%
Manufacturing 6% 9%
Wholesale and retail trade services 12% 14%
Transportation and utilities services 3% 4%
Information services 1% 2%
Financial services 1% 6%
Professional and business services 11% 14%
Private education services 2% 2%
Healthcare services 10% 14%
Leisure and hospitality services 37% 10%
Personal services 6% 4%
Government and public education services 5% 15%

Source: Georgetown University Center on Education and the Workforce analysis of US Bureau of Labor Statistics Employment Situation Summary, 2020.

Note: Columns may not add up to 100% due to rounding.


Although white-collar jobs in sectors such as professional and business services have been affected, the impact has been disproportionately higher in traditional blue-collar jobs—and according to some analysts, those jobs have been filled predominantly by women, in occupations such as waitresses, cashiers and sales. Lack of experience also make young workers more vulnerable any type of economic downturn and less likely to be employed in what little jobs remain.

The graduating class of 2020 will face a difficult job market, and the adversities will follow them for years. New graduates facing these types of jobs numbers will be subject to scarring—reduced lifetime incomes caused by entering the workforce during a downturn. Faced with the quandary of choosing between a subpar job or prolonged unemployment, new college grads should expect to earn up to 7% less for every 1% increase in the overall unemployment rate in the first few years.

The inertia of pay parity for the scarred class is likely to persist, with graduates still earning 2.5% lower than their peers who entered the workforce during rosier economic times, even 15 years later, according to past analysis by University of Rochester economist Lisa Kahn. Recent graduates fortunate enough to continue working in the internships they secured during the previous year will also see lower wages. The economic hardships faced by the graduating class of 2020 may even percolate down to the graduating class of 2021.

Georgetown University data analysis has shown that traditionally, recent graduates who could afford it weathered economic storms by going back to school and earning an additional credential, test-based license or certification. They figured extra credentials would give them a competitive edge when employers eventually resumed hiring.

COVID-19, however, has forced a reevaluation of that practice. The pandemic has caused chaos on college campuses, and many colleges have gone virtual, offering classes online, rather than in person. Good online connectivity has become necessary for matriculating, taking classes and graduating on time.

Previous researchers have shown as expected, the digital divide disproportionately affects low-income households. Geography also plays a role, with many areas receiving only spotty access to the internet. Surprisingly, three times as many urban households lack access to broadband internet as rural households, according to recent data analysis on the topic. The seemingly simple solution of going to the local library for internet access is not viable because of social distancing. Even with a strong internet connection, however, the online format can be challenging and not necessarily compatible with nontraditional learning styles.

The experiences of the class of 2009, who graduated during the Great Recession—which, prior to COVID-19 was the worst recession since the Great Depression—are instructive. For them, internship opportunities were a big plus once the economy began recovering. Despite today’s challenges, upcoming graduates should consider taking similar opportunities to shore up their skills for what’s going to be an employer’s market for some time to come. If possible, they should consider holding off on taking jobs until good opportunities return.

Most economists, including a Georgetown analysis of HIS Markit predicts data, estimate a slow return over an 18-month to 36-month time frame. But like the pandemic itself, the timeline is unpredictable and shrouded in uncertainty. We do know, however, that jobs will return. The best bet for new graduates is to continue to prepare by accepting internships, adding credentials such as test-based industry certifications and utilizing informational interviews to tailor resumes, for when they arrive.

Nicole Smith is research professor and chief economist at the Georgetown University Center on Education and the Workforce.


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