Recessions have a lasting impact on employment and pay of young adults but parents can provide an important safety net

By Nuffield Foundation

A new report, published today by the Institute for Fiscal Studies (IFS) and funded by the Nuffield Foundation, shows that leaving education when the economy is weak can have lasting effects on your pay and employment – even once the wider economy has returned to normal.

However, young adults’ own pay and employment are not all that matters for their living standards: both the tax and benefit system and parental incomes can cushion the blow for many.

Key findings include:

  • Leaving education when the economy is weak has a direct impact on employment and pay at least five years afterwards. Young adults five years after leaving education are still 1 percentage point less likely to be employed if they started out when the unemployment rate was 10% rather than 6% (unemployment has risen by 4 percentage points on average during the last three recessions). The average negative impact on the pre-tax earnings of young adults and their partners (if they have one) five years after leaving education is 4% – or £1,100 per year. These effects have faded away almost completely after a further five years.
  • Some of the impact is offset by lower taxes and higher benefits. Once you account for taxes and benefits, the effect of leaving education when unemployment is high on the combined incomes of young adults and their partners (if they have one) five years later falls from 4% to 2%.
  • Another important potential safety net is that most people live with their parents in the first few years after leaving education, irrespective of economic conditions. This is particularly important in the years immediately after leaving education, when the effects on employment and pay are the largest: between 2010 and 2015, 74% of young adults lived with their parents a year after leaving education, 54% three years in and 38% five years in.
  • As a result, starting working life during a recession has little impact on the total resources available to the households that young adults live in, on average. Young adults’ net household incomes (including the incomes of all members of their household – most importantly parents) are hit by only 1% five years after leaving education. While there is no guarantee that resources in the household are always shared equally, at the very least this implies that many parents have the capacity to provide an important safety net for their children after they leave education.
  • The safety net provided by parents is particularly significant because lower-educated people are both most affected by starting out in a recession and most likely to live with their parents. Five years after joining the labour market, the pre-tax earnings of young adults and their partners are 4% lower for those who left education at 16 but there is no effect on those who left when they were 19 or older. At the same five-year stage, 60% of those who left education at 16 still live with their parents, compared with 21% of those who left when they were 19 or older.
  • For those young adults not living with parents, there are significant lasting effects on overall incomes and household spending. For this group, starting working life when the economy is weak causes household net incomes and spending to be 2–3% lower even five years later.

Jonathan Cribb, a Senior Research Economist at the IFS and an author of the report, said:

“The direct negative impact of entering the labour market in a recession is to significantly depress pay and employment for the next few years – even if the economy as a whole returns to normal. The tax and benefit system provides some protection against this, and a big potential safety net that many young adults have is their parents. But for those not living with their parents, the persistent negative effects on pay and employment of starting out in a recession do translate into lower net household incomes and lower spending for several years afterwards.”

Explore our projects

Woman-medical-professional-treats-patient-impact-MSK-conditions-outcomes-other-illnesses-PROJ
New

Welfare | 2020 - 2022

The impact of musculoskeletal conditions on outcomes of other illnesses

View project
Female-nurse-sees-patient-in-office-Integrating-enriched-longitudinal-data-North-Staffordshire-Stoke-on-Trent-PROJ
New

Welfare | 2020 - 2024

Enriched data integration for population musculoskeletal health intelligence

View project
Older-man-and-woman-walk-together-Geographical-mapping-prevalence-outcomes-MSK-conditions-Wales-Scotland-PROJ
New

Welfare | 2020 - 2022

Mapping rheumatic and musculoskeletal disease in Scotland and Wales

View project
New

Welfare | 2020 - 2022

Older people in England: the geography of challenges and opportunities

View project
Older-man-reads-textbook-Assembling-data-jigsaw-Greater-Manchester-PROJ
New

Welfare | 2020 - 2023

Assembling the data jigsaw: powering robust population research in MSK disease

View project
Senior-woman-enjoys-video-call-on-smartphone-Social-cohesion-in-context-of-COVID-19-PROJ
New

Welfare | 2020 - 2021

Social cohesion in the context of COVID-19

View project
New

Education | 2020 - 2020

The impact of COVID-19 on mainstream schools in England

View project
Teenage-girl-looks-at-smartphone-next-to-laptop-Growing-up-under-COVID-19-PROJ
New

Education | Welfare | 2020 - 2021

Growing up under COVID-19

View project
Medical-professional-massages-patient-knee-Understanding-joint-replacement-surgery-decision-making-for-older-patients-PROJ
New

Welfare | 2020 - 2022

Supporting older patients to make informed decisions about knee surgery

View project
Woman-looks-at-smartphone-screen-How-the-UK-public-gets-information-about-COVID-19-PROJ
New

Welfare | 2020 - 2020

How the UK public gets information about COVID-19

View project
New

Welfare | 2020 - 2021

COVID-19 and families on a low income: poverty in the pandemic

View project
Empty-street-with-cyclist-and-pedestrian-in-distance-Law-and-compliance-during-COVID-19-PROJ
New

Justice | 2020 - 2021

Law and compliance during COVID-19

View project
New

Education | 2020 - 2020

The impact of COVID-19 on mainstream schools in England

View project
New

Welfare | 2020 - 2022

Older people in England: the geography of challenges and opportunities

View project
Senior-woman-enjoys-video-call-on-smartphone-Social-cohesion-in-context-of-COVID-19-PROJ
New

Welfare | 2020 - 2021

Social cohesion in the context of COVID-19

View project
Teenage-girl-looks-at-smartphone-next-to-laptop-Growing-up-under-COVID-19-PROJ
New

Education | Welfare | 2020 - 2021

Growing up under COVID-19

View project
Young-boy-wearing-glasses-watches-laptop-school-lesson-with-notepad-The-effects-COVID-19-on-families-time-use-child-development-PROJ
New

Education | 2020 - 2022

The effects of COVID-19 on families’ time-use and child development

View project
Father-working-from-home-while-his-two-children-do-schoolwork-nearby-COVID-19-social-study-PROJ
New

Welfare | 2020 - 2022

COVID-19 social study

View project
Empty-street-with-cyclist-and-pedestrian-in-distance-Law-and-compliance-during-COVID-19-PROJ
New

Justice | 2020 - 2021

Law and compliance during COVID-19

View project
New

Welfare | 2020 - 2021

COVID-19 and families on a low income: poverty in the pandemic

View project
Woman-looks-at-smartphone-screen-How-the-UK-public-gets-information-about-COVID-19-PROJ
New

Welfare | 2020 - 2020

How the UK public gets information about COVID-19

View project
Woman-medical-professional-treats-patient-impact-MSK-conditions-outcomes-other-illnesses-PROJ
New

Welfare | 2020 - 2022

The impact of musculoskeletal conditions on outcomes of other illnesses

View project
Man-massages-own-hand-Longitudinal-evidence-how-arthritis-affects-earnings-PROJ
New

Welfare | 2020 - 2022

How arthritis affects earnings over time

View project
Medical-professional-massages-patient-knee-Understanding-joint-replacement-surgery-decision-making-for-older-patients-PROJ
New

Welfare | 2020 - 2022

Supporting older patients to make informed decisions about knee surgery

View project
Woman-medical-professional-treats-patient-impact-MSK-conditions-outcomes-other-illnesses-PROJ
New

Welfare | 2020 - 2022

The impact of musculoskeletal conditions on outcomes of other illnesses

View project
Female-nurse-sees-patient-in-office-Integrating-enriched-longitudinal-data-North-Staffordshire-Stoke-on-Trent-PROJ
New

Welfare | 2020 - 2024

Enriched data integration for population musculoskeletal health intelligence

View project
Older-man-and-woman-walk-together-Geographical-mapping-prevalence-outcomes-MSK-conditions-Wales-Scotland-PROJ
New

Welfare | 2020 - 2022

Mapping rheumatic and musculoskeletal disease in Scotland and Wales

View project
New

Welfare | 2020 - 2022

Older people in England: the geography of challenges and opportunities

View project
Older-man-reads-textbook-Assembling-data-jigsaw-Greater-Manchester-PROJ
New

Welfare | 2020 - 2023

Assembling the data jigsaw: powering robust population research in MSK disease

View project
Senior-woman-enjoys-video-call-on-smartphone-Social-cohesion-in-context-of-COVID-19-PROJ
New

Welfare | 2020 - 2021

Social cohesion in the context of COVID-19

View project
New

Education | 2020 - 2020

The impact of COVID-19 on mainstream schools in England

View project
Woman-looks-at-smartphone-screen-How-the-UK-public-gets-information-about-COVID-19-PROJ
New

Welfare | 2020 - 2020

How the UK public gets information about COVID-19

View project
New

Welfare | 2020 - 2021

COVID-19 and families on a low income: poverty in the pandemic

View project
Father-working-from-home-while-his-two-children-do-schoolwork-nearby-COVID-19-social-study-PROJ
New

Welfare | 2020 - 2022

COVID-19 social study

View project
Young-boy-wearing-glasses-watches-laptop-school-lesson-with-notepad-The-effects-COVID-19-on-families-time-use-child-development-PROJ
New

Education | 2020 - 2022

The effects of COVID-19 on families’ time-use and child development

View project
Empty-street-with-cyclist-and-pedestrian-in-distance-Law-and-compliance-during-COVID-19-PROJ
New

Justice | 2020 - 2021

Law and compliance during COVID-19

View project
Reported

Welfare | 2019 - 2020

Valuing data: foundations for data policy

View project
Reported

Welfare | 2019 - 2020

Revaluation and reform: bringing council tax into the 21st century

View project
Reported

Welfare | 2018 - 2019

Atlas of inequality: understanding the local nature of a global phenomenon

View project
Reported

Welfare | 2018 - 2018

Interdisciplinary conference on evidence use in policy

View project
Reported

Welfare | 2018 - 2019

Overview of the major ethical issues arising from data, algorithms and AI

View project
Reported

Welfare | 2018 - 2018

Council tax support schemes’ impact on claimants & local authorities

View project
Reported

Welfare | 2018 - 2018

Improving survey representation of non-resident parents

View project
Reported

Justice | Welfare | 2018 - 2019

Pathways of incarcerated children in care

View project
Reported

Justice | Welfare | 2017 - 2018

Visualising data in care proceedings

View project
Reported

Education | 2017 - 2018

Growing up digital

View project
Reported

Justice | Welfare | 2017 - 2018

Addressing the ‘care cases’ crisis: a sector-led review

View project
Reported

Welfare | 2017 - 2018

Vulnerable migrants and well-being: A pilot study

View project
Search projects

We improve people’s lives by funding research that informs social policy, primarily in EducationWelfare and Justice. We also fund student programmes that give young people skills and confidence in science and research.

We offer our grant-holders the freedom to frame questions and enable new thinking. Our research must stand up to rigorous academic scrutiny, but we understand that to be successful in effecting change, it also needs to be relevant to people’s experience.

Profile