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Educational losses scar outlook for recovery in many countries

With the success of some vaccine rollouts, the worst of the COVID-19 pandemic appears to be over, at least in the developed world. But, behind the triumphant headlines, the world is still faced with a lot of economic ground to make up. There is much to try and make whole. But young people will suffer some of the worst consequences if the policies aimed at healing the scars of the recent recessions do not tackle the educational costs they have been saddled with over the past 14 months.

A study by the International Monetary Fund (IMF) suggests the Covid crisis will cause permanent losses in output and welfare, known as economic scarring. This will be caused by a wide range of factors, but one of the hardest to quantify is the educational ‘deficits’ caused by school closures during the pandemic.

Policymakers have not yet fully grasped the potential impact of this scarring on young people’s lives, but it seems certain to leave a mark on the job prospects and lifetime earnings of the cohort known as Generation Z.

According to the Economic Policy Institute, all recessions scar children’s futures because parental unemployment and income losses can negatively impact educational achievement. It does this by undermining childhood nutrition; supportive learning environments; and college plans. This leads to career scarring, defined as longer-term lower salaries and higher unemployment rates for graduates caused by recession.

But the protracted school and university closures of the last year will compound this effect dramatically. International consultancy McKinsey & Co calculates that students will, on average, have lost five to nine months of learning by the end of the 2020-21 school year. Minority and economically disadvantaged students could be six to 12 months behind, compared with four to eight months for white students. Those in countries where schools have been unable to re-start quickly – often in emerging markets -- could suffer even worse effects.

An OECD paper cites research showing that closures of one third of a year for students in grades 1 to 12 potentially reduces income by more than 3% over their entire lifetimes. For nations, such losses might translate into a GDP cut of 1.5% a year for the rest of the century, said the organization. That number could be much bigger and uglier if waves of the pandemic are still hitting nations in 2022.

Policymakers can still minimize these effects if they recognize the problem now. But it is an area of huge uncertainty, and historically it is the needs of the voting age population and the already employed that get the most attention from those policymakers.

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