Canada may be headed for a recession. Are you ready?
As the country’s economy weakens, students need to prepare for the financial consequences of a recession
The Canadian economy has undeniably been facing a rough patch for the past year. With the cost of living rising and wages lagging far behind, inflationary pressures left many Canadians squeezing their wallets dry.
A recession is defined as a period of economic decline. Marked by a decrease in a country’s gross domestic product, a recession brings severe job cuts as businesses reduce production, sales suffer, and consumer spending falls.
So, why should you care?
Students already grapple with a range of education-related costs, on top of their basic necessities, but the volatile economic state could lead to even further financial constraints and unexpected expenses.
The lack of financial aid, joined with the hiking interest rates on existing student loans, makes students more vulnerable to accumulating debt during a recession. Of greater concern, however, is the fact that some may end up digging themselves an even bigger hole, as they’re forced to borrow more money as a means of short-term relief.
Beyond these financial constraints, graduating students and those who are employed or searching for employment will need to navigate an unstable job market. The rise in layoffs may hit some working students, but graduating students and those searching for work will face a range of challenges securing a job as employment opportunities become scarce. The inability to secure a job during a recession only magnifies the financial hardships endured by students who rely on employment to support their day-to-day needs and pay off their student loan debt.
Though the recession will widen economic disparities, stretching students thinner than ever, preparing now can help mitigate the way you experience the economic downturn.
As with inflation, reducing spending on unnecessary purchases is a fundamental starting point to saving up for the heightened financial pressures brought by a recession. However, paying bills and credit card balances on time is also vital to ensuring you aren’t slammed with late fees and high interest charges during an already stressful period.
For instance, those graduating in a recession are dealt lower wages and lose out on initial earnings compared to students who graduate prior to a recession. Research also suggests that these students are less likely to hold managerial or skilled positions by their thirties. These issues in employment, however, translate to more concerning impacts such as lower socioeconomic status and poorer health outcomes.
While the prospect of graduating in a recession is daunting, preparing yourself for the unstable job market through career counselling and making yourself more hireable are important steps in increasing your chances of employment. The basic advice for advancing your competitive edge in the job market has always been to diversify your skillset through further training or taking on job and volunteer opportunities that contribute to professional development – and that advice is still valuable.
The bottom line is recessionary pressures will affect you no matter what – but doing your research on how best to prepare and taking preventative actions can help to reduce anxiety and mitigate some of the effects of a recession.