Still Young, Restless, and Jobless: The Growing Employment Malaise Among U.S.

Teens and Young Adults

Prepared by: Andrew Sum Ishwar Khatiwada With Sheila Palma Susan Perron Center for Labor Market Studies Northeastern University Boston, Massachusetts Prepared for: Jobs for Americas Graduates Alexandria, Virginia January 2004

Table of Contents Introduction..................................................................................................................................... 2 The Deteriorating Employment Situation Among theNations Teens and 20-24 Year Olds Between 2000 and 2003 ............................................................................................................. 4 Trends in the E/P Ratios of Key Demographic Subgroups of Teens .............................................. 7 Trends in the Employment Rates of Out-of-School, 16-24 Year Old Youth.................................. 9 Changes in the Part-time and Full-time Employment Status of Out-of-School Young Adults .... 10 The Deteriorating Employment Situation of the Nations Youngest High School Graduates...... 12 Comparisons of the Recent Employment Experiences of Teens With Those During the 1990-91 Recession and Economic Recovery ..................................... 15 Job Deficits Among Teens and Young Adults 20-24 Years Old.................................................. 17 Changes in the Out-of-School and Out-of-Work Young Adult Population.................................. 18 Why We Should Care About Higher Levels of Youth Joblessness .............................................. 19 What Can Be Done?...................................................................................................................... 21

Introduction In early 2001, the economic boom of the 1990s which was accompanied by ten consecutive years of economic growth and high levels of job creation came to an immediate halt, and the recession of 2001 set in. While the National Bureau of Economic Research has recently announced that the recession ended in November 2001, labor markets have failed to generate the same level of strength as exhibited by the growth of the nations real output over the past year. Unemployment continued to rise through 2002, and payroll jobs failed to increase. The onset of the recession of 2001 and the so-called jobless recovery of 2002 took a severe toll on job opportunities for the nations teens and young adults (20-24), especially those lacking a four year college degree.1 Rising unemployment among teens and young adults was accompanied by declines in their labor force participation, growing underemployment, and rising malemployment among college graduates. Underemployment problems are measured by workers who can only obtain part-time jobs even though they wish to be employed full-time, and malemployment occurs when workers cannot obtain jobs in occupations that will fully utilize their education and skills; e.g., college graduates working as waiters/waitresses, sales clerks, call center operators, construction laborers. During the second and third quarters of 2003, economic growth in the U.S. accelerated, with real Gross Domestic Product rising by more than 8% in the third quarter. Payroll employment began to rise steadily from August through November, and the estimated number of employed persons 16 and older in the CPS household survey rose even more strongly. The overall unemployment rate began to drift downward, falling below 6% in the fall of 2003 and to 5.7% in December.2 How have these recent output and employment developments influenced
1

For an earlier review of the impacts of the 2001 recession and the jobless recovery of 2002 on the employment opportunities for teen and young adult population, See: (i) Andrew Sum, Nathan Pond, and Sheila Palma, The Impacts of the 2001 National Recession and the Ensuing Jobless Recovery on the Employment of the Nations Teens and Young Adults, Prepared for the National League of Cities, Washington, D.C., August 2002; (ii) Andrew Sum, Leaving Young Workers Behind, National League of Cities, Institute for Youth, Education, and Families, Washington, D.C., 2003. For other articles on the declining economic fortunes of the nations young adults, See: (i) Peter Cox, Michelle Conlin, and Emily Thornton, A Lost Generation?, Business Week, November 4, 2002, pp. 44-46; (ii) Noshua Watson, Generation X: Generation Wrecked, Fortune, October 14, 2002, web site. 2 The decline in the unemployment rate to 5.7% in December 2003 was due entirely to a drop in the number of persons in the labor force rather than to a rise in employment.

job opportunities for the nations teens and young adults? This research report will provide a detailed answer to this key labor market question. Unfortunately, the findings are overwhelmingly disappointing. The employment rates of the nations teens 16-19 years old and 20-24 year old adults continued to plummet during calendar year 2003, with several of these employment rates falling to new historical lows.3 The empirical findings will begin with an overview of employment and population developments among the nations 16-24 year olds over the 2000-2003 period, with separate breakouts of the data for teens and 20-24 year olds. Changes in the annual employment/population ratios of teens and young adults over the 2000-2003 period will be presented and compared to those of the nations adults in older age groups. The employment experiences of teens in an array of gender and race-ethnic groups will be examined as will those of out-of-school 16-24 year olds in various educational attainment subgroups. The changes in the employment rates of teens during the recession of 2001 and the first two years of recovery from the recession will be compared to those that took place in the 1990-91 recession and the early years of recovery from that recession. The employment analyses will be followed by an examination of changes in the numbers and demographic characteristics of 16-24 year olds who were both out-of-school and out-of-work in 2000 and 2003, a group sometimes referred to as disconnected youth.4 The final section will be devoted to a discussion of why the nation ought to care about these growing youth labor market problems and provide a brief description of national economic policy actions that the U.S. Congress and the Bush administration should consider undertaking in cooperation with the states and local governments to address the growing problems of youth idleness and joblessness.

See: U.S. Bureau of Labor Statistics, The Employment Situation: December 2003, Washington, D.C., January 2004. 3 The term employment rate in this study is used to refer to the employment/population ratio, i.e., the ratio of the number of employed youth in a given age group to the civilian non-institutional population of youth in that same age group. 4 See: (i) Douglas J. Besharov, Americans Disconnected Youth: Toward A Preventive Strategy, CWAL Press and American Enterprise Institute for Public Policy Research, Washington, D.C., 2000; (ii) Andrew Sum, Ishwar Khatiwada, et.al., Left Behind in the Labor Market: Labor Market Problems of the Nations Out-of-School, Young Adult Population, Alternative Schools Network, Chicago, January 2003.

The Deteriorating Employment Situation Among the Nations Teens and 20-24 Year Olds Between 2000 and 2003 The onset of the national economic recession of 2001 and the lack of any job growth in 2002 substantially reduced employment opportunities for the nations teens and young adults (20-24). These young workers bore the brunt of the employment losses experienced across the country between 2000 and 2002.5 Recently-released national CPS employment data for 2003 reveal that the employment rates of teens and young adults continued to decline in 2003, pushing the teen employment rate (E/P ratio) down to a new post-WW II low during the past year. In the following three tables, we summarize three sets of inter-related developments for the 16-19 and 20-24 year old population over the 2000-2003 period: changes in their annual average aggregate employment levels, their population size, and their employment/population ratios (E/P). The key findings of this analysis can be summarized as follows. Over the past three years, the annual average number of employed 16-24 year olds declined by nearly 1.1 million or 5.2%, far exceeding the rate of employment declines for all other age groups. The teen population was responsible for all of the net decline in employment among the 16-24 age group with their numbers dropping by 1.272 million or 18%. There was a modest gain in the number of 20-24 year olds over this time period. Table 1: Comparisons of Employment Levels of 16-19 and 20-24 Year Olds in the U.S., 2000 and 2003 (in millions) (A) Age Group 16-19 20-24 16-24 Employed 2000 7.194 13.228 20.422 (B) Employed 2003 5.922 13.434 19.356 (C ) Change 2000-2003 -1.272 0.206 -1.066 (D) % Change 2000-2003 -17.7% +1.5% -5.2%

Over the same three year period, the 16-24 year old population increased by nearly 5% with the number of 20-24 year olds rising by 8% due in large part to a substantial influx of new

immigrant workers, who often displaced native born workers in the same age group from jobs that they would likely have obtained. Table 2: Changes in the Population of 16-19 and 20-24 Year Olds in the U.S., 2000 to 2003 (in millions) (A) Age Group 16-19 20-24 16-24 (B) (C) Change 2000-2003 +0.184 +1.490 +1.674 (D) % Change 2000-2003 +1.1% +8.1% +4.9%

Population 2000 Population 2003 15.912 18.311 34.223 16.096 19.801 35.897

As a consequence of declining employment and a rising population, the employment/ population ratios of teens and 20-24 year olds declined sharply over the 2000-2003 period. The teen E/P rate fell by 8.4 percentage points to 36.8% in 2003, the lowest E/P ratio for the nations teens since the end of World War II.6 (Chart 1). The E/P ratio of 20-24 year olds fell by 4.4 percentage points over the same three year period. The E/P ratios of most other age groups of adults fell by much smaller amounts over this period, and persons 55 and older actually experienced increases in their employment rates over this three year period. (Chart 2). The younger the age group, the greater the decline in their E/P ratio. Idleness problems have accelerated among the nations teens and young adults over the past three years, with no sign of recovery during calendar year 2003.

See: Andrew Sum, Nathan Pond, with Sheila Palma, The Impacts of the 2001 National Recession and the Ensuing Jobless Recovery 6 As will be noted below, annual average data on teen employment rates are available from the CPS survey from 1948 onward.

Table 3: Comparisons of the Employment/Population Ratios of 16-19 and 20-24 Year Olds in the U.S., 2000 and 2003 (in %) (A) Age Group 16-19 20-24 2000 45.2 72.2 (B) 2003 36.8 67.8 (C) Change 2000-2003 -8.4 -4.4

Chart 1: Trends in the Employment-Population Ratios of Teens and 20-24 Year Olds in the U.S., 2000 to 2003 (Annual Averages in Percent)
80 72.2 70 60 50 Percent 40 30 20 10 0 2000 2001 Teens 2002 2003 2000 2001 2002 2003 20-24 Year Olds 70.7 69.0 67.8

45.2

42.3

39.6

36.8

Chart 2: Changes in Employment to Population Ratios in the U.S. by Age Group, 2000 and 2003
4.0 2.1 2.0 1.0 0.0

Change (%)

-2.0 -2.1 -4.0 -4.4 -6.0 -3.3 -4.0 -2.5

-1.7

-8.0 -8.4 -10.0 All 16+ 16 -19 Years 20 - 24 Years 25 - 29 Years 30 - 34 Years 35 - 44 Years 45 - 54 Years 55 - 64 Years 65 +

Trends in the E/P Ratios of Key Demographic Subgroups of Teens The nations teenagers clearly experienced the most substantial declines in their employment rates over the past three years. How widespread were the job losses among the nations teens across demographic subgroups over the 2000-2003 period? To answer this question, we analyzed changes in the E/P ratios of gender and race-ethnic subgroups of the teenaged population of the nation between 2000 and 2003. Findings reveal that these E/P ratios declined considerably across both gender groups and all four race-ethnic subgroups (Table 4 and Chart 3). Male teens, however, were more adversely affected than women. The E/P ratio of male teens fell by nearly 10 percentage points while that for women declined by seven percentage points. Male teens have been affected more considerably than women by the surge in new immigrant workers in recent years, two-thirds of whom are males and half of whom are under the age of 30.7 The E/P ratios of Black, Hispanic, and White teens fell by 8 to 9 percentage points over the past three years. (See Table 4 and Chart 3).

See: Andrew Sum, Ishwar Khatiwada, Paul Harrington, with Sheila Palma, New Immigrants in the Labor Force and the Number of Employed New Immigrants in the U.S. from 2000 through 2003, Center for Labor Market Studies, Northeastern University, Boston, December 2003.

Table 4: Trends in the Employment/Population Ratios of Teenagers in the U.S., by Gender and Race-Ethnic Group, 2000 to 2003 (Annual Averages in %) (A) (B) (C) Percentage Point Change 2000-2003 -8.4 -9.7 -7.1 -6.4 -8.1 -8.4 -8.7

Group All Men Women Asian Black Hispanic White

2000 45.2 45.4 45.0 30.8 29.8 38.6 49.1

2003 36.8 35.7 37.9 24.4 21.7 30.2 40.4

Chart 3: Percentage Point Change in the Employment/Population Ratios of Teenagers between 2000 and 2003, by Gender and Race-Ethnic Group
All 0 Men Women Asian Black Hispanic White

-2

-4

-6 -6.4 -7.1 -8 -8.4 -10 -9.7 -8.1 -8.4 -8.7

-12

To place these declining E/P ratios of teens into historical perspective, we analyzed the historical CPS data on employment rates of teens back to 1948, the beginning year of the data series. For Black teens, employment data are only available back to 1973 and for Hispanics only back to 1994. The estimated 36.8% employment rate for the nations teens was the lowest ever recorded since 1948. The same holds true for the 35.7% employment rate among male teens. At 8

no time in the past 55 years have so few male teens worked as a percent of their population. Among women, the 38% employment rate in 2003 was the lowest since 1971. For White teens, the E/P rate was the lowest since 1964; and for Black youth the 22% employment rate was the lowest since 1983 and the third lowest over the 30 year period for which such data are available. Yet, with few exceptions, the national media and political leaders of both parties have been largely silent on these issues. Table 5: Comparisons of the 2003 Employment/Population Ratios of Teens (16-19) with those over the previous 57 Years (A) 2003 E/P Ratio 36.8 35.7 37.8 40.4 21.7 (B) Previous Year that the E/P Ratio was Lower None; Lowest in Post-WWII Period None; Lowest in Post-WWII Period Lowest since 1971 Lowest since 1964 Lowest since 1983 (3rd lowest in 30 years for which data are available)

Group All 16-19 Males 16-19 Females 16-19 Whites 16-19 Blacks 16-19

Trends in the Employment Rates of Out-of-School, 16-24 Year Old Youth While in-school youth have faced sharp drops in the demand for their labor in recent years, some labor market observers would place greater emphasis on the labor market plight of the nations out-of-school youth. How have out-of-school teens and young adults fared in the labor market over the past three years? To answer this question, we estimated E/P ratios for all out-of-school 16-24 year olds by educational attainment during 2000 and 2003. Findings are displayed in Table 6. During calendar year 2000, the E/P ratio for these out-of-school youth was 73.2%, but it fell to 68.5% in 2003, a decline of nearly five percentage points. Declines in E/P ratios were in the 4.5 to 6.0 percentage point range for all educational subgroups, except four year college graduates. The E/P ratio of bachelor degree recipients (and a few with advanced degrees) fell by only 2.1 percentage points over this three year period. Young college graduates enjoyed substantial advantages over their less educated counterparts. In 2003, 86 of every 100 young college graduates were employed versus only 70 of every 100 high school graduates and

50 out of 100 high school dropouts. Idleness rates and underemployment problems were very high among out-of-school youth with no post-secondary education in 2003.8 Table 6: Trends in the Employment/Population Ratios of Out-of-School 16-24 Year Olds by Educational Attainment Between 2000 and 2003, U.S. (in %) (A) Educational Attainment All 0-12 years, no diploma or GED H.S. diploma/GED 1-3 years college, no degree Associates degree Bachelors degree 2000 73.2 55.7 75.9 83.9 89.2 88.3 (B) 2003 68.5 50.7 69.8 79.5 84.6 86.2 (C) Percentage Point Change, 2000 2003 -4.7 -5.0 -6.1 -4.5 -4.6 -2.1

Changes in the Part-time and Full-time Employment Status of Out-of-School Young Adults The ability of young adults to secure full-time employment when they do seek work has a number of important economic advantages for them. Those youth who are employed full-time work substantially more hours per week than their part-time peers, and they earn more per hour, yielding very large weekly earnings advantages (more than twice as high as those of part-time workers).9 Full-time employed youth are more likely to receive informal and formal training from their employers and to be eligible for tuition assistance for college courses. They are also more likely to be eligible for vacation pay, health insurance coverage, and pension coverage. The economic returns from full-time work experience in the form of higher future wages are considerably higher than those from part-time work. Given the multiple economic advantages of full-time work, how well did the nations outof-school employed young adults fare in obtaining full-time jobs when they did secure employment in 2000 and 2003? Overall, 19 percent of employed out-of-school young adults
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A high fraction (nearly 1 of 4) of employed out-of-school youth with no post-secondary education were only working part-time during calendar year 2003 even though many of them preferred full-time work. 9 For a more detailed review of the economic advantages of full-time employment for young adults, See: Andrew Sum, Neeta Fogg, and Garth Mangum, Confronting the Youth Demographic Challenge.

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were working part-time in 2000; however, by 2003, the share of employed young adults in parttime positions had risen to nearly 22 percent, an increase of three percentage points (Table 7). Employed out-of-school youth in each educational subgroup were more likely to be working part-time in 2003 than they were in 2000. Nevertheless, the ability of these youth to obtain fulltime jobs when they did work was strongly associated with their educational attainment. Only 11 percent of employed four year college graduates worked part-time in 2003 versus 21% of high school graduates and 31% of high school dropouts. Table 7: Per Cent of Employed Out-of-School 16-24 Year Old Youth Working Part-time in 2000 and 2003 by Educational Attainment, U.S. (A) Educational Group All Lacks high school diploma/GED High school graduate, no college 1-3 years of college Bachelors degree 2000 18.9 29.7 17.4 17.7 6.9 (B) 2003 21.9 31.2 20.7 21.8 10.7 (C) Absolute Change +3.0 +1.5 +3.3 +4.1 +3.8

By combining the findings on the estimated employment rates of out-of-school 16-24 year olds with the shares of youth working full-time, we can generate estimates of full-time employment/population ratios for each educational subgroup of out-of-school youth. The fulltime employment/population ratio of all out-of-school youth declined considerably between 2000 and 2003, a drop of 6 percentage points or 10%, more than three times as high as that for the nations adults 25 and older. Young adults in each educational subgroup experienced substantial declines in their full-time employment rates, with the absolute size of these reductions, ranging from 4 to 7.5 percentage points. In 2003, only 35% of young high school dropouts and 55% of high school graduates were employed on a full-time basis versus 77% of four year college graduates (Table 8).

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Table 8: Trends in the Full-time Employment/Population Ratios of 16-24 Year Old Youth by Educational Attainment, 2000 to 2003, U.S. (in %) (A) Educational Group All Lacks high school diploma/GED High school graduate, no college 1-3 years of college Bachelors degree 2000 59.4 39.1 62.7 69.0 82.3 (B) 2003 53.5 34.9 55.3 62.1 77.0 (C) Absolute Change -5.9 -4.2 -7.4 -6.9 -5.3 (D) Per Cent Change -10% -11% -12% -10% -6%

The Deteriorating Employment Situation of the Nations Youngest High School Graduates Many of the nations young adults who complete their formal schooling after graduating from high school, especially men, have faced considerable difficulties in obtaining access to well-paid, full-time jobs over the past few decades. The employment rates of the nations young high school graduates (under 25) declined by six percentage points over the past three years. These declines in employment rates were quite steep among both male and female high school graduates, and graduates in each of the three major race-ethnic groups saw their employment rates drop by 5.5 to 6.5 percentage points between 2000 and 2003. On a typical month, only 56 of every 100 Black high school graduates had any type of job in 2003.

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Table 9: Trends in the Employment/Population Ratios of Out-of-School 16-24 Year Old High School Graduates by Gender and Race-Ethnic Origin, 2000-2003 (A) Gender/Race-Ethnic Group All Men Women Black Hispanic White 2000 75.9 81.3 69.9 62.7 75.2 79.1 (B) 2003 69.8 74.9 63.8 56.2 69.7 73.5 (C) Absolute Change -6.1 -6.4 -6.1 -6.5 -5.5 -5.6 (D) Percent Change -8.0% -7.8% -8.7% -10.3% -7.3% -7.0%

The nations youngest high school graduates (those under 20) have fared even more poorly in the labor market over the past three years. In calendar year 2000, at the peak of the labor market boom, 71% of all non-enrolled high school graduates under age 20 were employed. By 2003, the employment rate of these young high school graduates had declined to slightly under 62% (Table 10). Each gender and race-ethnic group of young high school graduates experienced very steep declines in their employment rates over this three year period. In 2003, only 43% of young Black high school graduates were able to obtain some type of employment versus 66% of White graduates.

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Table 10: Trends in the E/P Ratios of Non-Enrolled 16-19 Year Old, High School Graduates, by Gender and Race-Ethnic Origin, 2000-2003 (A) Gender/Race-Ethnic Group All Men Women White Black Hispanic 2000 71.4 74.9 67.7 75.5 53.2 69.3 (B) 2003 61.8 63.9 59.5 66.5 43.3 57.5 (C) Absolute Change -9.6 -11.0 -8.2 -9.0 -9.9 -11.8 (D) Percent Change -13.5% -14.6% -12.1% -12.0% -18.7% 17.0%

These young high school graduates had an even more difficult time in finding full-time jobs in the first year or two following high school graduation. In 2000, only 50% of these teenaged high school graduates were able to secure a full-time job (Table 11). Three years later, the share of these young graduates with full-time jobs had fallen to 39%, a relative decline of 23%, with very sharp reductions taking place among each gender and race-ethnic group. Only one of four young Black high school graduates were working full-time. Clearly, the nations newest high school graduates have been facing several obstacles in transitioning to the labor market and in securing full-time employment in the nations career labor markets. This situation represents a substantial waste in available human resources, and the continued underutilization of these young adults by reducing their cumulative work experience will lower their future earnings as well.

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Table 11: Full-Time E/P Ratios for the 16-19 Year Old High School Graduates Not Enrolled in College, 2000-2003 (A) Gender/Race-Ethnic Group All Men Women White Black Hispanic 2000 50.6 57.9 42.9 53.8 35.7 51.8 (B) 2003 38.9 45.2 32.2 42.6 24.5 38.6 (C) Absolute Change -11.7 -12.7 -10.6 -11.2 -11.2 -13.2 (D) Percent Change -23.1% -22.0% -24.8% -20.9% -31.4% -25.5%

Comparisons of the Recent Employment Experiences of Teens With Those During the 1990-91 Recession and Economic Recovery The steep decline in the employment/population ratio of the nations teens from 2000 to 2003 differs in a number of important respects from its behavior during the recession of 1990-91 and the first two years of recovery from that recession. The employment rate of the nations teens is quite cyclically sensitive, declining at above average rates during recessionary periods and rising at above average rates during periods of strong job growth and declining unemployment. For example, the teen employment rate rose strongly during the economic boom years of the mid to late 1980s increasing from 41.5% in 1983 to 47.5% in 1989, the peak economic year before the recession of 1990-91 set in. From 1989 to 1991, the E/P rate of teens fell by 5.5 percentage points and would decline by another full percentage point in 1992. In 1993, however, the E/P rate of teens began to rise. Two years after the 1990-91 recession ended, the E/P rate of teens was back to where it was at the end of the recession. From 1992 to 2000, the E/P ratio of the nations teens rose from 41.7% to 45.2%, but never achieved its 1989 cyclical peak value of 47.5%. The recession of 2001 lasted from March to November, an eight month duration identical to that of the 1990-91 recession. The nations unemployment rate at the trough of the recession in March 1991, however, was 6.8% versus an unemployment rate of only 5.6% in November 2001, the trough of the 2001 recession. The E/P

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rate of teens fell by 5.8 percentage points between 2000 and 2002, but rather than rising as expected in 2003 it continued to decline by nearly another three percentage points. While payroll job growth in the U.S. has been quite weak in the past two years, the number of persons reporting themselves as employed in the CPS household survey was 2.3 million higher in November 2003 than in November 2001, a stronger level of employment growth than took place during the recovery from the 1991 recession.10 There are clearly important structural forces at work in U.S. labor markets that are holding down the employment levels of teens, including low rates of growth in formal payroll employment, especially in retail trade, a key sector for youth employment, and high levels of competition from new foreign immigrants, whose employment ranks increased by 2.5 million from 2000 to 2003. There is clear evidence of displacement of native born, young adults by these new immigrants, a majority of whom are young, male, and poorly educated. Chart 4: Trends in the Employment/Population Ratios of the Nations Teens, Selected Years, 1989 to 2003 (in %)
55

50 47.5 Percent 45.2 45 42.0 41.0 40 42.3

41.7

39.6

36.8 35 1989 1991 1992 1993 2000 2001 2002 2003

10

See: Andrew Sum, Paul Harrington, and Ishwar Khatiwada, Employment Developments in the U.S. Since the End of the Recession of 2001: Conflicting Tales from Two National Surveys, Center for Labor Market Studies, Northeastern University, November 2003.

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Job Deficits Among Teens and Young Adults 20-24 Years Old The extraordinarily steep declines in the employment/population ratios of the nations teens and young adults over the past three years have left a large number of youth jobless in the past year. To estimate the size of the job deficits faced by youth in these two age groups in 2003, we calculated the number of additional jobs that would have been needed by teens and 20-24 year olds in the past year to maintain their employment rates at their 2000 levels. The number of additional jobs needed by the nations teenagers in 2003 would have been 1.352 million while 20-24 year old youth would have required another .872 million jobs to achieve this employment target (Table 12 and Chart 5). The combined number of additional jobs needed by teens and young adults to eliminate their job deficits would have been 2.224 million, an increase of between 11 and 12 percent over their actual 2003 employment levels. Elimination of these job deficits will require extraordinary job creation efforts. It took six years of steady and strong national job growth from 1992 to 1998 to boost teen employment by 1.37 million jobs. In the absence of a new, comprehensive youth employment initiative, including incentives for firms to hire young workers and public job creation programs, teen idleness will remain at very high levels over the next few years, especially among high school dropouts, high school graduates with no college, low income youth, and Black teens. Table 12: Comparisons of the Actual 2003 Employment Levels of 16-19 and 20-24 Year Olds with those that Would Have Prevailed if their E/P Ratios in 2000 Had Been in Place in 2003 (in Millions) (A) Age Group 16 19 20 24 16 24 Actual 2003 Employment 5.922 13.434 19.356 (B) Hypothetical 2003 Employment 7.274 14.306 21.580 (C) Hypothetical Minus Actual 1.352 0.872 2.224

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Chart 5: Additional Number of Employed Youth if Year 2000 E/P Ratios had Prevailed (in Millions)
2.5 2.224 2.0

Employment (in millions)

1.5

1.352

1.0

0.872

0.5

0.0 16 - 19 20 - 24 16 - 24

Changes in the Out-of-School and Out-of-Work Young Adult Population Joblessness among the nations youth is often viewed as a much more serious economic and social problem when it is combined with the absence of any schooling/training activity. The national CPS data for 2000 and 2003 have been used by BLS to produce estimates of the labor force status of 16-24 year old youth by their school enrollment status at the time of the surveys. We have analyzed these data to produce estimates of the number of 16-24 year old youth who were both out-of-school and out-of-work in 2000 and 2003 (Table 13). Over this three year period, the annual average number of out-of-school, out-of-work youth increased from 4.881 million to 5.668 million, an increase of 787,000 or 16%. Young males accounted for the bulk of this increase, with their numbers rising by 525,000 or 26 percent, due to their steeper job losses over this three year period and their lower school enrollment rates. The pool of women who were out-of-school and out-of-work rose by only 8%, but many women enrolled in school were

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left jobless. Both Whites and Hispanics experienced double digit growth in the number of teens and young adults in their out-of-school, out-of-work ranks. Table 13: Trends in the Number of Out-of-School, Out-of-Work 16-24 Year Olds in the U.S., by Gender and Race-Ethnic Origin, 2000 to 2003 (A) Group All 16-24 2000 4,881 (B) 2003 5,668 (C) Absolute Change 787 (D) Percent Change 16%

1,992 2,517 525 26% Men 2,890 3,151 261 9% Women 1,113 1,206 93 8% Black 1,008 1,233 225 22% Hispanic 3,509 4,014 505 14% White Source: U.S. Bureau of Labor Statistics, Unpublished tabulations from the CPS surveys, 2000 and 2003. Why We Should Care About Higher Levels of Youth Joblessness The high and rising levels of youth joblessness across the country and the growing numbers of disconnected youth have received some media attention over the past few years, but economic policymakers at the national and state level have provided few, and in most cases no, effective responses to the problem.11 There even has been a tendency among some analysts and reporters to casually dismiss the problem of declining labor force participation and rising joblessness among teens, claiming that they can go apply themselves to their academic studies or work on their tans during the summer months.12 These shortsighted and largely ignorant views of the problem need to be challenged by youth advocates, labor market analysts, and youth themselves, and the nations and states economic policymakers need to provide considerably more political leadership and support for youth employment, education, and training programs to substantially boost employment among the nations teens and young adults in the near future.

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See: (i) Marla Dickerson, Latino Job Seekers Find Born in USA Not Enough, Los Angeles Times, April 2, 2002, (ii) Bob Herbert, Young, Jobless, Hopeless, New York Times, February 6, 2003, pp. A-35. 12 (i) State of the Union: Americas Fortune, The Atlantic Monthly, January/February 2004, pp. ; (ii) Stephanie Armour, Record Number of Teens Just Say No to Summer Jobs, USA Today, 6-24-2002, www.USATODAY.com.

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There are a wide array of private and social economic and educational benefits that can be generated by a substantive expansion of employment opportunities for the nations teens and young adults.13 First, the high rates of labor underutilization among 16-24 year olds, including unemployment, underemployment, and discouragement, reduces the volume of labor inputs into the production process and the level of real output of the U.S. economy. These output losses from failing to utilize the available youth labor supply today are lost forever. Second, work experience is a valuable form of human capital that can increase the future employability and real wages of youth. Rising joblessness reduces the amount of work experience that youth will acquire today and their future earnings tomorrow. Third, the earnings obtained by young workers from their employment would be used to generate additional consumption expenditures on goods and services, thereby raising aggregate demand throughout the economy and the level of employment of other adult workers. Fourth, a number of studies of the in high school work experiences of teens have found that youth with some in-school employment experience, especially Black, Hispanic, and economically disadvantaged youths, are less likely to dropout of high school than their peers who do not work during their high school years. Employment expansion can help boost efforts to keep these youth in-school through graduation. Rising employment by itself can encourage some other teens to drop out of school, but strong efforts to tie jobs for youth to their continued enrollment in high school can achieve the desired results. Fifth, work-based learning opportunities can increase the perceived relevance of school-based learning among high school and college students and strengthen their incentives to acquire some post-secondary education. Followup studies of Boston high school graduates has revealed that participation in school-tocareer programs in high school with related work experience has been associated with a significantly higher likelihood of college enrollment upon graduation from high school. Sixth, students who work steadily in high school, especially those who do not go on to enroll in four year colleges and universities, obtain a smoother transition into the labor market in

13

For a review of the educational and economic advantages of in-school work experience, See: Andrew Sum, Neeta Fogg, and Garth Mangum, Confronting the Youth Demographic Challenge: The Labor Market Prospects of Out-of-School Youth, Sar Levitan Center for Social Policy Studies, Johns Hopkins University, Baltimore, 2000.

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the first few years after graduation from high school, avoiding problems of long-term idleness. Seventh, those states and metropolitan areas with higher rates of employment for teens are characterized by significantly higher rates of employment for its 20-24 year old residents five years later. Eighth, youth who work more during the high school years, especially those who learn new skills on their jobs, obtain significantly higher hourly earnings on their jobs in the first few years following graduation. Findings of longitudinal research also indicate that they will secure significantly higher annual earnings eight to ten years after graduation than their peers who did not work during high school. Ninth, a rise in the teen employment/population ratio tends to be associated with significantly lower rates of teen pregnancies.14 Tenth, teenaged mothers who work more during the first five to ten years following the birth of their first child obtain higher wages and real annual earnings in their young adult years and are significantly less likely to be poor.15 Eleventh, national research on the criminal behavior of young men suggests that reduced real earnings of young men tend to be associated with higher rates of criminal activity, including those involved with the illegal drug trade.16 High rates of idleness among young men reduces their work experience and their future earnings potential, thus making criminal activity more attractive. What Can Be Done? There is no simple silver bullet solution to the problems of the high levels of joblessness and underemployment among the nations teens and young adults. The causes of these problems are multiple in nature and new important structural forces seem to be at work.17 There are,

14

For evidence on the risky behavior of youth and its consequences, See: Jonathan Gruber, Risky Behavior Among Youth, MIT and NBER, Cambridge, May 2000. 15 For evidence on this set of issues and on the other determinants of the future earnings and poverty status of teen mothers, See: Neeta Fogg, An Economic Analysis of the Determinants and the Long-Term Labor Market Consequences of Teenage Childbearing in the United States, 1979-91, Ph.D. dissertation, Department of Economics, Northeastern University, Boston, 1997. 16 See: Richard B. Freeman, Why Do So Many Young American Men Commit Crimes and What Can We Do About It?, Journal of Economic Perspectives, Winter 1996, No. 1, pp. 25-42; (ii) Jeff Grogger, Criminal Opportunities, Criminal Activities and Young Mens Labor Supply, Department of Economics, University of California, Santa Barbara, 1997. 17 A recent article on the joblessness problems of young Black men cites other structural factors at work, including employability problems associated with criminal convictions and fathering children out-of-wedlock with accompanying child support burdens.

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however, a variety of macroeconomic policies, school-to-work transition strategies, and targetted job creation policies that can play an important role in generating additional employment opportunities for these young workers over the next few years. First, continued high rates of real output growth will be needed to boost the overall demand for labor, particularly in formal payroll employment, and increase employers willingness to hire additional numbers of young workers. The 1980s and 1990s experience bears out the importance of strong output and employment growth to boost teen employment opportunities. Between 1992 and 1998, employment levels among the nations teens increased by nearly 1.4 million, and they captured 14.5% of all of the gains in employment among the nations civilian working-age population over this six year period. Second, Targeted New Jobs Tax Credits for employers hiring additional numbers of teens and young adults could prove effective in boosting the demand for such workers in the short run. Past experience with the New Jobs Tax Credit of 1977 showed it was quite effective in boosting employment in teen-intensive industries.18 Employers need to be given incentives to hire additional numbers of youth. Third, there is a clear need to provide in-school youth with career counseling, job development and job placement services during the high school years to connect them to jobs and employers and to facilitate their transition to the labor market upon graduation. These labor market connecting activities also need to be supplemented with intensive followup support activities to strengthen the ability of youth to obtain and retain employment during the first year or two following high school graduation and to enable them to move seamlessly from one job to another. Both the U.S. Congress and state legislatures should be supportive of such efforts, with additional monies provided by state and local Workforce Investment Boards and county/city governments. Fourth, the U.S. Congress should provide monies to state and local Workforce Investment Boards under the current Workforce Investment Act to create jobs for unemployed 16-24 year

See: Harry Holzer and Paul Offner, The Puzzle of Black Male Unemployment, The Public Interest, Winter 2004, pp. 74-84. 18 Our proposal is based on a combination of the New Jobs Tax Credit and the Targeted Jobs Tax Credit Programs. For evidence on their effectiveness, See: Lawrence F. Katz, Wage Subsidies for the Disadvantaged, in Generating Jobs: How to Increase Demand for Less-Skilled Workers, Russell Sage Foundation, New York, 1998, pp. 21-53

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olds in nonprofit organizations and state and local governments. Past job creation programs for teens and young adults have been able to boost employment for disadvantaged and other low income neighborhood youth in a cost effective manner. Such monies should also be allowed to be used to subsidize jobs for teens and young adults in private for profit firms as was done under the Youth Incentive Entitlement Pilot7 Program in the late 1970s. Fourth, the Bush administration and the U.S. Congress should immediately restore funding for a separate summer jobs program for low income and other jobless youth, with the goal of putting no less than 500,000 youth to work in such jobs during the forthcoming summer. The last two summers have seen steep declines in the employment rates of teens, with the summer of 2003 being characterized by the lowest teen summer employment rate since the end of World War II. A combination of strong aggregate job growth, tax incentives for employers to hire teens and young adults, a comprehensive set of connecting activities to move youth into regular employment, and subsidized job creation programs for teens and young adults will be needed to substantively boost youth employment over the next few years. It is now time for national political leaders in both parties, including all Presidential candidates, to place youth joblessness higher on their political agendas.

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