Adrienne L. Fernandes-Alcantara
Specialist in Social Policy
Congress has indicated a strong interest in ensuring that today’s young people—those ages 16 through 24—attain the education and employment experience necessary to make the transition to adulthood as skilled workers and taxpayers. In the wake of the December 2007-June 2009 recession, questions remain about the employment prospects of youth today and the possible effects on their future earnings and participation in the labor market.
- Over the past decade, teens and young adults have experienced a precipitous decline in employment and a corresponding increase in unemployment. In 2000, their employment to population (E/P) ratio was about 60%. Their E/P ratio steadily eroded even when the economy grew in the mid-2000s. The December 2007-June 2009 recession resulted in record low employment (based on the E/P ratio) for this population. Since the official end of the recession, younger workers have continued to fare poorly in the labor market. In 2012, youth ages 16 through 24 had an E/P ratio of 46.0% and a rate of unemployment at 16.2%. This is compared to an E/P ratio of 75.7% and an unemployment rate of 7.0% for workers of prime working age, 25 through 54.
- Recent declining E/P ratios for young people are likely due to decreasing demand for labor generally and youth foregoing work for higher education. Youth may decide to pursue education because of dismal employment prospects and the growing need for more education to be successful in the labor market.
- Throughout the post-World War II period, the E/P ratio has been highest for white youth, followed by Hispanic youth. Black and Asian youth have been the least likely to be employed. For black youth, this is likely due to lower educational attainment. Lower rates of employment for Asian youth are likely attributable to their increasing participation in postsecondary education. Young black males in particular have had the lowest E/P ratios.
- Beginning in the 1970s, the E/P ratios for women increased as they entered the workforce in greater numbers. The gender difference in the E/P ratio for teens and young adults began to narrow in the 1990s, likely due to greater high school and college attainment among females and other factors.
- Lower E/P ratios—and simultaneous increases in unemployment—for young people appear to be due to a confluence of factors. Youth have less education and experience relative to older workers. In general, firms are more likely to hire workers with more experience and availability, which puts young workers at a disadvantage. Young workers may especially face challenges in landing a job during tough economic times.
The consequences of decreasing E/P ratios and increasing unemployment among youth have not been fully explored. Preliminary research in this area has hypothesized that reductions in human capital, such as deterioration of skills and foregone work experience, may have lasting impacts on employability and wages of youth. Some studies show that on average, early youth unemployment has negative effects on incomes but not as strong effects on future unemployment; however, youth entering the labor market during severe downturns in the economy appear to have relatively lower wages in the longer term.
Date of Report: July 11, 2013
Number of Pages: 36
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