The Non-Improvement in Full-Time Youth Employment Levels

by Reihan Salam

Diana Carew of the Progressive Policy Institute describes the dismal labor market conditions facing young U.S. workers:

In July 2013, just 36 percent of Americans age 16-24 not enrolled in school worked full-time, 10 percent less than in July 2007. It’s no secret that young people are struggling economically, but my analysis of Friday’s BLS release sheds light to what extent. The fact that so many young people are not realizing their true earnings potential in these formative years could have serious long-term consequences.

She observes that there has been little improvement in the share of young Americans not enrolled in school working full-time since the recovery began four years ago, and that labor force participation varies dramatically across educational groups:

[F]or those with less than a high school diploma, 14 percent worked full-time, compared to 66 percent with a Bachelor’s degree or higher.

And unfortunately, part-time employment has only partially filled the breach:

Of the 17 million Americans age 16-24 not enrolled in school or working full-time in July 2013, 5.6 million were working part-time, 3.2 million were unemployed – a 17.1 percent unemployment rate – and another 8.4 million were not in the labor force altogether.

As Ben Casselman reported last year, the scarring effects of unemployment, non-employment, and underemployment can last for years. This is particularly true for the young. In 2011, The Economist described recent research on the lasting effects of youth unemployment:

Research from the United States and Britain has found that youth unemployment leaves a “wage scar” that can persist into middle age. The longer the period of unemployment, the bigger the effect. Take two men with the same education, literacy and numeracy scores, places of residence, parents’ education and IQ. If one of them spends a year unemployed before the age of 23, ten years later he can expect to earn 23% less than the other. For women the gap is 16%. The penalty persists, though it shrinks; at 42 it is 12% for women and 15% for men. 

One danger is that this scarring effect will contribute to other social maladies, including drug and alcohol dependence and family disruption, all of which will contribute to the demand for means-tested transfers and labor-intensive social services. Fiscal conservatives focused on the long-term have good reason to be concerned about the persistence of high youth unemployment.