The Collapse of the Nation’s Labor Market for Teens and Young Adults (20-24): Designing A Set of Workforce

Development Strategies to Improve the Immediate and Long-Term Employment Prospects of the Nation’s Youth

Andrew SumCenter for Labor Market Studies

Northeastern UniversityBoston, Massachusetts

May 2009

The Collapse of the Teen and Young Adult Job Market in the U.S.: The Case for A Comprehensive

Workforce Development System Response

1) An overview of the steep unprecedented declines in teen and young adult employment rates in the U.S. since 2000 and during the current recession: we have achieved record low employment rates for the entire post-World-War II era, especially for men

2) These sharp drops in employment rates have taken place among all major groups of teens, including men and women, members of each major race-ethnic group, educational attainment, and family income group

3) There are very high underutilization rates for teens and young adults that go far beyond the official unemployment statistics

4) Why we should care about the severe loss in both the quantity and quality of teen and young adult employment prospects. The economic, educational, and social advantages of maintaining high employment rates for teens and young adults

5) The implications of these findings for the design and administration of future youth workforce development policies and programs

An Overview of Key Developments in the Nation’s Teen and Young Adult Labor Markets from 2000 to 2008 and

During the Current Economic Recession

• The civilian labor force participation and employment rates of the nation’s teens (16-19) and young native born adults (20-24) fell sharply and steeply from 2001 through 2003; their E/P ratios fell more steeply than any other age group by far

• Teen employment was only marginally affected by national job growth from 2003 to 2006 and then began to decline in the fall of 2006 well before the onset of the national recession. The teen E/P ratio fell considerably from the fall of 2007 to first quarter of 2009, by January-April period, under 30% of the nation’s teens were employed, lowest rate in post-World War II history

• Between 2000 and 2008, teen employment rate declines were overwhelming; their E/P rate fell by 15 percentage points from November-December 2000 to November-December 2008

Continued

• Teen employment declines were severe in every major demographic and socioeconomic group; young college students affected the least, high school students and high school dropouts the most

• Employment rates of teens in 2008 were lowest among the young (16-17), males, Blacks and Asians, and low income youth

• Among 20-24 year olds, employment rates in 2008 were nearly 5 percentage points below 2000 among all youth; by January 2009, young males were employed at rates 10 to 12 percentage points below those of early 2001; record low employment rates for young 20-24 year old males; high school dropouts and graduates with no college have fared the worst in the labor market

Continued

• E/P ratios of young college graduates have remained quite high (the smallest declines) but a very high and growing fraction of them are mal-employed, working at jobs that do not require a college degree; the mal-employment rates of the nation’s young college graduates (25 and under) have intensified during the past 18 months. Only 50% of BA degree holders (25 and under) were working in a college labor market job in the first 3 months of this year.

Trends in the Employment/Population Ratios of the Nation’s Teens (16-19) Between 2000 and 2009 (Annual Averages, Except 2009 Which is January – April)

(1) This employment rate for teens is the lowest ever record in post-World War II history.

45.2

39.636.8

34.832.6

29.8(1)

0

5

10

15

20

25

30

35

40

45

50

2000 2002 2003 2007 2008 2009 (January-April, Seasonally

Adjusted)

Year

Per

cen

t

Trends in the Employment/Population Ratios of the Nation’s Teens (16-19) During Selected Summers Between 2000 and 2008

(June-August Averages, Not Seasonally Adjusted)

51.7

45.241.7 42.6

39.637.8

0

10

20

30

40

50

60

2000 2002 2003 2006 2007 2008

Year

Per

cen

t

Trends in the Employment-Population Ratios of Male Teens in the U.S., 1979 to 2009

(Annual Averages, Except 2009, in %)

51.7

42.9

48.7

41.945.4

35.7

31.6

25.8

0

10

20

30

40

50

60

1979 1982 1989 1992 2000 2003 2008 2009(January-

April)

Year

Per

cen

t

The Employment/Population Ratios of Male and Female Teens in the U.S., Selected Years 1979 to 2009

(Annual Averages, Except 2009, in %)

Year

(A)

Men

(B)

Women

(C)

Men – Women

1979 51.7 45.3 +6.4

1989 48.7 46.4 +2.3

2000 45.4 45.0 +.4

2003 35.7 37.8 -2.1

2008 31.6 33.7 -2.1

2009 25.8 30.1 -4.3

The Employment/Population Ratios of Teens (16-19) by Their Family Income, January – March 2009

(in %)

22.7

27.228.9

33.9 33.935.0

28.0

0

5

10

15

20

25

30

35

40

<20 20-40 40-60 60-80 80-100 100-125 125+

Family Income (in 1000s)

Per

cen

t

Employment/Population Ratios of 16-19 Year Olds in Selected Race/Ethnic/Family Income Groups in the U.S., January-March 2009

(in %)

• Middle to upper middle income Whites and Hispanics are most likely to work; 3* as likely as low income Black teens. Middle income Blacks are 2.3* as likely to work as low income Blacks.

12.0

15.317.6

20.0

23.7

34.035.7

37.4

-

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

Black,<20K

Asian,<20K

Black, 20-40K

Hispanic,<20K

Hispanic,20-40K

White,40-100K

White,75-100K

Hispanic,60-75K

Group of Teens

Per

cen

t

Employment/Population Ratios of 16-19 Year Old Teens in the First Quarter of 2009, Bottom Ten and Top Ten States

(in %)

Bottom TeenE/P

Ratio Top TenE/P

Ratio

DC 10.5 Wyoming 38.7Arkansas 15.5 Missouri 40.8Mississippi 18.2 Kansas 41.0New Mexico 20.5 North Dakota 41.5California 20.9 Vermont 41.9New Jersey 21.3 Wisconsin 42.3Georgia 21.8 Iowa 43.2South Carolina 22.4 Nebraska 43.3New York 23.2 Utah 47.9Delaware 23.2 South Dakota 47.9Unweighted Average 20.7 42.8

Top ten states have an E/P ratio for teens that was twice as high as bottom ten states.

Changes in the Employment Levels of U.S. Adults (16 and Older) All and by Selected Major Age Groups, October-November 2007 to

March April 2009 (Seasonally Adjusted, in Millions)

Age Group

(A)

Oct./Nov.

2007

(B)

March/April 2009

(C)

Absolute

Change

(D)

Percent

Change

All 146.266 140.947 -5.319 -3.6%

16 – 19 5.889 5.093 -.796 -13.5%

20 – 24 13.912 13.090 -.822 -5.9%

25 – 29 16.496 15.329 -1.167 -7.0%

25 – 34 31.636 30.176 -1.460 -4.6%

55+ 26.074 26.987 +.913 +3.5%

55 – 64(1) 20.503 20.959 +.456 +2.2%

65+(1) 5.794 6.045 +.251 +4.3%Note: (1) Data for this age group are not seasonally adjusted.

Source: U.S. Bureau of Labor Statistics, CPS household survey, web site, tabulations by authors.

Trends in the Employment/Population Ratios of 20-24 Year Old Men and Women in the U.S., Selected Years, 2000-2009

(in %)

Year

(A)

Men

(B)

Women

(C)

Men – Women

2000 75.6 67.9 +7.7

2003 71.5 64.2 +7.3

2006 72.7 64.2 +8.5

2007 71.7 65.0 +6.7

2008 69.7 63.8 +5.9

2009 (Jan.-April) 63.8 61.8 +2.0

Change 2000 - 2009 -11.8 -6.7 -5.7

Trends in the Employment/Population Ratios of 20-24 Year Old Men in the U.S., Selected Years, 2000-2009

(Annual Averages, Except 2009, in %)

76.6

71.5 71.7

69.7

63.8*

60

65

70

75

80

2000 2003 2007 2008 2009 (January-April)

Year

Per

cen

t

*Lowest ever recorded in U.S., history since 1948.

Labor Underutilization Problems Among the Nation’s Teens (16-19) in the January-March Period of 2009

Labor Force/Labor Underutilization Variable

(A)

Number of Teens in Group

Civilian Labor Force 6,175,222

Unemployed 1,366,266

Unemployment Rate 22.1%

Underemployed 423,000

Labor Force Reserve (Hidden Unemployed) 917,194

Adjusted Civilian Labor Force (CLF + Labor Force Reserve)

7,092,416

Combined Pool of Underutilized Labor 2,706,462

Underutilization Rate (Underutilized/Adjusted Civilian Labor Force

38.2%

Labor Underutilization Rates of the Nation’s 16-19 Year Olds by Gender and Major Race-Ethnic Group, January-March 2009

(in %)

32.3

43.9

33.2

42.244.6

53.7

20

25

30

35

40

45

50

55

60

Women Men White, notHispanic

Asian Hispanic Black

Gender/Race-Ethnic Group

Per

cen

t

Labor Underutilization Rates of the Nation’s 16-19 Year Olds by Household Income, January to March 2009

56.7

42.8

38.8

33.4

28.8 28.3

20

25

30

35

40

45

50

55

60

<20K 20-40 40-60 60-75 75-100 100+K

Household Income (in 1000s)

Per

cen

t

Labor Force Underutilization Rates Among the Nation’s Teens (16-19) by School Enrollment/

Educational Level in the January-March Period of 2009 (in %)

22.9

37.5

48.5

60.0

20

25

30

35

40

45

50

55

60

65

College Students High School Students High School Graduates,not in College

High School Dropouts

Educational Group

Per

cen

t

The Potential Educational, Labor Market, and Social Impacts of Expanded Employment for the

Nation’s Teens and Young Adults (20-24)

In-school employment for economically disadvantaged males, especially Blacks and Hispanics, helps increase their high school graduation rate

In-school employment with work-based learning opportunities increases students awareness of the links between high school curriculum and world of work requirements; can increase commitment to school work and strengthen employability skills

Improves the transition from high school to the labor market upon graduation from high school, including higher employment rates, higher wages, and earnings

Continued

More intensive employment during teen years and early 20s increase likelihood of receiving apprenticeship training and formal training from employers in your early to mid 20s; these training investments raise wages and earnings

Local areas characterized by higher employment rates for teenaged girls have lower teen pregnancy rates

Local labor markets with higher employment rates and wages for boys reduces their involvement with criminal justice system, particularly for assault/battery and property crimes, reduces attraction of drug sales among inner city youth

What Can Be Done to Bolster Teen and Young Adult Employment Prospects in Short and Long Run

1) A need to expand both year-round and summer job opportunities for teens and young adults; greater long-term effects on youth from year round employment

2) Use WIA monies including stimulus dollars to create both year-round and summer subsidized job opportunities for teens and young adults Have the U.S. Congress allow the summer monies be used to fund job

developers for jobs for all teens in the private sector and to experiments with wage subsidies for private, for profit sector employers

3) Mandate all ARRA funded projects list their new job openings with one stop career centers, have out-of-school teens and young adults be assigned a priority for referral to such openings Use part of the ARRA stimulus monies for infrastructure/green

technology investment for training of jobless youth and adults

Continued

4) Expand school-to-work (e.g., Jobs for America’s Graduates) and connective activities programs, and Career Academies programs for more high school youth to facilitate their transition to the labor market upon graduation from high school

5) Strengthen in-school and summer internships, cooperative education programs, and job development/placement programs for college students in 2 year and 4 year colleges and universities to increase their employment in college labor market jobs upon graduation. These job placements will substantially increase the private and social rates of return to college investments

Estimating the Impact of Summer WIA Job Creation Programs for Teens and Young Adults on Their Overall

Employment/Population Ratio for the Year

∆ E Ratio = Number of youth Number of Net jobs Mean P 14-24 assigned to * 16-24 Year Old * created per * months in

jobs under the program Participants in program program Eligible youth 100 Total 12

Participants14-24

• Assumptions underlying our estimate of the employment impact of summer jobs programs under WIA in 2009

• 400,000 youth 14-24 will be assigned to the program• 95 of every 100 jobs will go to 16-24 year olds• 90 of every 100 jobs created by the program will be net new jobs for youth• Average job will last 8-9 weeks, or two months

Continued

Solving for Change in

the E/P Ratio for all = 400,000 * .95 * .90 * 2

16-24 Years Olds in 38,000,000 12

the Nation

= .15 percentage points

Annual average E/P ratio

would change from .48.5% to 48.6%, a gain of .1 percentage points

The estimated employment impact could be increased by focusing programs only on 16-21 years old, targetting services most heavily on at-risk youth to maximize net job creation effect, allocating monies to hire job specialists to development unsubsidized jobs for youth, subsidizing jobs for teens in the private for profit sector.

Continued

This is only a very modest impact of summer WIA jobs programs on the year-round employment rate of 16-24 year olds. Reasons for the modest impact are the following the:

• For economically disadvantaged youth, the impact will be up to 7* higher

• Size of job creation program is small-only 1 percent of the entire 16-24 youth population are served by the program

• Summer program is only creating jobs for 2 of the 12 months during the year; a year-round jobs creation program is needed to substantially boost the E/P ratio of teens and young adults

• There is always some substitution effect of jobs creation programs even among economically disadvantaged teens; past research has shown the displacement effects of job creation programs to be lowest for teens.