The Paradox of Rising Teen Joblessness in An Expanding Labor Market

A Forum — March 18, 2005

Introduction

This was the kick-off event of AYPF’s forums aimed at increasing awareness of effective career preparation and workforce development policy and programs for disadvantaged youth and young adults, sponsored by the GE Foundation. Andrew Sum, Director, Center for Labor Market Studies at Northeastern University, presented an overview of the current status of teens and young adults in the labor market and discussed several of his recent reports including, “The Paradox of Rising Teen Joblessness in An Expanding Labor Market: The Absence of Teen Employment Growth in the National Jobs Recovery of 2003-2004.”

What Has Happened

Sum argued that the nation’s youth are still “young, restless, and jobless.” He focused on the labor market experiences of the nation’s teens (16-19) and young adults (20-24) over the past four years: the steep decline in their employment rates and accompanying deterioration in job quality; the adverse affects of the substantial influx of unskilled, immigrant labor and the unprecedented “age twist” in employment rates in the past four years. While the national teen employment rate declined to a new historical low in 2004, the nation experienced continuous growth in payroll employment, and the nation’s overall unemployment rate declined to 5.4 percent. The latter labor market developments normally would have been expected to raise teen employment rates.

Sum uses the employment/population ratio (E/P) as the best available indicator, he asserts, of the overall success of teens in the labor market. The official unemployment rate for teens can be misleading, Sum said, due to the high cyclical sensitivity of teen labor force behavior, and the fact that many teens simply do not enter the labor force when job prospects are negatively perceived. Thus, many jobless teens will not be classified as unemployed in the official labor force statistics.

Since 2000, the E/P ratio of the nation’s teens has fallen by nearly 9 percentage points, a drop more than four times as high as the E/P ratio decline for adults 20 and older. Young adults (20-29), except for those with a bachelor’s or graduate degree, also experienced a sharp decline in their E/P ratios, in contrast to the older segment of the population (55 and over) who experienced job growth between 2000 and 2004. Sum asserted that the magnitude of this “age twist” in the structure of employment rates is historically unprecedented.

Regarding the demographic and socioeconomic shifts in the E/P ratios of teens between 2000 and 2004, women fared slightly better than men with an 8 percentage point decline, while the E/P ratio for the nation’s males fell by 10 percentage points. African Americans, Hispanics, and White teens all experienced substantial declines in their employment rates. In each race-ethnic group, youth from the lowest income households and those living in high poverty neighborhoods were the least likely to be employed, and they experienced relatively high rates of job loss. High school dropouts, specifically from low-income families, face the most severe difficulty in finding employment and are more likely than other groups to generate other social costs, including incarceration, teen pregnancy, cash welfare, and in-kind transfers.

In 2004, fewer than 7 percent of African American male high school students in low income households were employed versus 12 percent of low income Hispanic males and 23 percent of White males. The highest employment rates among high school students were achieved by White females in middle to upper-middle income families, in which 40 percent worked on average. Sum acknowledged that, “low income minority youth remain the least likely to be employed in high school, creating additional school-to-work transition barriers.”

Why This Happened?

Why the huge loss of jobs for teens over the past four years? Sum believes a variety of demand and supply forces are at work, including increased competition from jobless adults, new college graduates, and immigrants. New foreign immigration has remained at high levels, and the influx of many low educated young immigrants over the past four years is an important reason why teens and young adults have found work at much lower rates than before. While there typically is no statistically significant wage difference between native born teens and young immigrants having the same skill sets, Sum said, employers are more likely to hire immigrants for a variety of reasons, such as easier recruitment, ability to work full-time as compared to part-time teenage employees, and a perceived reputation of many immigrants as hardworking and loyal. Moreover, due to the young age structure of the population of new immigrant workers, with 51 percent under the age of 30 and two-thirds under the age of 35, older adults have not faced as much competition for positions as do younger adults and teens. “For example, 70 of every 100 new immigrants between the ages of 25-34 were actively participating in the civilian labor force in 2004 versus only 31 of every 100 new immigrants 55 and older.”

Sum noted that youth also have been adversely affected by the fact that there has been no substantive net new wage and salary growth since the first quarter of 2001. While strong payroll job growth over the past 18 months has allowed the U.S. labor market to recover, the nation’s payroll jobs have just gotten back to their level at the peak of the business cycle in 2001. Employment growth for many working-age adults has been among the self-employed, contract workers, and off-the-books workers; teens do not capture many jobs in these three arenas. Finally, Sum argues there has been little economic incentive for firms to hire new workers, especially teens, since there were strong federal tax incentives to acquire capital instead of labor and financing costs were steadily declining until recently.

Why This is an Important Trend

Teen employment is important for a variety of reasons, including the fact that “early work experience begets more work experience.” Youth who work during their teen years are more likely to work as young adults. Early work experience is even more important for those students who are not planning to continue onto post-secondary education immediately upon graduation. National longitudinal evidence reveals that high school senior year work experience has economic payoffs until youth at least reach their mid-20s. Metropolitan areas with high teen employment rates have significantly higher E/P rates for young adults 5 years later.

Employment in school also can have educational benefits for youth. Economically disadvantaged youth, both men and women, who work during high school, are less likely to drop out of school than their non-working peers. In addition, African American males who work between 21-30 hours a week are more likely to graduate from high school and attend college than their peers with no paid work experience. Sum noted that existing research also shows that metropolitan areas with higher rates of employment for teen females are characterized by significantly lower teen pregnancy rates.

Policy Solutions

Sum offered eight policy solutions to boost teen employment. Despite the severity of the current problem, he offered some proposed solutions that together could substantially raise teen employment rates:

• Strong and sustained payroll job creation in the nation will help teens gain employment in the formal sector at a disproportionate rate;
• Provide greater national and state financial support for connecting activities that link high school students to private sector jobs both during the school year and during the summer; youth from low-income families, single parent families, and high poverty neighborhoods are particularly in need of such labor market brokering services;
• Stronger national, state, and local leadership for the hiring of teenagers and new high school graduates not going on to college immediately upon graduation; more visible public support by the President, governors, and mayors for such programs. Consider placing a Jobs for America’s Graduates or Career Academies program in nearly every high school (For more information see www.jag.org);
• Provide increased financial incentives for employers to hire young workers; bring back the New Jobs Tax Credit that would provide tax credits for employers hiring net new workers, especially teens and young adults without four-year college degrees;
• Bolster cooperative education programs at the secondary and post-secondary levels; strengthen the job placement capabilities of colleges and universities;
• Provide increased federal and state funding for subsidized job creation programs for teens, especially in high unemployment and high poverty areas. Teens must earn the right to these jobs based on school behavior/academic performance and give back to the community in the form of volunteer services and required participation in literacy/remediation programs to improve their own human capital skills;
• Enforce the immigration laws of the nation and require employers to live up to the spirit as well as the letter of the law;
• Demand that youth take greater responsibility for themselves and their futures. We need to demand more of youth in both school and work even as we strive to expand opportunities for them to work and learn.

Resources

• Andrew Sum, Paul Harrington, Ishwar Khatiwada et al., New Foreign Immigrants and the Labor Market in the U.S.: The Unprecedented Effects of New Foreign Immigration on the Growth of the Nation’s Labor Force and Its Employed Population, 2000 to 2004, Report Prepared by the Center for Labor Market Studies, Northeastern University, Boston, January 2005.
• Andrew Sum, Ishwar Khatiwada, Joseph McLaughlin et al., The Paradox of Rising Teen Joblessness in An Expanding Labor Market: The Absence of Teen Employment Growth in the National Jobs Recovery of 2003-2004, Report Prepared by the Center for Labor Market Studies, Northeastern University, Boston, Massachusetts, Report Prepared for Jobs for America’s Graduates, Alexandria, Virginia, January 2005.
• Andrew Sum, Ishwar Khatiwada et al., Still Young, Restless, and Jobless: The Growing Employment Malaise Among U.S. Teens and Young Adults, Report Prepared by the Center for Labor Market Studies, Northeastern University, Boston, Massachusetts, Report Prepared for Jobs for America’s Graduates, Alexandria, Virginia, January 2004.
• Andrew Sum, Ishwar Khatiwada et al., The Age Twist in Employment Rates in the U.S., 2000-2004: The Steep Tilt Against Young Workers in the Nation’s Labor Markets, Report Prepared by the Center for Labor Market Studies, Northeastern University, Boston, Massachusetts, Report Prepared for Jobs for America’s Graduates, Alexandria, Virginia, January 2005.
• Andrew Sum, Nathan Pond, Mykhaylo Trub’skyy et al., The Summer Job Market for the Nation’s Teenagers from 2000-2002 and the Employment Outlook for the Summer of 2003: The Case for a Federally-Funded Summer Jobs Stimulus for Youth, Report Prepared by the Center of Labor Market Studies, Northeastern University, Boston, Massachusetts, Report Prepared for National League of Cities and Institute on Youth, Education and Families, Washington, D.C., May 2003.

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