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1 Center or American Progress |   The High Cost o Youth Unemployment

 The High Cost of Youth

UnemploymentSarah Ayres April 5, 2013

Nearly everyone has sruggled in he wake o he Grea Recession, bu young Americans

have suered he mos. While ohers have slowly reurned o work, he unemploymen

rae or Americans ages 16–24 sands a 16.2 percen, more han double he naional

rae o unemploymen.1 And even when his group evenually sars earning a paycheck,

he impac o heir unemploymen will ollow hem or years. According o a new analy-sis by he Cener or American Progress, young Americans will lose a saggering $20

 billion in earnings over he nex decade.

Research shows ha workers who are unemployed as young aduls earn lower wages

or many years ollowing heir period o unemploymen due o orgone work experi-

ence and missed opporuniies o develop skills.2 Building on his research, we esimae

ha he nearly 1 million young Americans who experienced long-erm unemploymen

during he wors o he recession will lose more han $20 billion in earnings over he

nex 10 years. Tis equaes o abou $22,000 per person. Te economic consequences

o hese los wages o individuals and o he broader economy are serious. Tese young Americans—reerred o as Millennials—will increasingly be orced o delay moving ou

o heir parens’ homes, sruggle o make paymens on ballooning suden-loan deb,

and ail o save adequaely or reiremen. As a consequence o he prolonged unemploy-

men o Millennials, he U.S. economy will eel he loss o aggregae demand in he orm

o slower growh and less job creaion.

o be sure, geting our economy back on rack will require geting people o all ages back 

o work. Bu he problem o youh unemploymen is especially pernicious, and as such

i deserves special atenion rom lawmakers.

In his issue brie we make he case ha he Unied Saes has a serious youh-unem-

ploymen problem ha will cos us dearly in he long run. We will show ha he

employmen prospecs or young Americans are dismal by boh hisorical and inerna-

ional comparisons, and we will explore in deail he coss associaed wih our curren

levels o youh unemploymen in erms o los earnings, slower economic growh, and

greaer axpayer burden.

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2 Center or American Progress |   The High Cost o Youth Unemployment

Just how bad is the U.S. job market for teens and young adults?

Youth unemployment is at a historic high

oday’s young Americans ace he wors employmen prospecs in recen hisory.

 Wha’s more, rends in employmen and unemploymen raes since World War IIindicae ha he labor marke is becoming even less riendly o young workers. Even

prior o he Grea Recession, young people had a hard ime in he labor marke, and

heir employmen siuaion has worsened since. Over he pas several decades, employ-

men and labor-orce paricipaion among Americans ages 16–24 have declined, while

he unemploymen rae or his group has risen. During ha same ime period, hese

employmen measures have remained sable or even improved or Americans in he

prime working age group o 25–54, indicaing ha he youh-employmen problem

canno be atribued solely o a worsening economy. And alhough declining employ-

men and labor-orce paricipaion among young people can be pegged in par o rising

educaional atainmen—more youh compleing high school and possecondary educa-ion—he daa sugges ha here is more o he sory. Le’s look a hree job-prospec

measures or young Americans.

• Labor-force participation: Te labor-orce paricipaion rae is he percenage o indi-

 viduals in he populaion who are eiher employed or unemployed and acively look-

ing or work.3 Tis measure indicaes he level o ineres individuals have in working,

alhough i can decline when workers become discouraged or pursue educaion—even i 

hey would oherwise have he desire o work.

 While labor-orce par icipaionamong young people increased

in he years ol lowing World

 War II, i began o decline sar-

ing in he 1980s. Te bigges

drop in labor-orce paricipa-

ion has been or eenagers,

 who saw heir numbers decline

rom a high o nearly 60 percen

in 1978 o an all-ime low o 

33.5 percen in 2012.4 Young

aduls ages 20–24 have ared

somewha beter, bu heir

labor-orce paricipaion rae

has dropped rom a high o 79.6

percen in 1987 o 70.1 per-

cen oday. Over he pas hree

FIGURE 1

Labor force participation

20%

40%

60%

80%

100%

0%

  1   9  4   8

  1   9   5  1

  1   9   5  4

  1   9   5   7

  1   9  6  0

  1   9  6   3

  1   9  6  6

  1   9  6   9

  1   9   7   2

  1   9   7   5

  1   9   7   8

  1   9   8  1

  1   9   8  4

  1   9   8   7

  1   9   9  0

  1   9   9   3

  1   9   9  6

  1   9   9   9

   2  0  0   2

Source: Bureau of Labor Statistics

25 to 54 years

20 to 24 years

16 to 19 years

   2  0  0   5

   2  0  0   8

   2  0  1   2

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3 Center or American Progress |   The High Cost o Youth Unemployment

decades, labor-orce paricipaion among aduls ages 25–54 has remained mosly 

sable a around 80 percen.5 

o be sure, declining labor-orce paricipaion among eens and young aduls is no neces-

sarily a bad economic sign. Downward moves in labor-orce paricipaion can be atribued

in par o increasing school enrollmen, a posiive developmen ha booss boh workers’

earnings and broader economic growh.6 Bu oday’s high unemploymen raes indicaeha here are oo many young people who wan o work bu canno nd jobs.

• Employment-to-population ratio: Te employmen-o-populaion raio is he propor-

ion o individuals in he populaion who are employed.7 A high employmen-o-popula-

ion raio indicaes ha people in he populaion are able o nd jobs.

Since he 1980s he employmen-

o-populaion raio or eenagers

and young aduls has declined,

 wih he seepes drops occurringin he pas decade. During ha

ime employmen among eenag-

ers has dropped he mos, alling

rom 50 percen in 1978 o jus

25.8 percen oday. Employmen

among young aduls peaked a

72.9 percen in 2000, alling o

60.8 percen oday. By conras,

employmen among Americans

o prime working age currenly sands a 75.9 percen, abou he

same as i was in he mid-1980s.

Here again, declining employ-

men raes among young people

are no necessarily bad i hey represen increases in educaional atainmen. Bu because

hese changes are also accompanied by rising unemploymen raes, hey sugges ha

 young people are dropping ou o he labor marke due o discouraging job prospecs.

• Unemployment rate: Te unemploymen rae is he share o individuals in he labor

orce who are unemployed.8 o be considered unemployed, a worker mus be looking

or a job by sending ou resumes, lling ou applicaions, inerviewing or posiions,

or engaging in oher job-search aciviies.9 Te unemploymen rae indicaes wheher

people are able o nd employmen, bu i can also decline i workers become discour-

aged and qui looking or work—even i hey wan a job.

FIGURE 2

Employment to population ratio

20%

40%

60%

80%

100%

0%

Source: Bureau of Labor Statistics

25 to 54 years

20 to 24 years

16 to 19 years

  1   9  4   8

  1   9   5  1

  1   9   5  4

  1   9   5   7

  1   9  6  0

  1   9  6   3

  1   9  6  6

  1   9  6   9

  1   9   7   2

  1   9   7   5

  1   9   7   8

  1   9   8  1

  1   9   8  4

  1   9   8   7

  1   9   9  0

  1   9   9   3

  1   9   9  6

  1   9   9   9

   2  0  0   2

   2  0  0   5

   2  0  0   8

   2  0  1   2

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4 Center or American Progress |   The High Cost o Youth Unemployment

Since World War II young people

have become increasingly more

likely o be unemployed, while

he unemploymen rae or

aduls has remained lower and

relaively more sable. oday 

he unemploymen rae amongeens—alhough down slighly 

rom an all-ime high o 27.2

percen in 2010—is 24.2 percen,

higher han i ever was prior o

he Grea Recession o 2007–

2009.10 Young aduls have ared

somewha beter han eens, bu

hey also experienced an all-ime

high unemploymen rae in 2010,

 when 17.2 percen o people ages20–24 were ou o work.11 Te

rends in unemploymen indicae ha young job seekers have suered disproporion-

aely in he recession compared o adul workers.

Youth unemployment in the United States is high relative to European countries

with more youth-friendly labor markets

 While advanced economies around he world are sruggling wih high unemploymen

in he wake o he global recession, he ac ha some counries have been able o keepheir youh unemploymen raes relaively low indicaes ha high youh unemploy-

men is no an ineviable consequence o an economic downurn. German, Danish,

Duch, and Ausrian youh, or example, all enjoy lower unemploymen raes han heir

 American counerpars. While American youh are unemployed a a rae o 16.2 per-

cen, youh in hese counries are unemployed a raes o 7.9 percen, 15 percen, 10.3

percen, and 9.9 percen, respecively.12

 Wha’s more, hese counries have done a beter job han he Unied Saes o keeping

 youh unemploymen low relaive o overall unemploymen. Te raio o youh unem-

ploymen o overall unemploymen is an indicaor o how much more difcul i is or a

 young person o nd a job compared o an adul worker. In he Unied Saes, he unem-

ploymen rae or workers ages 16–24 is more han wice he overall unemploymen rae

o 7.6 percen.13 In Germany, however, he unemploymen rae or young workers—7.9

percen—is only 1.5 imes he overall unemploymen rae o 5.3 percen.14 Denmark,

he Neherlands, and Ausria also have raios o youh unemploymen o overall unem-

ploymen ha are lower han ha experienced in he Unied Saes.15

FIGURE 3

Unemployment rate

Source: Bureau of Labor Statistics

0%

5%

10%

15%

20%

25%

30%

16 to 19 years

20 to 24 years

25 to 54 years

  1   9  4   8

  1   9   5  1

  1   9   5  4

  1   9   5   7

  1   9  6  0

  1   9  6   3

  1   9  6  6

  1   9  6   9

  1   9   7   2

  1   9   7   5

  1   9   7   8

  1   9   8  1

  1   9   8  4

  1   9   8   7

  1   9   9  0

  1   9   9   3

  1   9   9  6

  1   9   9   9

   2  0  0   2

   2  0  0   5

   2  0  0   8

   2  0  1   2

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5 Center or American Progress |   The High Cost o Youth Unemployment

Cerainly, more work mus be done o undersand why some counries seem o have

labor markes ha are more youh riendly, bu some hypohesize i is because hese

counries end o have workorce-developmen sysems ha suppor appreniceships,

 vocaional programs, and oher worker-raining programs ha bolser he ransiion

 beween school and work.16 Providing young people wih more srucured pahways

ino work could be he key o mainaining relaively low youh-unemploymen levels

even during periods o economic downurn. Wha we do know or sure rom heseexamples is ha America’s high level o youh unemploymen is avoidable.

Youth unemployment is even worse than the unemployment rate suggests

Te high unemploymen rae or young Americans is a bad sign, bu i doesn’ even

 begin o ell he whole sory o jus how grim employmen prospecs are or oday’s

 young aduls. Looking jus a he overall unemploymen rae obscures he exremely 

high raes o unemploymen among communiies o color, ignores workers who have

given up on nding a job, and ails o ake ino accoun he many workers who areunderemployed relaive o heir skills and educaion levels.

Unemploymen is a major problem or young Americans in general, bu i’s an even

 bigger problem or young people o color. While he overall unemploymen rae or

eenagers is 25.1 percen, he unemploymen rae or black eens is 43.1 percen.17 And

ully hal o black males ages 16–19 are looking or work bu unable o nd a job.18

 Wha’s more, he unemploymen

rae does no include discour-

aged workers—people who havelooked or a job in he pas year

 bu who have grown discour-

aged and given up because hey 

 believe ha here are no jobs

available—or a leas none or

 which hey would qualiy.19 

Te percenage o people aged

16–24 who are no in he labor

orce bu who wan a job is 11

percen, compared o 7.1 percen

o people o all ages no in he

labor orce bu who wan a job.20 

Furhermore, a sudy by he Cener or Labor Marke Sudies esimaed ha in 2009

here were 2.8 million eens who waned o work bu who were no currenly looking or

 were employed par ime bu waned ull-ime work. Tis is in addiion o he 1.5 mil-

FIGURE 4

Unemployment rate, by age and race

0%

10%

20%

30%

40%

50%

16 to 19 years

20 to 24 years

25 to 54 years

Source: Bureau of Labor Statistics

Asian White Hispanic Black  

18.4

7.85.4

22.8

11.7

6.3

29.1

14.7

8.7

43.1

25.7

11.3

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6 Center or American Progress |   The High Cost o Youth Unemployment

lion eens who were couned as unemployed,21 suggesing ha he employmen siua-

ion or young Americans may be even bleaker han he unemploymen saisics convey.

Moreover, unemploymen numbers ell us nohing abou he qualiy o jobs available o

 young workers, many o who nd hemselves overqualied and underpaid. In ac, abou

hal o all recen college graduaes are in jobs ha do no require a our-year degree, and

37 percen are in jobs ha require no more han a high school diploma.22

What is the true cost of youth unemployment?

Youth unemployment leads to depressed lifetime earnings

No only is unemploymen bad or young people now, bu he negaive eecs o being

unemployed have also been shown o ollow a person hroughou his or her career.

 A young person who has been unemployed or six monhs can expec o earn abou$22,000 less over he nex 10 years han hey could have expeced o earn had hey no

experienced a lenghy period o unemploymen.23 In April 2010 he number o people

ages 20–24 who were unemployed or more han six monhs had reached an all-ime

high o 967,000 people.24 We esimae ha hese young Americans will lose a oal o 

$21.4 billion in earnings over he nex 10 years.25

Tis esimae is based on a sudy ha ound men who experienced a six-monh period o 

unemploymen a age 22 earned 8 percen less a age 23 han hey would have oher-

 wise.26 Te wage gap narrows wih age, bu i sill persiss. By age 26, he men earned 6

percen less han hey would have i hey had never been unemployed. Even by age 31,heir wages were 3 percen or 4 percen lower han hey oherwise would have been.

Long-erm unemploymen robs young people o he opporuniy o gain he skills, expe-

riences, and connecions ha ranslae ino higher wages.

Relaed sudies have ound similar negaive eecs on uure earnings. Researchers in he

Unied Kingdom ound ha one year o youh unemploymen a he age o 22 resuled

in wages ha were 13 percen o 21 percen less 20 years laer.27 Anoher sudy ha

looked a American men who graduaed rom college during a recession esimaed ha

an increase in he naional unemploymen rae o 1 percen ranslaed ino 6 percen o 7

percen lower wages iniially and 2.5 percen lower wages 15 years down he road.28

Te impac o hese los earnings on young Americans is readily apparen. Young

 Americans oday nd hemselves being increasingly squeezed by everyhing rom rising

uiion coss o healh care expenses o energy bills, bu income or he ypical house-

hold hasn’ increased in 20 years.29 Te repercussions o his nancial squeeze are clear.

oday Americans under he age o 40 have accumulaed less wealh han heir parens

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7 Center or American Progress |   The High Cost o Youth Unemployment

did a ha age more han 25 years ago.30 More han 13 percen o borrowers—mainly 

 young aduls—have deauled on heir suden loans, and anoher 26 percen are delin-

quen.31 Young aduls are now more likely o live wih heir parens and less likely o own

a home han hey were beore he recession.32 And more han hal o Americans ages

25–34 have saved less han $10,000 or reiremen, increasing he odds ha hey will

lack sufcien savings o reire in heir old age.33

 Ye anoher casualy o hese los wages is long-erm U.S. economic growh. When

 workers earn less because hey were once unemployed, hey spend less money a super-

markes, booksores, caes, and oher businesses. Te eec o aking his spending ou

o he economy adds up, resuling in ewer jobs and slower economic growh. Allowing

high levels o youh unemploymen o persis will weaken America’s economic growh

and prosperiy or years o come.

Youth unemployment incurs fiscal costs

Moreover, youh unemploymen creaes an addiional cos burden or axpayers in he

orm o los revenues, he need or governmen-provided healh care, increased crime,

and addiional welare paymens. In a recen sudy commissioned by he Whie House

Council on Communiy Soluions, researchers esimae ha he scal cos o he 6.7

million Americans ages 16–24 who are neiher working nor atending school is $1.6 ril-

lion over heir lieimes.34 Failing o creae jobs or unemployed young people oday will

leave axpayers wih a huge bill down he road.

Conclusion

Ignoring he dire employmen siuaion or young Americans is simply no an opion. Te

economic consequences o high youh unemploymen are enduring, and ailing o employ 

 young people oday will resul in los earnings, greaer coss, and slower economic growh

omorrow. Unorunaely, Congress is moving in he wrong direcion wih sequesraion

and misguided policy decisions o end programs ha are proven o pu young people o

 work. While youh unemploymen has risen, Congress has cu $1 billion rom youh jobs

programs over he pas decade.35 Furhermore, sequesraion, wih is across he board

auomaic spending cus, will resul in he eliminaion o 4,200 AmeriCorps posiions,

cuting back on an imporan source o jobs ha allow young people o gain valuable

experience and develop markeable skills.36 In uure bries, CAP will propose a series o 

orward-hinking policies ha will help lawmakers ackle he naion’s youh-unemploy-

men crisis. Bu Congress can sar o address he crisis now by puting a sop o hese

shorsighed unding cus and beginning o ake youh unemploymen seriously.

Sarah Ayres is a Policy Analyst with the Economic Policy team at the Center for American Progress.

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8 Center or American Progress |   The High Cost o Youth Unemployment

Endnotes

1 Bureau o Labor Statistics, Current Population Survey (U.S.Department o Labor, 2013).

2 Thomas Mroz and Timothy Savage, “The Long-Term Eectso Youth Unemployment,” The Journal of Human Resources 41 (2) (2006): 259–293; Paul Gregg and Emma Tominey,“The Wage Scar From Male Youth Unemployment,”Labor 

Economics 12 (4) (2005): 487–509; Lisa Kahn, “The Long-TermLabor Market Consequences o Graduating rom College ina Bad Economy,” Labor Economics 17 (2) (2010): 303–316.

3 Bureau o Labor Statistics, “Glossary,” available at http://www.bls.gov/bls/glossary.htm.

4 Bureau o Labor Statistics, Employment status of the civiliannoninstitutional population by age, sex, and race (U.S. Depart-ment o Labor 2013).

5 Ibid.

6 National Center or Education Statistics, Digest of EducationStatistics 2011 (U.S. Department o Education, 2012), avail-able at http://nces.ed.gov/pubs2012/2012001.pd. 

7 Bureau o Labor Statistics, “Glossary.”

8 Ibid.

9 Ibid.

10 Bureau o Labor Statistics, Employment status of the civiliannoninstitutional population by age, sex, and race.

11 Ibid.

12 Eurostat, “Unemployment rate by sex and age groups”(European Commission, 2013).

13 Bureau o Labor Statistics, Current Population Survey .

14 Author’s analysis o Eurostat, “Unemployment rate by sexand age groups.”

15 Author’s analysis o Eurostat, “Unemployment rate by sexand age groups.”

16 Tess Lanning, “Youth unemployment in Europe: what makesa labour market ‘youth riendly’?” (London: Institute or

Public Policy Research, 2012), available at http://www.ippr.org/articles/56/9419/youth-unemployment-in-europe-what-makes-a-labour-market-youth-riendly. 

17 Bureau o Labor Statistics, Current Population Survey .

18 Ibid.

19 Bureau o Labor Statistics, “Glossary.”

20 Bureau o Labor Statistics, People not in the labor force by desire and availability for work, age, and sex (U.S. Departmento Labor, 2013).

21 Andrew Sum and Ishwar Khatiwada with Sheila Palma, “DireStraits in the Nation’s Teen Labor Market: The Outlook orthe Summer 2010 Teen Job Market and the Case or a Com-prehensive Youth Job Creation Strategy” (Boston: Centeror Labor Market Studies, 2010), available at http://www.seakingwdc.org/pd/other-reports/AndySumYouthEmpRe-

port_4-10.pd .

22 Richard Vedder, Christopher Denhart, and Jonathan Robe,“Why are Recent College Graduates Underemployed?:University Enrollments and Labor-Market Realities” (Wash-ington: Center or College Aordability and Productivity,2013), available at http://centerorcollegeaordability.org/uploads/Underemployed%20Report%202.pd .

23 Author’s analysis o Mroz and Savage, “The Long-Term E-ects o Youth Unemployment.”

24 Bureau o Labor Statistics, Unemployed persons by age, sex,race, Hispanic or Latino ethnicity, marital status, and durationof unemployment (U.S. Department o Labor, 2013).

25 Author’s analysis o Mroz and Savage, “The Long-TermEects o Youth Unemployment”; Bureau o Labor Statistics,Unemployed persons by age, sex, race, Hispanic or Latino eth-

nicity, marital status, and duration of unemployment ; Bureauo Labor Statistics, Average hourly and weekly earnings of all employees on private nonfarm payrolls by industry sector (U.S.Department o Labor, 2013).

26 Mroz and Savage, “The Long-Term Eects o Youth Unem-ployment.”

27 Gregg and Tominey, “The Wage Scar From Male YouthUnemployment.”

28 Kahn, “The Long-Term Labor Market Consequences o Graduating rom College in a Bad Economy.”

29 David Madland and Nick Bunker, “5 Charts on the State o the Middle Class,” Center or American Progress, August 30,2012, available at http://www.americanprogress.org/issues/economy/news/2012/08/30/33600/5-charts-on-the-state-o-the-middle-class/.

30 Eugene Steuerle and others, “Lost Generations? WealthBuilding among Young Americans” (Washington: UrbanInstitute, 2013), available at http://www.urban.org/UploadedPDF/412766-Lost-Generations-Wealth-Building-Among-Young-Americans.pd .

31 Alisa Cunningham and Gregory Kienzl, “Delinquency: TheUntold Story o Student Loan Borrowing” (Washington: In-stitute or Higher Education Policy, 2011), available at http://www.ihep.org/assets/fles/publications/a-/Delinquency- The_Untold_Story_FINAL_March_2011.pd.

32 Timothy Dunne, “Household Formation and the GreatRecession” (Cleveland: Federal Reserve Bank o Cleveland,2012), available at http://www.clevelanded.org/research/Commentary/2012/2012-12.cm.

33 Employee Beneft Research Institute and Mathew Green-wald & Associates Inc., “2013 Retirement Confdence Survey”(2013), available at http://www.ebri.org/pd/surveys/rcs/2013/Final-FS.RCS-13.FS_4.Age.FINAL.pd .

34 Clive R. Belfeld, Henry M. Levin, and Rachel Rosen, “TheEconomic Value o Opportunity Youth” (Washington: CivicEnterprises, 2012), available at http://www.serve.gov/new-images/council/pd/econ_value_opportunity_youth.pd.

35 Mattea Kramer, Rory O’Sullivan, and Brian Burrell, “A Fightor the Future: Education, Job Training, and the FiscalShowdown” (Washington: Young Invincibles and NationalPriorities Project, 2012), available at http://nationalpriorities.org/media/uploads/publications/2012-young-invincibiles-report-v2.pd.

36 Zach Murray, “Celebrating AmeriCorps Week,” Cen-ter or American Progress, March 14 2013, availableat http://www.americanprogress.org/issues/labor/news/2013/03/14/56716/celebrating-americorps-week/.