Ignore the Teen Employment Problem at Your Peril

Posted on Tuesday, March 15, 2011

In reviewing the findings of the recently released national report on employment and unemployment developments in the U.S. for January 2011, one might have encountered a sense of double vision in examining the findings for the nation's teenagers (16-19 years old). In January 2011, only 25.7 percent of the nation's teens (16-19 years old) were employed, continuing the steep decline in teen job opportunities over the past few years and decade. During that same month, the unemployment rate for the nation's teens (seasonally adjusted) also was 25.7%. Thus, perfect equality existed between the teen employment rate (E/P) and the unemployment rate of teens in that same month. An identical result prevailed in the previous calendar year (2010) when the teen annual average E/P ratio and their unemployment rate were again exactly equal at 25.9%. This was the first time since the end of World War Two when these two key teen labor market variables came into equality.
The 25.9% teen employment rate in 2010 marked the fourth consecutive annual drop in their employment rate. The modest growth in overall payroll employment levels during the past year did nothing for improving teen employment. Aggregate teen employment continued to fall for the fourth consecutive year and helped drive up their official unemployment rate to just under 26%, the highest it has been in the past 62 years for which CPS unemployment rates are available, another record high. Limited employment prospects for teens have pushed more than a million of them out of the labor force over the past few years (a 1.4 million decline since 2007) helping keep their unemployment rate artificially low.
The magnitude of the decline in teen employment over the past decade (2000-2010) is mind boggling. In 2000, slightly over 45% of the nation's teens were employed. The teen employment rate declined very sharply during the recession of 2001 and the largely jobless recovery of 2002-03, falling by between 8 and 9 percentage points. Teens benefitted very little from the national job growth that took place from 2003-2006, with their E/P ratio staying largely unchanged over this period. Over the next four years, their employment rate would fall steadily and steeply from 36.9% to 25.9%, a decline of 11 percentage points, far exceeding that of any other age group (See Chart 1).
Every major demographic and socioeconomic group of teens has experienced declining employment rates over the past decade. Yet, in 2010 and all preceding years, both the employment rates and unemployment rates of teens differed often widely across gender, race-ethnic, educational attainment, and family income groups. Teenage males have performed worse than females in the labor market, and both Blacks and Hispanics trail considerably behind White, non-Hispanics. Low income minorities fare the worst by far in obtaining any type of employment.
The deep deterioration in teen employment over the past decade will have severe adverse consequences for them and the rest of the nation in the future. Teen employment is highly path dependent. The more teens work this year, the more likely they are to work next year. Cumulative work experience in the teen years influences the employability, wages, and training experiences of these youth in their early to mid-20s. National research also has shown that higher teen employment for women and men has been associated with lower teen pregnancy rates, a lower tendency for men to drop out of high school, and reduced delinquency behavior. Higher employment also raises the annual incomes of teens and young adults, thereby increasing federal and state tax revenue and reducing a number of cash and in-kind transfers. Improved teen employment is thus a win, win, win, win proposition for the youth themselves, for their communities, the nation as a whole, and for national and state governments. We ignore this problem at our peril.
THE HUFFINGTON POST, Andrew Sum, Professor of Economics, Northeastern University

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