THE BLOG
11/30/2010 06:54 pm ET | Updated May 25, 2011

The Labor Market Depression Among the Nation's Young Under 30 Adults

During the past week, both President Obama and newly-elected U.S. Representative Austin Scott (R - Ga.) delivered radio addresses, calling for a new commitment to solving the high levels of joblessness in the U.S. In his Thanksgiving address to the nation, the President noted that "as long as many of our friends and neighbors are looking for work, we have got to do everything we can to accelerate the recovery." U.S. Rep. Scott remarked, "too many Georgians and too many Americans have been out of work for far too long."

We heartily concur with both of these views, but, if the nation is to solve these labor market problems, we must identify who has been most affected by the deep downturn and the tepid recovery in labor markets. The labor market burden generated by the Great Recession was far from evenly shared. The greatest losses were experienced by the young (under 30), blue collar workers, those without post-secondary degrees, and lower income adults.

Labor market difficulties faced by the nation's teens (16-19) and young adults (20-29) have increased markedly over the past three years. In 2007, the official unemployment rate of the nation's 16-29 year olds was 8.3%, but through the first ten months of this year, it has nearly doubled in size to 15.2%. The labor market problems of these young adults go well beyond those of official unemployment. The generally weak labor market faced by young adults over most of the entire past decade also reduced the labor force attachment of the nation's under 30 population, especially among teens and young adults 20-24 years old. Over the 2000-2010 period, the number of 16-29 year olds in the civilian, noninstitutional population increased from 53 to 59 million, Yet, over the same time period, the number of 16-29 year olds actively participating in the nation's civilian labor force expanded by less than 200,000.

The steep decline in the labor force participation rate of teens and young adults over the past decade was accompanied by growth in the number of hidden unemployed; i.e., those expressing a desire for immediate employment but not actively looking for work. In 2010, during the first 10 months of the year, there were on average nearly 2.4 million persons under 30 who were members of the hidden unemployed. In addition to the 5.9 official unemployed and the 2.4 million hidden unemployed, there were another 3.1 million young adults who were underemployed this year; i.e., working part-time but wanting and available for full-time jobs. The combined pool of underutilized young adults (the official unemployed, hidden unemployed, and the underemployed) has averaged 11.346 million this year, yielding an underutilization rate of just under 28%, nearly twice as high as it was in 2000 and more than double that of older adults (30+).

The declining rate of labor force attachment and rising unemployment among young adults have sharply reduced their employment rates over the past decade. The employment rates of males in each age group (16-19, 20-24, and 25-29) in 2010 were the lowest ever recorded since the end of WWII. Female teens also have experienced a post World War II employment low and those women 20-24 were working at a lower rate than in all but one year over the past 36 years. If each age group of male and female 16-29 year olds in the U.S. had maintained their 2000 employment rates, there would have been an additional 7.5 million 16-30 year olds working this year.

This steep loss in the number of young adult workers has a number of adverse short and long-term impacts on the economy and the nation's social well being. Less employment today reduces the ability of young workers to buy goods and services and contribute taxes to federal and state governments, thereby increasing federal and state budget deficits. Loss of employment today reduces the cumulative work experience of young adults, a key form of human capital investment that will lower their future employability and earnings. The rise in underemployment lowers their years of full-time work experience which has considerably larger future payoffs than part-time work in the form of higher wages. The lower earnings also reduce the ability of young adults to form independent households, to marry, and to raise their children out of poverty. The steep rise in poverty/near poverty rates of young families has very adverse consequences for the economic and social well-being of their children.

Prepared by: Andrew Sum and Paul Harrington, Center for Labor Market Studies at Northeastern University