The New "Lost Generation": Young Workers

06/07/2010 05:12 am ET | Updated May 25, 2011

A devastating new report, "The Kids Aren't All Right," released by the Economic Policy Institute last Wednesday underscores the plight facing young workers -- and how little is being done to address the long-term damage this recession has inflicted on a generation of workers. The official unemployment rate for young workers ages 16 to 24 -- who make up over a quarter of all the unemployed -- peaked, officially, at 19.2% in September and is still hovering near 19%. And those figures don't count those who've given up or who are under-employed. That's roughly twice the unemployment rate for all workers.

Indeed, as AFL-CIO Secretary-Treasurer Liz Shuler pointed out at a forum this week on labor (via the AFL-CIO Now blog), "Young people are disenfranchised. They graduate and they have no jobs, let alone jobs with benefits."

The numbers are even grimmer for young minority workers. As EPI noted: "The disparities between the unemployment rates of white, black, and Hispanic young workers are also stark. Black 16-24 year-old workers had the highest rate, starting 2010 at 32.5%, followed by Hispanics (24.2%), and then whites (15.2%)."

The numbers are darker for teenagers of all ages 16 to 19 who aren't enrolled full-time in school:

Teenagers as a whole attained the highest unemployment rate on record (since 1948), peaking in October 2009 at 27.6%, and within that, record highs for whites (25.1%) and Hispanics (37.2%). In fact, the only group that did not experience record highs was black teenage workers, but with a peak unemployment rate of 49.8%, this is hardly an accomplishment.

What do all these numbers mean for the long-term prospects of young workers? A must-read article by Don Peck in the March issue of The Atlantic shows the real blight that is facing young workers, their prospects for a successful family and their communities. Working at jobs well below their skill levels and denied opportunities for advancement, we could be seeing an entire generation devastated by this jobless "recovery." Peck doesn't pull his punches:

If it persists much longer, this era of high joblessness will likely change the life course and character of a generation of young adults--and quite possibly those of the children behind them as well. It will leave an indelible imprint on many blue-collar white men--and on white culture. It could change the nature of modern marriage, and also cripple marriage as an institution in many communities. It may already be plunging many inner cities into a kind of despair and dysfunction not seen for decades. Ultimately, it is likely to warp our politics, our culture, and the character of our society for years.

An earlier AFL-CIO-sponsored study found that a third of all workers under 35 now live at home with their parents. As Richard Trumka explained last September:

We're calling the report "A Lost Decade" because we're seeing 10 years of opportunity lost as young workers across the board are struggling to keep their heads above water and often not succeeding. They've put off adulthood - - put off having kids, put off education - and a full 34 percent of workers under 35 live with their parents for financial reasons.

Thirty-five percent are significantly less likely to have health care than older workers, only 31 percent make enough money to pay their bills while putting anything aside in savings, and almost half are more worried than hopeful about their economic future.

Now Don Peck's analysis, joined by the grim figures released by EPI, explains how this unemployment tsunami among young workers can potentially devastate them for their entire lives:

In fact a whole generation of young adults is likely to see its life chances permanently diminished by this recession. Lisa Kahn, an economist at Yale, has studied the impact of recessions on the lifetime earnings of young workers. In one recent study, she followed the career paths of white men who graduated from college between 1979 and 1989. She found that, all else equal, for every one-percentage-point increase in the national unemployment rate, the starting income of new graduates fell by as much as 7 percent; the unluckiest graduates of the decade, who emerged into the teeth of the 1981-82 recession, made roughly 25 percent less in their first year than graduates who stepped into boom times.

But what's truly remarkable is the persistence of the earnings gap. Five, 10, 15 years after graduation, after untold promotions and career changes spanning booms and busts, the unlucky graduates never closed the gap. Seventeen years after graduation, those who had entered the workforce during inhospitable times were still earning 10 percent less on average than those who had emerged into a more bountiful climate.

The economic downturn also sets in motion a downward spiral of worse and fewer jobs -- and diminished opportunities. As the EPI paper by Kathryn Anne Edwards Alexander Hertel-Fernandez observes:

Moreover, a downturn in the youth labor market is particularly worrisome because it comes at a critical time for workers. Work during teen years is characterized as being highly path-dependent--work status in one period is very sensitive to work status in the time period before. Individuals with more work experience are more likely to work...

However, even if young workers are employed, they may be more likely now to be in a job below their skill level, such as a college graduate who waits tables. With such little financial security, as explained above, young workers have less freedom to wait out a downturn and so they frequently take whatever job is available, even if it pays less than a job that matches their skill level. The loss of human capital that occurs when taking jobs in lower-level occupations is one of the principle contributors to the long-run negative effect recessions have on the wages of young workers Indeed, there is a permanent effect of lost work experience on wages as it delays the start of a young worker's climb. This is a serious drain on labor market potential--lower earnings, lower output, lower productivity, and the displacement of less-educated workers. Low wages also jeopardize the return to higher education.

Unfortunately, there is little sign that either Congress or the President will be taking anywhere near the bold steps needed to save or create the 11 million jobs needed to bring us up to pre-recession employment levels.

Peck outlines what we're facing, and, it seems, our political leadership hasn't been up to the task of confronting this social, political and economic disaster. This is truly an economic Katrina, and we've responded almost as fecklessly as former FEMA director Mike "Heckuva Job" Brown did to that natural disaster:

A slowly sinking generation; a remorseless assault on the identity of many men; the dissolution of families and the collapse of neighborhoods; a thinning veneer of national amity--the social legacies of the Great Recession are still being written, but their breadth and depth are immense. As problems, they are enormously complex, and their solutions will be equally so...

At the very least, though, we should make the return to a more normal jobs environment an unflagging national priority. The stock market has rallied, the financial system has stabilized, and job losses have slowed; by the time you read this, the unemployment rate might be down a little. Yet the difference between "turning the corner" and a return to any sort of normalcy is vast.

We are in a very deep hole, and we've been in it for a relatively long time already. Concerns over deficits are understandable, but in these times, our bias should be toward doing too much rather than doing too little. That implies some small risk to the government's ability to continue borrowing in the future; and it implies somewhat higher taxes in the future too. But that seems a trade worth making. We are living through a slow-motion social catastrophe, one that could stain our culture and weaken our nation for many, many years to come. We have a civic--and indeed a moral--responsibility to do everything in our power to stop it now, before it gets even worse.

The article was cross-posted from the Working In These Times blog, which covers labor and other reform issues affecting American workers.