To Be Young and Unemployed

Millions of workers are struggling with joblessness, economic inequality has been rising over the past thirty years, and large swaths of America are still feeling the consequences of the Great Recession. However, economic challenges are not shared equally. Certain socio-demographic groups are hit particularly hard, while others remain largely insulated from the difficulties of economic hardship. This discrepancy is particularly evident with regard to young workers.¹

While every point throughout a worker's career trajectory is important, the labor market experiences—earnings, benefits, skill development, and job security—of young workers are of particular significance. Early labor market experiences play a central role in shaping earnings and career trajectories—thus, they can have lasting consequences for economic security and patterns of earnings inequality over the life course.² As Annette Bernhardt and her colleagues succinctly put it: "the majority of lifetime wage growth occurs during a worker's first ten years in the labor market. To understand how inequality is generated, we need to focus on this formative period during which trajectories of upward mobility are effectively set."³

Research on young workers who enter the labor market during times of economic decline makes this point clear. Using rich longitudinal data, Lisa Kahn has examined the employment outcomes of young white male workers who entered the labor market before, during, and after the recession of the early 1980s. She found that the young workers who entered the labor market in the midst of the recession had lower wages than those workers who did not enter during the recession, even fifteen years later.⁴ More so than for older workers, how young workers fare in the labor market has consequences for their economic well-being for decades into the future.

The Labor Market Position of Young Workers

What does the distribution of young workers look like across the economy? Do young workers tend to be clustered in particular industries? In 2009, young workers (ages sixteen to twenty-four) made up 13 percent of all employees in the U.S. However, they made up 34 percent of the employees in the leisure and hospitality industry and 20 percent of employees in the wholesale and retail trade industry, indicating a clear over-representation of young workers in these sectors of the economy. At the same time, only 5 percent of workers in the government sector and 7 percent of workers in manufacturing were between the ages of sixteen and twenty-four.⁵ Importantly, these numbers indicate an under-representation of young workers in sectors of the economy that historically have had higher wages.

In addition to where they are located in the economy, a key outcome for young workers is whether or not they are employed at all. Figure 1 presents the unemployment rate for young workers (sixteen to twenty-four), prime-aged workers (twenty-five to fifty-four), and older workers (five-five and older) over time.⁶ There are two main points to take away from this graph. First, the unemployment rate for young workers is about twice that of prime-aged workers. And, second, in times of economic recession (the shaded areas on the graph), the unemployment rate for young workers remains about twice that of prime-aged workers. This means that the unemployment rate increases more intensely for young workers, in raw terms, during times of economic recession. For example, if the unemployment rates during times of economic growth are 6 percent and

Figure 1.

Unemployment Rate from 1974 to 2010, by Age Group

12 percent for prime-aged and young workers, respectively, then they may increase to 12 percent and 24 percent in times of economic recession. Thus, the unemployment rate would have increased by six percentage points for prime-aged workers, but by an incredible twelve percentage points for young workers.

Cross-sectional data also demonstrate the over-representation of young workers in the ranks of the unemployed. In 2010, for example, young workers (ages sixteen to twenty-four) made up 14 percent of the labor force, but represented 25 percent of the...