Some Thoughts On Youth Unemployment

Jake at published this graph today(click to enlarge).

Jake, I think properly, finds the decline in employment among the young troubling:

Reading the post allowed for some self reflection on jobs I had before turning 20 (lawn mowing, snow shoveling, race track concession stand, snack bar at a swim club, waiter at a retirement community, waiter at a diner, painter, medical assembly line, data entry at a local college… to name a few). While some of these jobs were miserable and some quite enjoyable, I truly believe that in aggregate they helped me figure out what it was that I wanted to be (and what I didn’t), the “rules” of work, as well as the importance of hard work.

Rortybomb has used the same data to suggest some sort of link between OWS, the Arab Spring and an attack on public sector workers in this country. I’ll pass on any comment but I do want to use his chart which is a bit more detailed than Jake’s in order to make a point in a second.

So what’s behind these numbers? Arnold Kling suggests one explanation:

On the whole, though, I think I would rather start with a PSST story. Entrepreneurs are having a hard time coming up with productive uses for anyone other than health care professionals or software engineers.

Or put another way, the young are simply the victims of the same forces reshaping the economy as are the rest of the workers. No conspiracy, just a conflation of events. If you look at a chart of employment-population for the entire labor force you see a similar dive off of the cliff around 2006-2007, though from around 64% to about 58%. The kids took a bigger hit.

What else might be going on? Well, given my biases you know I’m going to point to the minimum wage. Groan if you must but here is the timeline for the increases:

This increase is the last of three provided by the enactment of the Fair Minimum Wage Act of 2007, which amended the FLSA to increase the federal minimum wage in three steps: to $5.85 per hour effective July 24, 2007; to $6.55 per hour effective July 24, 2008; and now to $7.25 per hour effective July 24, 2009.

Kind of matches up with some of the inflection points on Rortybomb’s chart doesn’t it. Now, even I don’t believe that minimum wage increases account for the magnitude of the decline in employment for the young, but neither do I believe that those increases were benign. So what else might be driving the trend. Here are a few thoughts, feel free to add your own:

  • Compliance with employment regulations are not negligible. It’s often more logical to pay overtime than to hire parttime workers given the extra cost of compliance.
  • Work experience is less valued by university admission standards than extracurricular activities. Youngsters ┬ácommitted to college are less likely to work than to engage in activities that will enhance their prospects of admission to better universities.
  • More wealth means less need for the young to work. Luxuries are funded by parents instead of the paper route.
  • The young are not graduating from college in four years and are pursuing graduate degrees in greater numbers. Essentially, they are not participating in the labor force though they count for the statistics.

To be sure we have a jobs catastrophe in this country and the young have not been spared. I do wonder, however, how much noise is in the statistics, how much societal changes have permanently altered the participation of kids in the labor market, how much misguided social engineering has exacerbated the problem and how much permanent changes in the amount of jobs on offer have to do with the issue. I think the young have disproportionally suffered but I’m not at all sure that when and if the labor markets return to something approximating full employment we will necessarily see a consummate rebound in employment among the young.

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