Number of idle young adults increasing

Why is the number of idle young adults increasing in the United States?

The number of young high school and college graduates who are neither in work nor enrolled in school has increased significantly this year, according to a new report issued by the Economic Policy Institute.

The report – The Class of 2014: The Weak Economy Is Idling Too Many Young Graduates – written by Heidi Shierholz, Alyssa Davis and Will Kimball, looked at the employment prospects of young graduates, specifically those aged 17-20 (high school leavers) and 21-24 (college graduates) years.

The authors found that the share of young high school graduates who were “idle” rose from 13.7% in 2007 to 17.7% in 2010, with no significant improvement during the last four years.

The proportion of idle recent college graduates rose increased from 8.4% in 2007 to 11.6% in 2011. Today the share stands at 11.2%.

Idle young adults – a loss of opportunities

According to the authors, this sizable number of high school and college leavers represents a massive loss of opportunities whose lack of employment or further studies will have “lasting consequences”.

Shierholz said:

“The opportunities young adults have at the start of their careers have long-lasting effects on their trajectories and future earnings. Through no fault of their own, many new graduates this year will suffer consequences from entering such a weak labor market, including diminished job opportunities, more spells of unemployment, and reduced earnings for a decade or more.”

Young adults typically experience abnormally high increases in unemployment during periods of market weakness. However, during the Great Recession and its aftermath, they have been hit particularly badly.

March’s youth unemployment (under 25 years) rate at 14.5% was nearly double the overall rate (6.7%). There were also almost one million potential workers who were neither in work nor actively looking for a job (and are consequently not counted as unemployed) because the jobs are so hard to find.

If these “missing” workers were included in the statistics, youth unemployment would be 18.1%.

For recently graduated college students:

  • Unemployment stands at 8.5% versus 5.5% in 2007.
  • 16.8% are underemployed, compared to 9.6% in 2007.

For recently graduated high school students:

  • The unemployment rate is 22.9%, versus 15.9% in 2007.
  • 41.5% are underemployed, compared to 26.8% in 2007.

Unemployment rates among Hispanics and blacks are considerably higher than for non-Hispanic whites.

Remuneration for young adults has declined

Pay prospects for young graduates are bleak, the authors add. Wages are currently significantly lower than they were in 2000. Over the past 14 years, the real (inflation-adjusted) wages of recently qualified high school students have fallen by 10.8%, while those of young college graduates have declined by 7.7%.

Young adult workers today are much less likely to receive employer-provided health insurance or pensions today.

Shierholz said:

“The scarcity of job opportunities for the Class of 2014 is a symptom of weak demand for workers more broadly. Like their parents, young workers would benefit from policies that will generate strong job growth overall, such as substantial additional investment in infrastructure and direct job creation programs in communities particularly hard-hit by unemployment.”