The long drag of the Great Recession and its post-recessionary slump has pulled down young people all across the United States, leaving them with the highest unemployment rate and leading to dwindling college enrollment.
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According to new research from the Economic Policy Institute, there is a large and significant increase in the share of young high school and college graduates who are out of work and not in school. The spike in what the EPI calls “idled young adults” is caused by the weak economy, and the EPI reports that this represents an “enormous loss of opportunities for this cohort that will have lasting consequences.”
“The paths that you start down really does make a difference in your future -- and the paths young adults are being set up for in the future are not good ones,” explains Heidi Shierholz, an economist at EPI and co-author of the study. “In a strong job market, you have choices. But because of the current environment, these [young adults] end up taking a job for lower wages since employers can offer lower wages when people are desperate for work. And those young workers will not see the kind of increased wage trajectory that they would otherwise have gotten.”
Very high unemployment among young adults is not something unique to the Great Recession. In fact, young workers always experience disproportionate increases in unemployment during periods of labor market weakness. It’s just that this recession and its aftermath, Shierlotz points out, is the longest, grimmest period of weakness in more than seven decades. She says that because of this, the long-run wage trends for young graduates are bleak, with paychecks substantially lower today than in 2000. (Since 2000, the inflation-adjusted real wages of young high school graduates have dropped 10.8% and those of young graduates have dropped 7.7%, according to the Bureau of Labor Statistics. That is in sharp contrast to the strong wage growth for these groups between 1995 and 2000, when wages rose 15.4% for young high school graduates and 19.1% for young college graduates.)
“The paths that you start down really does make a difference in your future -- and the paths young adults are being set up for in the future are not good ones,”
“We are a long way from full employment, but people who have taken the lion’s share of the harm are under 30,” says Gary Burtless, an economist at Brookings Institution. “And reaching adulthood in a miserable job market can have lingering affects.”
Research from EPI shows that entering the labor market in a bad economy can not only lead to reduced earnings but also greater earnings instability and more spells of unemployment over the following 10-15 years.
“These [young adults] will get back to what they should be paid in 10-15 years -- but will never get recoup that lost part of their lifetime earnings,” Shierholtz explains.
Burtless says taking advantage of school could be a way to compensate for less work experience -- but the high cost of education may be proving too high for many young Americans.
“The heart of the question is [since] they have entered the workforce at a historically horrible time, have they gone to school more and increased their education to compensate for their lack of work experience?” asks Burtless. “If you can’t find a job that is going to look good on your resume, than certainly it is better to complete at degree….”
Yet, according to EPI, college enrollment rates have not increased despite the lack of job opportunities during the Great Recession and in its aftermath and, in fact, have dropped since 2012.
Cost does seem to be part of the reason. EPI estimates that in the 2013-2014 school year, the total cost of attendance for an on-campus student at a four-year, in-state public college is $22,826; for a four-year private institution, the price climbs to $44,750. That means the inflation-adjusted cost of a four-year education -- including tuition, fees, and room and board -- increased 125.5% for private schools and 129.1% for public schools over the 1983-1984 school year. Median income only increased 15.6% during this period, according to EPI, which the report says “leaves families and students unable to pay for most colleges and universities in full.”
In addition to these idle workers between the ages of 18-24, there are many slightly older young adults that Shierholtz says may feel stuck.
“You want your first several years out of college to be in a strong labor market…. [older Millennials] did luck out if they got a job in 2007, but they were not completely saved by the impact,” she says. “For most people, they would of done better if they have switched jobs. So while they may be better off than their brothers or sisters two to three years younger than them, they’re not better off than a sibling a few years older.”
EPI report points out that the low level of young adults voluntarily leaving their jobs in this country, which is about 20% lower than its 2007 level, not only represents lost prospects for workers of all ages but also illustrates a critical loss of opportunities for young workers simply because they are likely to be in the process of identifying their own abilities and interests and might have greatly benefited from leaving a job and moving into another that is a better fit.
Between 2007 and the middle of 2009, the average number of young adults voluntary quits dropped by a staggering 43%, from 2.9 million a month to 1.6 million a month. And while the voluntary quit rate has picked up, as Shierholtz points out, many have been locked into their jobs, unable to find a workplace with better potential for wage growth. The report says this low quit rate is also one of the factors underlying their wage declines since the start of the Great Recession.
“That sense of feeling stuck and having anxiety -- that fits with what we have heard from many young people,” says Rory O'Sullivan, deputy executive director of the youth advocacy group Young Invincibles. “But there is also a sense of optimism and hope from this group…. Hard times can bring out the best in people.”
The notion that there is resounding optimism among this cohort does seem to ring true. According to Pew Research Center, almost half of Millennials think the country’s best days are ahead of them, which is a more positive take on the future than that of any of older generation. Still, the weak demand for workers in the overall economy and the consequential weak labor market is undoubtedly hurting young people in a very real way, says Burtless.
“It’s heartbreaking to think that we threw away the lessons from 1929 to 1946…. The first 12 months we did act and we did well by the lessons. But we didn’t act long enough. And then we forgot all the lessons we learned,” he says, referring to the pullback on government spending. “So, 10 years from now, we will be back on track unless there is a remarkable spurt of growth that kind of can fix all the scars and bruising…. But if not, [the aftermath of the recession] will continue to be hum-drum growth, and young people will continue to be at a disadvantage.”