America's Youth Labour Issues - Entrenched Unemployment and Labour Underutilization

The recent uprisings in the Middle East nations, most particularly Egypt, were often a result of poor economic conditions for younger members of their respective societies.  In my posting on Egypt back in February, I noted the extremely high unemployment rate among highly educated male and female Egyptians and how this had created a feeling of hopelessness and frustration among the country's young adults since they are unable to progress in their life journey.

The Center for Labor Market Studies at Northeastern University prepared a paper for the Children's Defense Fund in late 2010 entitled "Deteriorating Employment Rates and Incomes Threaten the Futures of Young Workers and Young Families; Black Young People and Young Families Fare the Worst".  In this paper, the authors, Andrew Sum and Ishwar Khatiwada, examined the weak labour market for young adults between the ages of 16 and 29 and how the situation has worsened over the past decade.  The researchers divided the young adults into three ages groups, 16 to 19, 20 to 24 and 25 to 29 years of age.  For the purposes of this posting, I will concentrate on the statistics for each of the three demographic groups and summarize the issue of labour underutilization among young adults.

Let's start with the 16 to 19 year olds who are mainly high school students, high school dropouts or in their early college years.  Sum and Khatiwada noted that overall teen employment rates for those aged 16 to 19 years of age declined from 45.5 percent in the year 2000 to 27 percent in 2010 with teen males seeing a drop of 19.6 percentage points and females seeing a drop of 17.4 percentage points.  They also observed that the highest teen unemployment rates were found among African-American, Asian and Hispanic teens, those that dropped out of high school or were high school graduates and those who came from low income families.

Here's a chart showing the overall employment data for the 16 to 19 year old cohort broken down into gender, ethnic group, educational level and household income:

Over the 10 year period, high school dropouts saw their employment rate drop from 50.4 percent to 29.6 percent, a drop of 20.8 percentage points.  The drop was 19.9 percentage points for high school graduates and only 12 percentage points for college students.  The worst employment level was found among high school students; 34.4 percent of high school students were employed in 2000; this dropped to 16.4 percent in 2010.

Overall, white teens saw the greatest decline in employment over the 10 year timeframe from 52 percent in 2000 to 32.2 percent in 2010.  While that is a large drop, white teens still have roughly twice the employment rate of Asians (17.4 percent) and African-Americans (15.8 percent).

Among African-American families with annual incomes between $20,000 and $40,000, only 13.6 percent of teens were employed; the level of employment drops to 12.7 percent when income falls below $20,000.  The authors note that this is of particular concern since more than half of all African-American families have household incomes below the $40,000 level.  In comparison, 30.1 percent of teenagers in white families with incomes between $20,000 and $40,000 annually are employed and 28.9 percent of teenagers in families with incomes less than $20,000 annually are employed.

What is rather sad about this situation is that, quite often, employment at this young age provides income for future post-secondary education and forms the basis for career direction later in life.  It also provides experience that allows teenagers to successfully transition to responsibilities in their adult working life.

Let's move on to the 20 to 24 year olds.  With this age group, we can start to divide the young adults based on their ultimate educational attainment; whether or not they have attained a university degree, whether they have attended at least some post-secondary education or whether they have a high school diploma.  For the entire demographic group, over the 10 year period, the overall employment rate dropped from 77.8 percent in 2000 to 67.4 percent in 2010, a decline of 10.4 percentage points.  Males saw a drop of 14.5 percentage points and females saw a drop of 6.4 percentage points.  The highest unemployment rates were once again found among African-American, Asian and Hispanic young adults and those with less education.

Here is a chart showing the overall results of the statistics for the 20 to 24 year old demographic:

It's rather shocking to see that high school graduates have seen their employment rate drop from 77.5 percent in 2000 to 62.8 percent in 2010.  While it is not surprising, for the same age group, employment rises to 84.6 percent in 2010 for those with a university degree with a drop of only 4.1 percentage points over the 10 year period.  The authors of the study do note that, while those who have graduated from university have a  higher level of employment, a growing number of them are "mal-employed", that is, they are working in a field that is either not related to the field of study associated with their degree or they have been forced to take a job that does not require a degree of any sort.  The rising number of mal-employed young adults is strongly related to poor employment prospects in a very unstable labour market.

Lastly, we have the 25 to 29 year olds, the demographic where many young adults are considering establishing or have already established their own family unit.  Once again, the age group is divisible based on educational attainment.   For the entire demographic, over the 10 year period, the overall employment rate dropped from 81.2 percent to 73 percent, a decline of 8.2 percentage points.  Males saw a drop of 10.9 percentage points and females saw a drop of 5.9 percentage points.  The highest unemployment rates were once again found among Asian, African-American and Hispanic young adults and those with less education as has been the case for the younger demographic groups.

Here is a chart showing the overall results of the statistics for the 25 to 29 year old demographic:

The African-American young adults saw both the greatest decline in employment, dropping by 14.4 percentage points over the 10 year time frame and the lowest overall employment rate of 62.9 percent.  White young adults with a degree have the highest level of employment at 83.3 percent in 2010, they still experienced a drop of 4.9 percentage points over the 10 year period.  Once again, high school graduates experience the highest drop in employment at 11.6 percentage points and have an employment rate of only 67.7 percent, well below that of the university graduates.

Like the rest of American workers, young adults also suffer from underemployment.  The underemployed are working part-time (less than 35 hours per week) but wish to work full-time but cannot for economic reasons (jobs are not available).  The authors of the study added the total number of real unemployed, those who are not actively looking for work but wish to work and the underemployed to calculate the labour underutilization rate.  In the year 2000, the underutilization rate was 14.1 percent, this rose to 16.5 percent in 2007 and to a stratospheric 27.7 percent in 2010.  The authors state that the total pool of underutilized teens and young adults rose from 6.8 million in 2007 to 11.3 million in 2010.  Once again, the percentage of underutilized young adults varied with ethnicity and gender; African-American males fared the worst with a labour underutilization rate of 43 percent.  Those African-Americans that dropped out of high school had a stunning labour underutilization rate of 63.7 percent.

Here's a bar graph showing the labour underutilization rate by ethnic group:

The authors of the study note that higher levels of unemployment among young adults is leading to an overall decline in the household incomes of young families.  Median real income levels of young families peaked in 1973 and since 1979, median young family income has dropped by 16.8 percent from $46,216 to $38,440.  Among young African-American families, median real income has dropped by 23.7 percent to $19,913 over the 30 year period between 1979 and 2009.  A drop in employment levels and a rise in labour underutilization is definitely impacting the incomes (and lifestyles) of young, American families, most particularly those of African-American descent.

It's interesting to put all of this data into perspective.  As I noted at the outset of this posting, unrest in Egypt was precipitated, in part, by dissatisfaction among unemployed and underemployed young adults who felt a sense of hopelessness because they are unable to proceed with their working lives and the establishment of their own, independent families.  By the same token, one cannot fault young American adults for feeling the same way about their lives, most particularly those who go on to attain post-secondary education.  While we have employment data from the Bureau of Labor Statistics to mull over on a monthly basis, this study shows us that it will be a long time before the employment situation for young American adults recovers to reasonable and comfortable levels and that sometimes the U-3 unemployment data tells us very little about the real world.