The Labor Underutilization Problems of the Nation's Young Adults (16–29) in 2013–2014

Since the end of the nation's labor market boom years of the 1990s, national labor markets have been characterized by a “great age twist” in the structure of employment rates. ^[1] While the nation's older adults (57 and older) had higher employment rates in 2010–2011 than they did in 1999–2000, all younger adults had lower employment rates. These declines were sharpest with the youngest age groups. As was the case in many other OECD (Organisation for Economic Co-operation and Development) countries, U.S. teens fared the worst in the labor market by far, followed by 20–24 year olds, and 25–29 year olds (Sum et al. 2014a).

The annual average employment rates of the nation's teens (16–19 years old) fell from 45 % in 1999–2000 to only 28 % in 2013–2014 (see Fig. 7.16). ^[2] Steep declines in employment rates were experienced by the nation's teens in every age, gender, race-ethnicity, and family income group, but employment rates remained lowest among the youngest teens (16–17), Blacks and Hispanics, high school students and dropouts, and low-income youth.

The employment/population ratio (E/P) of the nation's young adults (20–24) fell by 10 percentage points over the same time period, creating a new historical low for young U.S. adult men, while the ratio for 25–29 year olds dropped from 81 to 74 %, a seven percentage point decline. The deteriorating employment prospects for teens have had negative impacts on their employability as young adults here and in most other OECD nations. They have seen reduced ability to form independent households, leading more to remain living at home with one or both parents (for estimates

Fig. 7.16 Trends in the employment/population ratios of teens and young adults (20–24, 25–29) in 1999–2000 and 2013–2014 (in %)

of earnings losses among young unemployed workers, see Ayres 2013). These same factors also have led to a reduction in marriage rates among the young, which has helped raise the share of new births taking place out of wedlock to all-time highs. ^[3] With that said, part of the decline in employment for young people can be attributed to more young people being enrolled in colleges/schools. But the largest decline occurred among teens who were not enrolled (Table 7.6).

These income and family formation developments have contributed in an important way to declining real incomes of young families with children and to higher rates of poverty among them. Young families' incomes (a family head under 30 years of age) have been subject to widening inequality over the past few decades, with the top decile (one-tenth) of families' gains equaling close to half of all young family incomes (McLaughlin et al. 2010). Wealth gaps among young households have increased to an even greater degree, with the top 10 % capturing 86 % of the net worth of young households in 2007 (Sum and Khatiwada 2009).

Given the high and rising degrees of labor underutilization among the nation's teens and young adults, we also estimated a logistic probability model of labor

Table 7.6 Employment-population ratio of 16to 24-year-old by school enrollment status, 1999–2000 and 2013–2014 averages

Source: Monthly CPS household surveys, public use files, 1999–2000 and 2013–2014, tabulationsby authors

underutilization among those labor force participants under age 30 in 2013–2014. For full detail, see Appendix 7E.

We have picked five young males (from ages 16–19 to 25–29) with different race-ethnicity, educational attainment, and family income backgrounds and used the logistic probability model to estimate their predicted probability of being underutilized in 2013–2014 (see Table 7.7).

Our first individual is a teenaged Black male, who was a high school dropout and lived in a low-income family. His predicted probability of being underutilized was an astonishingly high 73 %. If we made this young man a White male and raised his age to 20–24 but kept his education and family income status unchanged, his estimated probability of being underutilized still remained at 47 %. If this same young man's educational attainment was raised to that of a high school graduate and his family income raised to $20,000–$40,000, then his probability of being underutilized fell to 26.8 %.

If his educational attainment was increased to that of an associate's degree and his family income increased to a middle-income level, his probability of being underutilized dropped to 14.2 %. Our final individual is a 25to 29-year-old White non-Hispanic male who was native born, had a bachelor's or higher degree, and lived in an upper middle-income family ($75,000–100,000). His predicted probability of being underutilized was only 6.8 %, or basically only one-eleventh as high as that of our first individual (the Black, male, teen dropout from a low-income family). The distribution of labor underutilization rates among our nation's young adults in 2013–2014 was extraordinarily varied, with potentially severe adverse consequences for future family formation, income and earnings inequality, and the economic and social well-being of children in these families.

Table 7.7 Predicted probabilities of selected young adult labor force participants beingunderutilized in 2013–2014 (in %)

• [1] For a detailed review and assessment of the changing labor market experiences of teens and young adults (20–24) in the U.S., see Sum et al. 2014b.
• [2] See Josh Sanbum, “Fewest Young Adults (18–24) in 60 Years Have Jobs,” Business.com,February 9, 2012.
• [3] Over 50 % of all births to women under 30 in 2011 were out of wedlock, the first time ever thata majority of such births took place outside of marriage.