Tag Archives: Unemployment Rate

Green Shoots for Young Worker Job Prospects in 2011?

4 Jan

From PBS Newshour last night:

Happy New Year? Job Market Looking Up for College Grads?

Editor’s Note: A poor economy does not bode well for college grads trying to enter the job market.

“The last couple of years have been a very, very tough time to be coming out of college,” said Richard White in our second piece on malemployed grads, airing tonight on the NewsHour.

Head of career services at Rutgers, the State University of New Jersey, White said he’d recently seen the number of students with a job at graduation cut in half. Our piece earlier last month profiling four recent grads struggling to find paying jobs — let alone jobs in their fields of study — fits right in with what White is seeing. (That piece and a web profile of the four job hunters sparked some interesting comments and mail. The idea of getting a degree seems to have hit on a sensitive nerve.)

But things might be looking up for 2011 graduates according to “Recruiting Trends,” an annual report put out by Michigan State University (emphasis original):

“Despite the gloomy national labor market situation, the college segment of the market is poised to rebound this year. While overall hiring across all degrees is expected to increase 3%, hiring at the Bachelor’s level is expected to surge by 10%.”

From the Michigan State University study:

Over 1,600 companies indicated that they would consider any major for a position. Representing 36% of all respondents, this figure is at a historic high. For all technical and business majors, approximately one-quarter of the employers will be seeking them (a slight decrease from last year). Sixteen percent of the employers will seek all liberal arts majors, which includes the sciences, social sciences, and humanities, and will actually hire more new graduates than the other groups.

  • All Majors: increase hiring 13%, averaging 38 Bachelor graduates per company.
  • All Technical: increase hiring 19%, averaging 24 Bachelor graduates per company.
  • All Business: increase hiring 18%, averaging 34 Bachelor graduates per company.
  • All Liberal Arts: increase hiring 21%, averaging 40 Bachelor graduates per company.

Read the full report here.

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NYT Editorial on Combating Inequality

14 Dec
December 13, 2010

College, Jobs and Inequality

Searching for solace in bleak unemployment numbers, policy makers and commentators often cite the relatively low joblessness among college graduates, which is currently 5.1 percent compared with 10 percent for high school graduates and an overall jobless rate of 9.8 percent. Ben Bernanke, the chairman of the Federal Reserve, cited the data recently on “60 Minutes” to make the point that “educational differences” are a root cause of income inequality.

A college education is better than no college education and correlates with higher pay. But as a cure for unemployment or as a way to narrow the chasm between the rich and everyone else, “more college” is a too-easy answer. Over the past year, for example, the unemployment rate for college grads under age 25 has averaged 9.2 percent, up from 8.8 percent a year earlier and 5.8 percent in the first year of the recession that began in December 2007. That means recent grads have about the same level of unemployment as the general population. It also suggests that many employed recent grads may be doing work that doesn’t require a college degree.

Even more disturbing, there is no guarantee that unemployed or underemployed college grads will move into much better jobs as conditions improve. Early bouts of joblessness, or starting in a lower-level job with lower pay, can mean lower levels of career attainment and earnings over a lifetime.Graduates who have been out of work or underemployed in the downturn may also find themselves at a competitive disadvantage with freshly minted college graduates as the economy improves.

When it comes to income inequality, college-educated workers make more than noncollege-educated ones. But higher pay for college grads cannot explain the profound inequality in the United States. The latest installment of the groundbreaking work on income inequality by the economists Thomas Piketty and Emmanuel Saez shows that the richest 1 percent of American households — those making more than $370,000 a year — received 21 percent of total income in 2008. That was slightly below the highs of the bubble years but still among the highest percentages since the Roaring Twenties.

The top 10 percent — those making more than $110,000 — received 48 percent of total income, leaving 52 percent for the bottom 90 percent. Where are college-educated workers? Their median pay has basically stagnated for the past 10 years, at roughly $72,000 a year for men and $52,000 a year for women.

A big reason for the huge gains at the top is the outsize pay of executives, bankers and traders. Lower on the income ladder, workers have not fared well, in part because health care has consumed an ever-larger share of compensation and bargaining power has diminished with the decline in labor unions.

College is still the path to higher-paying professions. But without a concerted effort to develop new industries, the weakened economy will be hard pressed to create enough better-paid positions to absorb all graduates.

And to combat inequality, the drive for more college and more jobs must coincide with efforts to preserve and improve the policies, programs and institutions that have fostered shared prosperity and broad opportunity — Social Security, Medicare, public schools, progressive taxation, unions, affirmative action, regulation of financial markets and enforcement of labor laws.

College is not a cure-all, but it will certainly take the best and brightest minds to confront those challenges.

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New Report on Youth Unemployment Crisis

8 Dec

New report out today from the New America Foundation:

The Great Recession and Joblessness Among Young Workers

Shayne Henry, Next Social Contract Initiative
December 2010

Introduction

During the last three years, youth employment has taken a large hit, absorbing a significant portion of job losses.  One in four unemployed persons is under the age of 25 and nearly one in five young workers is unemployed.1  The rate of joblessness among individuals aged 16-24 is at its highest level on record.2

The Recession

Young workers, aged 16-24, are an important part of the American labor force, accounting for 14% of all individuals in the labor market.3  At the same time, they are also the most vulnerable workers during weak economies and recessions. Since the start of the recession, youth unemployment has increased by 7.5 percentage points while unemployment for the rest of the labor force has only increased by 4.7 percentage points.  The overall unemployment rate, an aggregate of the two, has increased by 5.1 percentage points. 

During this same period, the number of employed youth has declined by 12.2 percent, compared to only a 3.9 percent decline for the rest of the working population.4 This is the result of increased layoffs and the number of young workers who appear to be leaving the labor market.  While the employment-to-population ratio of young people has been steadily decreasing for the past decade, this decrease has become more dramatic since the beginning of the Great Recession and far outpaces the drop in the employment-to-population ratio of the remainder of the workforce. 

 

The fact that youth have been hardest hit by the recession is not surprising. Since the recession began, both the number of job openings and the number of people voluntarily leaving their jobs have declined dramatically.5 In this tight labor market, young workers are less competitive and are often the first to be laid off because they tend to work in temporary positions, are among the newest hired, and are heavily concentrated in job sectors that are most vulnerable to economic fluctuations.6

 

Underemployment and Long-Term Unemployment

Entering the job market during a recession can lead to reduced earnings for up to 15 years, and many workers may never entirely recover.7 Among college graduates, one study has found that individuals entering the labor market during severe recessions earn 17.5 percent less than their peers who enter the labor force during better market conditions, an effect that can plague workers for over 17 years.8 This is the uncertain future faced by the millions of young people who have entered the job market since the beginning of the Great Recession and represents billions of dollars in lost salaries and potential consumption.

While the future of those youth who find employment during the Recession appears precarious, many youth are faced with an even more severe problem. Perhaps the most alarming aspect of youth employment data is that young workers represent not only a larger proportion of the unemployed population, but also a larger proportion of those who suffer from long-term unemployment. As shown in Figure 3, while young workers make up only 14% of the labor force, they represent 26% of the unemployed and 21% of the long-term unemployed. The remaining two age subsets in the labor force, workers aged 25-54 years and 55+, are both underrepresented in these unemployment categories. Long-term unemployment can have long-lasting and often permanent consequences for the individual’s career in terms of productivity, earnings and skill retention.9 Young workers, both those who are fortunate enough to find jobs and those who are not, face a difficult road of underemployment and low wages in the years ahead.

 

Existing Programs are Failing to Address the Problem
The federal government continues to allocate money to programs specifically targeting the problem, with the expressed aim of improving employment prospects for young workers. However, these programs have had, at best, limited effectiveness.  Programs like JOBSTART and the Job Training and Partnership Act appear to be largely ineffective in lowering unemployment or providing higher earnings for youth participants.10

Job Corps, the leading program designed specifically to improve youth employment by providing training and benefits for 60,000 disadvantaged youth aged 16-24, costs the federal government $24,000 per participant and yet seems to have little effect on long-term job placement or earnings.11 While individuals who complete the program have higher medium-term job prospects, within as little as five years the difference in wages and employment between individuals who completed the program and those who did not becomes increasingly non-existent.12 The figure below further illustrates the limited effectiveness of Job Corps in placing participants in jobs during the short-term, with only small advantages between years two and four.

Policy Solutions
As seen in Figure 1, unemployment numbers for young workers follow the trend of the general job market.  It makes sense, then, to focus on overall job creation in order to bring down youth unemployment.

However, simply returning to an employment situation similar to pre-recession levels would leave youth unemployment rates hovering around 10%.  In the long-term, then, policies must be created that target young workers specifically.  For example, a continued investment in educational access for young people is something that has been encouraged by the policy community for years. It is widely known that there exists a strong negative correlation between educational attainment and unemployment.13  Further, engaging larger numbers of young people in vocational training or higher education removes individuals from the labor market, bringing unemployment numbers down.  Any durable solution for the youth unemployment problem must at least address high school graduation rates and access to higher learning or vocational training.

Conclusion
Youth unemployment is a continuing and escalating problem for the American labor market. Traditional approaches to bringing down unemployment numbers among youth have failed to adequately address the problem, while important policy initiatives such as increasing access to education seem to be addressing the problem too slowly. As such, it is time for the policy community to turn to new, innovative ideas to tackle the problem of youth unemployment.

Notes

1Bureau of Labor Statistics. Household Data, A-9 Unemployed persons by age, sex and marital status, seasonally adjusted.

2US Congress Joint Economic Committee, Unemployment Among Young Workers, May 2010

3Bureau of Labor Statistics. A-13 Employment status of the civilian noninstitutional population by age, sex and race

4Bureau of Labor Statistics. Employment Level 16-24, Employment Level 25 years & over; Author’s calculations

5Department of Labor. Job Openings and Labor Turnover Survey. October 7, 2010.

6Stefano Scarpetta, Anne Sonnet and Thomas Manfredi, “Rising Youth Unemployment During the Crisis: How to Prevent Negative Long-Term Consequences on a Generation?” OECD Social, Employment and Migration Papers, No. 106, April 14, 2010 available at
http://www.olis.oecd.org/olis/2010doc.nsf/LinkTo/NT000028DE/$FILE/JT03281808.PDF
 and
US Congress Joint Economic Committee, Unemployment Among Young Workers, May 2010; Bureau of Labor Statistics, Household Data, Employed persons by occupation, sex and age.

7Oreopoulos, von Wachter, and Heisz (2008); Till von Wachter Testimony to the Joint Economic Committee, May 26, 2010.

8Lisa B. Kahn. The Long-Term Market Consequences of Graduating from College in a Bad Economy. 2009.

9Stefano Scarpetta, Anne Sonnet and Thomas Manfredi, “Rising Youth Unemployment During the Crisis: How to Prevent Negative Long-Term Consequences on a Generation?” OECD Social, Employment and
Migration Papers, No. 106, April 14, 2010 . Available Online

http://www.olis.oecd.org/olis/2010doc.nsf/LinkTo/NT000028DE/$FILE/JT03281808.PDF

10James Heckman, Robert Lalonde, and Jeffrey Smith, “The Economics and Econometrics of Active Labor Market Programs.” Handbook of Labor Economics, First Edition, (Amsterdam: Elsevier, 1999), Vol. 3, Chap. 31, p. 2056

11ExpectMore.gov. Program Assessment of Job Corps. Available Online <
http://www.whitehouse.gov/omb/expectmore/summary/10002372.2007.html
>

12Peter Schochet, John Burghardt, and Sheena McConnell, “Does Job Corps Work? Impact Findings from the National Job Corps Study,” American Economic Review, American Economic Association, Vol. 98, No. 5 (December 2008), pp. 1864-1886.

13Bureau of Labor Statistics. Occupation Outlook Quarterly.  More Education: Higher Earnings, Lower Unemployment. 1999.
http://www.bls.gov/opub/ooq/1999/Fall/oochart.pdf

 
Youth Unemployment

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ILO Report- Bad Trends for Youth Employment

16 Aug

In case you were unconvinced that young people globally are especially suffering by the world-wide jobs deficit, the International Labour Organization released a report late last week documenting the crisis, showing 13.1% unemployment through 2010 and 28% of working young people actually doing so in extreme poverty.  More ominous is that the current downturn resulting in unemployment, underemployment, and idleness will negatively effect future prospects, both on individual lifetime earnings and on the make up of society.  A global strategy is needed to ensure that the generation with the most potential of any in recent decades does not become a lost generation.  Here is the press release from the ILO:

(If you are still unconvinced, there is nothing that can help…)

World economic crisis has spurred a record increase in youth unemployment says ILO

GENEVA (ILO News) — Global youth unemployment has reached its highest level on record, and is expected to increase through 2010, the International Labour Organization (ILO) said in a new report issued to coincide with the launch of the UN International Youth Year on 12 August.

The report ILO Global Employment Trends for Youth 2010 says that of some 620 million economically active youth aged 15 to 24 years, 81 million were unemployed at the end of 2009 — the highest number ever. This is 7.8 million more than the global number in 2007. The youth unemployment rate increased from 11.9 percent in 2007 to 13.0 percent in 2009.

It adds that these trends will have “significant consequences for young people as upcoming cohorts of new entrants join the ranks of the already unemployed” and warns of the “risk of a crisis legacy of a ‘lost generation’ comprised of young people who have dropped out of the labour market, having lost all hope of being able to work for a decent living”.

According to the ILO projections, the global youth unemployment rate is expected to continue its increase through 2010, to 13.1 per cent, followed by a moderate decline to 12.7 per cent in 2011. The report also points out that the unemployment rates of youth have proven to be more sensitive to the crisis than the rates of adults and that the recovery of the job market for young men and women is likely to lag behind that of adults.

The report indicates that in developed and some emerging economies, the crisis impact on youth is felt mainly in terms of rising unemployment and the social hazards associated with discouragement and prolonged inactivity.

The ILO report points out that in developing economies, where 90 per cent of young people live, youth are more vulnerable to underemployment and poverty. According to the report, in the lower income countries, the impact of the crisis is felt more in shorter hours and reduced wages for the few who maintain wage and salaried employment and in rising vulnerable employment in an ‘increasingly crowded’ informal economy.

The report estimates that 152 million young people, or about 28 percent of all the young workers in the world, worked but remained in extreme poverty in households surviving on less than US$1.25 per person per day in 2008.

“In developing countries, crisis pervades the daily life of the poor” said ILO Director-General Juan Somavia. “The effects of the economic and financial crisis threaten to exacerbate the pre-existing decent work deficits among youth. The result is that the number of young people stuck in working poverty grows and the cycle of working poverty persists through at least another generation.”

The ILO report explains how unemployment, underemployment and discouragement can have a long-term negative impact on young people, compromising their future employment prospects. The study also highlights the cost of idleness among youth, saying “societies lose their investment in education. Governments fail to receive contributions to social security systems and are forced to increase spending on remedial services”.

“Young people are the drivers of economic development,” Mr. Somavia said. “Foregoing this potential is an economic waste and can undermine social stability. The crisis is an opportunity to re-assess strategies for addressing the serious disadvantages that young people face as they enter the labour market. It is important to focus on comprehensive and integrated strategies that combine education and training policies with targeted employment policies for youth.”

“Today the UN is launching the International Year of Youth. Through this year’s themes of dialogue and mutual understanding, we will be better placed to shape viable policies that respond to the need and aspirations of young people for decent work,” he added.

Key findings in youth labour market trends at the global level:

  • Between 2007 and 2009, youth unemployment increased by 7.8 million (1.1 million in 2007/08 and 6.7 million in 2008/09). In comparison, over the course of the ten-year period prior to the current crisis (1996/97 to 2006/07), the number of unemployed youth increased, on average, by 191,000 per year.
  • The global youth unemployment rate rose from 11.9 to 13.0 per cent between 2007 and 2009. Between 2008 and 2009, the rate increased by 1 percentage point, marking the largest annual change over the 20 years of available global estimates and reversing the pre-crisis trend of declining youth unemployment rates since 2002.
  • Between 2008 and 2009, the number of unemployed youth increased by 9.0 per cent, compared to a 14.6 per cent increase in the number of unemployed adults. In terms of unemployment rates, however, the impact on youth has proven to be greater than that of adults. The youth rate increased by 1.0 percentage point compared to 0.5 points for the adult rate over 2008/09.
  • In 2008 young people accounted for 24 per cent of the world’s working poor, versus 18.1 per cent of total global employment.
  • Young women have more difficulty than young men in finding work. The female youth unemployment rate in 2009 stood at 13.2 per cent compared to the male rate of 12.9 per cent (a gap of 0.3 percentage point, the same gender gap seen in 2007).
  • The projections show a longer expected recovery for youth compared to adults. Youth unemployment numbers and rates are expected to decline only in 2011. The ILO forecasts a continued increase in global youth unemployment to an all-time high of 81.2 million and a rate of 13.1 per cent in 2010. In the following year, the number of unemployed youth is projected to decline to 78.5 million with a 12.7 per cent rate. Meanwhile, the adult rate is expected to peak in 2009 at 4.9 per cent and then decline by 0.1 percentage points in both 2010 and 2011 (to 4.8 and 4.7 per cent, respectively).

Regional trends:

  • Youth unemployment rates increased by 4.6 percentage points in Developed Economies & the European Union between 2008 and 2009 and by 3.5 points in Central & South-Eastern Europe (non-EU) & CIS. These are the largest annual increases in youth unemployment rates ever recorded in any region. The youth unemployment rate of 17.7 per cent in 2009 in the Developed Economies & European Union is the highest the region has seen since regional estimates have been available (since 1991).
  • In most regions, young women continued to be the hardest hit by unemployment. Only in the Developed Economies & European Union were young males harder hit; the increase in the male youth unemployment rate between 2007 and 2009 was 6.8 percentage points compared to 3.9 points for young women.
  • In some countries, including Spain and the United Kingdom, there was an increase in inactivity among youth in the crisis years. This implies an increase in discouragement, whereby growing unemployment has led some young people to give up the job search.
  • In developing economies, the crisis adds to the ranks of vulnerable employment and informal sector employment. There is supporting evidence of such an increase in Latin America where between 2008 and 2009 the number of own-account workers increased by 1.7 per cent and the number of contributing family workers by 3.8 per cent. The region also experienced an increase in the share of teenagers engaged in informal sector employment during the crisis.
  • For almost all regions, slight improvements are forecast as compared with the peak unemployment years (2010 in most cases). Only in the Middle East and North Africa are youth unemployment rates expected to continue on an upward path in 2011. The largest decrease (1 percentage point) in youth unemployment rates is expected for Central & South-Eastern Europe (non-EU) & CIS. The projected 2011 rate in the Developed Economies & European Union would represent a 0.9 percentage point decrease from the previous year. However, the projected rate of 18.2 per cent would still be higher than was ever seen in the pre-crisis period (1991-2007).

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American Dream Elusive for Young Workers Before Recession

8 Jul

Yesterday the New York Times ran a front page article, A New Generation, an Elusive American Dream, on how the recession has made the American Dream unattainable for many young folks.  It’s a must-read article, however, it missed the long-term trends that have been exacerbated by the recession: youth unemployment and decline in quality of jobs.

Taking the story of Scott Nicholson, a Colgate University graduate, who is living off his parents while he optimistically searches for a job, the Times’ story generalizes:

Starved for jobs at adequate pay, the millennials tend to seek refuge in college and in the military and to put off marriage and child-bearing.  Those who are working often stay with the jobs they have rather than jump to better paying but less secure ones, as young people seeking advancement normally do.  And they are increasingly willing to forgo raises, or to settle for small ones.

All true, but these trends were already occurring in response to a difficult labor market for young workers.  Businesses have been retaining older workers and not hiring young workers since the recession of 2001.  According to a working paper, Out With the Young and In With the Old: U.S. Labor Markets 2000-2008 and the Case for An Immediate Jobs Creation Program for Teens and Young Adults, by the Center for Labor Market Studies at Northeastern University, from 2000 to 2008, the employment rates of each age group below 35 declined sharply with the most significant decline in teenage employment.  Over the same time, older workers employment rate increased 4.6 points for 55-64 year olds and 4 points for 65+.

But its not just employment figures that matter, its also the quality of the jobs.  Pay and employer-provided benefits for young workers has stagnated.  Wages for 18 to 29 year olds was 10 percent lower in 2007 than in 1979.  According to a report by the Center for Economic and Policy Research, Unions and Upward Mobility for Young Workers, the decline in union density has had a significant effect in diminishing the quality of jobs available to young workers.  Unions boost wages for young workers by $1.75/hour on average and significantly increase the prospects of health insurance coverage (by 17%) and retirement security (by 24%).

However, the trend has been away from unions – not towards them.  Meaning there has been a real decline in the quality of jobs young workers have available to them.

Scott Nicholson has the bad luck to graduate into a recession, yes, but the opportunities available to his grandfather (a retired stockbroker) and his father (a tool manufacturer) might never have been available to him at least not in the ways this relatives fell into them.  Young workers have been hardest hit by this recession (as they have been in every post-WWII recession), but its these long-term structural problems that need to be addressed.  The standard, slow job growth won’t dig young workers out.

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