Prosperity Watch Issue 42, No. 3: Unemployment for Young People Generates Costs for Us All

The lack of jobs and growth of low-wage work has left many in North Carolina struggling to find a foothold in the labor market. Millennials, those aged 18 to 34 years old, have faced a particularly steep climb to greater economic security in this context. It turns out that their experiences of entering the workforce during a downturn will hold back their earnings over their lifetime relative to those who started to work in better times.  Research released by MDC this week shows that economic mobility is particularly challenging for young people in the South, thereby perpetuating high poverty and higher societal costs.

Young people’s economic barriers and unemployment in particular generate costs to larger society, primarily in the form of foregone revenue, according to research by the Young Invincibles – a non-profit organization that focuses on empowering young Americans with information regarding healthcare, jobs, economic opportunity and higher education. Young people in North Carolina have much higher unemployment rates and much lower labor force participation relative to the prime working age population and the population overall.  In 2013, the unemployment rate for North Carolinians aged 18 to 34 years was 3.3 percentage points higher than in 2007.  For young people aged 16 to 24, the unemployment rate was 9.1 percentage points higher than in 2007. For those of prime working age (25 to 54) there was just a 2.8 percentage point increase in the unemployment rate in 2013 over the 2007 rate.

Labor force participation rates for young North Carolinians also fell farther than for prime working age North Carolinians over that period, dropping by 1.5 percentage points for millennials and by more than 6 percentage points for 16 to 24 year olds.  The latter figure is far greater a decline than the one percentage point fall in labor force participation over the same period for the prime working age population. There are both good and bad explanations for the labor force decline among this population. More young people are pursuing a post-secondary education. However, due to rising tuition, this pursuit requires many Millennials to work while attending school. Students and families have seen tuition increase while financial aid has not, which often increases the necessity for students to work to pay for a postsecondary education.  

In combination with data previously highlighted here regarding growing number of North Carolina young adults not in school and not working, the labor force decline for this population is, as for the broader population, driven by the lack of available jobs. The jobs deficit continues to remain high for all North Carolinians, with nearly half a million jobs needed to reach pre-recession levels. For the Millennial generation, an estimated 85,508 jobs are needed to reach pre-recession employment levels.

A recent report by the Young Invincibles quantified the cost of young adult unemployment using data on the millennial population aged 18 to 34 years. The findings of that report suggest that the federal government and states face significant costs due to youth unemployment primarily because of lost revenue resulting from young people not earning or spending income.  North Carolina fares among the worst of all states with an estimated loss of more than $100 million in state taxes, the second highest cost in the nation behind California. That figure translates to $80.20 in cost per taxpayer for youth unemployment.

The costs of not addressing the job shortage for young adults starting out their careers will be carried by us all, however public policies exist to improve and enhance opportunities. Programs that provide apprenticeships to young adults can improve the skills training and employment prospects of young adults while public jobs programs have supported private employers still considering expansion and funding for affordable post-secondary education and training in high-growth fields have supported those seeking further education and skills training. A host of policy opportunities exist for supporting young adults as they enter the workforce and investment in them will require policymakers to ensure that adequate revenue is available and that a focus on the next generation of leaders and workers is front and center.

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