NCPA - National Center for Policy Analysis

What's Behind the Dramatic Decline in Youth Employment?

November 23, 2011

Since the beginning of the recent recession, the employment-population ratio for high-school age youth (16-17 years old) has fallen by nearly a third, to its lowest level ever.  However, this recession has exacerbated a longer-run downward trend that actually began in the 1990s and accelerated in the early 2000s.  Given the longevity of this trend, it is a mistake to assert that current levels of teenage unemployment are due largely to the recent recession, as this appears not to be the case, says researcher Christopher L. Smith.

  • Teenage employment has fallen with employment figures as a whole in each recession in the last 30 years -- but unlike other demographics, teenage employment showed little recovery each time.
  • Since the start of the most recent recession, the employment-population rate for high school-age youth has fallen from around 23 percent to around 15 percent.
  • Analysis shows that this precipitous drop is at least half-explained by changes in labor demand for teenagers, while changes in labor supply have proven to be less impactful.

Many theories have been proposed to explain the decrease in teenage employment.  In labor demand, some have emphasized changes in occupational polarization as the primary culprit, while others have pointed to immigration.  In labor supply, changes in education priorities and the wage premium between high school and college graduates has had significant impacts.

  • Occupational polarization refers to the automation and efficiency gains that have replaced many adult workers in labor jobs, moving them into the service sector where teenagers typically work.
  • Increases in immigration in some states has tracked over time with increases in teenage unemployment as low-skilled immigrants take jobs previously held by teenagers.
  • Changes in education, on the other hand, suggest that a greater emphasis on college preparation and summer school has decreased the proportion of teenagers who are seeking employment.

Regardless of the relative importance of each of these factors, and those factors not yet identified, it is difficult to assess the aggregate impact of this trend.  If teenagers are replacing the time they might have spent working with other activities that grow human capital, such as self-education and schooling, then the United States might actually experience a net gain from teenage unemployment.  Until it is known how teenagers are increasingly spending their time, however, the potential consequences of this trend cannot be meaningfully calculated.

Source: Christopher L. Smith, "Polarization, Immigration, Education: What's Behind the Dramatic Decline in Youth Employment?" Federal Reserve, October 2011.

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