NCPA - National Center for Policy Analysis

The Unemployment Crisis for Younger Workers

June 6, 2012

A recent Government Accountability Office (GAO) report recommends that Congress take action to alleviate the pain of the recession that is felt by America's oldest workers.  Within the recommendation, the GAO offers several policies to accomplish this objective, including subsidies to employers who hire older workers, training programs for older workers and compensation for older workers who accept lower-paying jobs, says Diana Furchtgott-Roth, a senior fellow at the Manhattan Institute.

This excessive concern offers relief to a portion of the population that has felt the least pain in the recent downturn.  If assistance must be offered to a specific classification of workers, it is the youngest who are most in need.

  • Since 2000 the labor force participation rates of workers age 55 and over have been rising steadily, whereas the labor force participation rates of workers 16 to 24 years old and workers 25 to 54 years old have been declining.
  • The biggest decline in labor force participation rates can be observed for workers aged 16 to 24.
  • Over the past 10 years employment has increased among Americans age 55 and over by 8.9 million.
  • At the same time, it has declined by 3.1 million in the 25 to 54 age group, and by 313,000 among those aged 20 to 24.
  • The labor force participation rate of seniors has increased by 5.7 percentage points from 2002 to 2011, yet declined in other age groups.

Furthermore, the long-term prospects of younger workers are far bleaker than those of their older counterparts.

  • A new paper in American Economic Journal: Applied Economics found that graduating in a recession leads to earnings losses that last for 10 years after graduation.
  • Researchers also found that earnings losses are greater for new entrants to the labor force than for existing workers, who might see smaller raises, but who have jobs.
  • In addition, recessions lead workers (especially younger workers) to accept employment in small firms that pay lower salaries.

Finally, younger workers tend to have larger debts and fewer assets than older workers.  Young homeowners tend to buy their houses during the buildup to the housing bubble, subsequently witnessing a bottoming out of their home value.  Older workers who have owned their homes longer were more protected from the bubble.

Source: Diana Furchtgott-Roth, "The Unemployment Crisis for Younger Workers," Manhattan Institute, May 2012.

For text:


Browse more articles on Economic Issues