Letter

Instructor Notes: Young Worker Unemployment – During the Pandemic

Unemployment Among Young Workers During COVID-19 (Brookings, September 10, 2020)

While young people aged 16-29 make up less than a quarter of the labor force, they accounted for about a third of the rise in the unemployment rate between February and April of this year (2020).

• Disparities among young workers by education and by race, with Black and Hispanic workers and workers with lower levels of education experiencing larger increases in unemployment rates between February and April compared to white and college-educated workers.

• Unemployment rates for young white, and to a lesser extent Hispanic, workers have retraced a good part of their initial rise, the unemployment rate for young Black workers remains particularly elevated and was little changed in June and July.

• Young workers were more likely to be laid off than older age workers in almost every industry. These dynamics are similar to those typically observed during a recession. Employers may be more likely to layoff young workers for a variety of reasons, which depend on the culture of the industry, the nature of the work, and the cost structure. For instance, employers may have policies of firing the most recent hires first, as a way to retain the morale and support of long- time workers. In industries that require significant firm-specific knowledge, young workers with lower tenure would likely have less of this, which would make separating them from the rm less of a loss.

• The pandemic appears to have introduced an additional economic challenge for young workers. In February 2020, prior to the significant decline in economic activity due to the pandemic, young workers were significantly more likely to be working in many of the hardest hit industries, including leisure and hospitality (17.5 percent) and wholesale and retail trade (16.5 percent) compared to their older counterparts (7 percent and 10.8 percent respectively). These industries are not especially sensitive to economic downturns, so this is a dynamic that is unique to the pandemic and is different from a typical recession.

• For those who get a college degree, research suggests that graduating during a recession can leave a lasting imprint. For instance, nearly one third of college graduates who entered the labor market during the Great Recession ended up in jobs that did not require a college education. Although this is often a temporary phenomenon, it can have long-lasting implications. For example, research shows that college graduates who have the lowest predicted earnings (based on college and major) suffer the most during a typical recession: experiencing a loss of 8 percent of cumulative earnings in their first 10 years.

Young Workers Hit Hard by the COVID-19 Economy: Workers Ages 16–24 Face High Unemployment and an Uncertain Future – EPI October 2020

Historically, young people are disproportionately disadvantaged in many ways during economic downturns, but this recession has been particularly acute given the sectors of the economy that were hit the hardest. Furthermore, many have been all but blocked from receiving jobless benefits even with meaningful expansions to the unemployment insurance system.

• Young workers’ already-high unemployment rates have jumped much higher.

o In the pre-COVID economy—April, May, and June 2019—the unemployment rate for workers ages 16–24 (8.4%) was three times as high as for workers ages 25 and up (2.8%).

o Young Black workers experienced the highest unemployment of any racial/ethnic group, 14.5%.

o At the height of the coronavirus recession, about one-fourth of young workers were unemployed, 24.4%, compared with just over one-tenth of older workers, 11.3%.

o Young Black, Hispanic, and AAPI workers experienced much higher unemployment rates than their white peers: In spring 2020, nearly 30% of young Black and Asian American/Pacific Islander workers were unemployed (29.6% and 29.7%, respectively).

o Underemployment rates for young workers are far higher than for older workers, both in the current year and historically.

§ Underemployment is the share of the labor force that either (1) is unemployed, (2) is working part time but wants and is available to work full time (an “involuntary” part-timer), or (3) wants work and is available to work and has looked for work in the last year but has given up actively seeking work in the last four weeks (a “marginally attached” worker).

o In the depths of this recession, more than one-third of younger workers were underemployed compared with less than one-fifth of older workers. Young white workers have an underemployment rate of 30.5%, which is significantly higher than the rate for older white workers, 15.9%. Young Black, Hispanic, and AAPI workers also saw big spikes in their underemployment rates. Roughly two in five young Black, Hispanic, and AAPI workers were underemployed this spring.

• Young workers are more likely to be in jobs impacted by COVID-19. o Young workers experienced greater job loss in the current recession because they

worked in industries that were impacted the most by the COVID-19 shutdown. § Leisure and hospitality experienced the largest job losses, with 41.0% of those

jobs shutting down in those months. One-quarter of young workers ages 16–24 were employed in leisure and hospitality in the pre-pandemic 2019 economy.

§ Retail trade had the third-largest job losses in the early months of the pandemic, and 18.9% of young workers were employed in retail trade in 2019.

o Service occupations experienced the largest job losses at the beginning of the pandemic, with 27.2% of service jobs lost between February and May 2020. Nearly one-third of younger workers (31.2%) worked in service occupations in 2019.

o Another factor that has disproportionately led to more job losses for young workers is their relative lack of options for working from home. A mere 6.7% of young workers were able to telework in the pre-pandemic period.

o Most of those who have kept their jobs face the risk of exposure to COVID-19 at their workplace. Because of the industries and occupations they work in, younger workers have been disproportionately forced to choose between their health and their earnings. They have been putting themselves and their family members at risk to earn a paycheck.

• The economic effects of the COVID-19 economy on young workers may persist for years. o Research on prior recessions finds substantial evidence that workers who enter the

labor market during an economic downturn are scarred for many years. These workers are more likely to experience lower earnings, greater earnings instability, and more spells of unemployment in the long term compared with similar individuals who entered the labor market in better times.

§ Because of their initial bad start, they often get stuck in low-paying, low-quality jobs. Even when the economy gets stronger, it can be difficult for these workers to catch up to their pre-recession cohorts.

o Young workers (millennials born between 1981 and 1996) experienced worse labor market outcomes than other generations during the Great Recession. Over the entire period from 2007 to 2017, they experienced earnings losses of about 13% on average compared with 9.1% for Gen-Xers and 7.1% for baby boomers.

§ These effects are magnified for young Black and Hispanic workers, who have higher unemployment and underemployment rates relative to their white peers.

• Young workers have been excluded from certain COVID-19 assistance. o While the provisions of the Coronavirus Aid, Relief, and Economic Security Act, also

known as the CARES Act, were vital for millions of workers and their families across the country, it unfortunately left many young workers wanting.

§ Because many young college students are dependents of their parents for tax purposes, they were not eligible for the one-time $1,200 stimulus checks.

§ Their parents also did not receive the $500 check for dependents because that age cutoff is 17.

§ The CARES Act made several very important, though temporary, improvements to the unemployment insurance program, including the $600 enhanced benefit as well as expanded eligibility. Unfortunately, many young workers who had yet to secure any employment were ineligible for these benefits.

• A return to a strong economy would disproportionately help young workers. o Policymakers have allowed the federal minimum wage to erode in value over the last 50

years. While increasing the minimum wage would aid workers across the age spectrum, young workers, who are the most likely to be earning very low wages, would see meaningful wage growth.

o Expansive collective bargaining rights benefits workers of all ages, including setting standards in nonunion workplaces and can improve the labor market for young workers while providing a boost to the economy as well.

Generation Unemployed: Another Class of Graduates Faces Pandemic-Scarred Future – NPR April 5, 2021

• Youth unemployment remains stubbornly high. Though much better than the 27.4% rate in April last year (2020), the unemployment rate for those ages 16-24 ticked higher, to 11.1% in March. That was significantly above the overall unemployment rate of 6%.

• The reality is that there may be plenty of cheaper- to-hire college graduates, but in an economy still recovering from major layoffs, there are also plenty more experienced workers desperate for jobs. They'll choose, all else equal, people with more experience," so young workers are left out in the

cold and many are going to have a hard time starting their career. • The difficulties in finding that first job is magnified for young people of color, especially those

without college degrees. Many worked in sectors such as hospitality and retail, where millions lost their jobs.

Youth Unemployment: A Global Crisis – Mercy Corps - September 4, 2020

• Over the next decade, the World Bank estimates one billion young people will try to enter the job market, but less than half of them will find formal jobs. This will leave the majority of young people, many in minority and marginalized groups, unemployed or experiencing working poverty.

• If left unchecked, youth unemployment can have serious social repercussions because unemployed youth tend to feel left out, leading to social exclusion, anxiety and a lack of hope for the future.

• Given that almost 90% of all young people live in low-income nations, not feeling that a better life is possible can result in millions of young people floundering in poverty and frustration – bringing fragile nations down with them.

• The contributing factors to this high rate of global youth unemployment are largely due to the lack of job opportunities but also include barriers to entering the labor market, like limited work experience and the increasing size of the population itself – worldwide, there are approximately 1.3 billion young people between the ages of 15 and 24.

• In regions like Africa, young people make up more than one fifth of the population and 95% of their work is considered informal. This means work that’s without legal or social protections. In the first month of the COVID-19 crisis, it’s been estimated that the income of informal workers like these dropped by 81%. Without alternate sources of income, these workers and their families will have no way to survive.

• NEET – “not in employment, education or training.” This means they are not gaining experience in the labor market, not receiving an income from work, and not enhancing their education and skills. Globally, one in five young people, or 267 million, have NEET status.

• In poor communities, people can’t afford to be unemployed, so they take any work they can get – resulting in underemployment, vulnerable employment and working poverty.