Published: May 3, 2013 The New York Times
Source: Organization for Economic Cooperation and Development
THE idle young European, stranded without work by the Continent’s dysfunction, is one of the global economy’s stock characters. Yet it might be time to add another, even more common protagonist: the idle young American.
For all of Europe’s troubles — a left-right combination of sclerotic labor markets and austerity — the United States has quietly surpassed much of Europe in the percentage of young adults without jobs. It’s not just Europe, either. Over the last 12 years, the United States has gone from having the highest share of employed 25- to 34-year-olds among large, wealthy economies to having among the lowest.
The grim shift — “a historic turnaround,” says Robert A. Moffitt, a Johns Hopkins University economist — stems from two underappreciated aspects of our long economic slump. First, it has exacted the harshest toll on the young — even harsher than on people in their 50s and 60s, who have also suffered. And while the American economy has come back more robustly than some of its global rivals in terms of overall production, the recovery has been strangely light on new jobs, even after Friday’s better-than-expected unemployment report. American companies are doing more with less.
“This still is a very big puzzle,” said Lawrence F. Katz, a Harvard professor who was chief economist at the Labor Department during the Clinton administration. He called the severe downturn in jobs “the million-dollar question” for the economy.
Employers are particularly reluctant to add new workers — and have been for much of the last 12 years. Layoffs have been subdued, with the exception of the worst months of the financial crisis, but so has the creation of jobs, and no one depends on new jobs as much as younger workers do. For them, the Great Recession grinds on.
For many people with jobs and nest eggs, the economy is finally moving in the right direction, albeit a long way from booming. Average wages are no longer trailing inflation. Stocks have soared since their 2009 nadir, and home prices are increasing again. But little of that helps younger adults trying to get a foothold in the economy. Many of them are on the outside of the recovery looking in.
The net worth of households headed by people 44 and younger has dropped more over the past decade than the net worth of middle-aged and elderly households, according to the Federal Reserve. According to the Labor Department, workers 25 to 34 years old are the only age group with lower average wages in early 2013 than in 2000.
The problems start with a lack of jobs. In 2011, the most recent year for whichinternational comparisons exist, 26.2 percent of Americans between ages 25 and 34 were not working. That includes those for whom unemployment is a choice (those in graduate school, for example, or taking care of children) and those for whom it is not (the officially unemployed or those who are out of work and no longer looking). The share was 20.2 percent in Canada, 20.5 percent in Germany, 21 percent in Japan, 21.6 percent in Britain and 22 percent in France.
The European economy has deteriorated over the last two years, and the American economy has strengthened modestly. But the job growth here has been fast enough merely to keep pace with population growth, which suggests that this country still lags in the employment of young adults. In 2000, by contrast, the United States led Germany, Britain, France, Canada and Japan — as well as Australia, Russia and Sweden — in such employment rates. The nation now trails them all. Older American workers have also lost relative ground, but not as much.
As Mr. Katz, Mr. Moffitt and others note, an explanation of the root causes remains elusive. But there are obvious suspects, and each probably plays a role.
The United States, for example, has lost its once-large lead in producing college graduates, and education remains the most successful jobs strategy in a globalized, technology-heavy economy. It is no accident that the most educated places in the country, like Boston, Minneapolis, Washington and Austin, Tex., have high employment rates while the least educated, including many in the South and inland California, have low ones. The official unemployment rate for 25- to 34-year-old college graduates remains just 3.3 percent.
Beyond education, the nation has also been less aggressive than some others in using counseling and retraining to help the jobless find work. To take one small example, a recent study in France by the renowned M.I.T. economist Esther Duflo and four colleagues found that placement programs for unemployed workers helped not only the workers but the economy too. The counseled workers were more likely to find work, and they did not simply take jobs from other candidates. Overall employment rose more quickly in the regions with job counseling.
Other research notes that the United States has expanded parental leave and part-time work less than other countries — and, perhaps relatedly, employment rates among women here have slipped.
Whatever role these trends are playing, they do not appear to fully explain the employment decline. It is too big and too widespread. Existing companies are not adding jobs at the same rate they once did, and new companies are not forming as quickly.
What might help? Easing the parts of the regulatory thicket without societal benefits. Providing public financing for the sorts of early-stage scientific research and physical infrastructure that the private sector often finds unprofitable. Long term, nothing is likely to matter more than improving educational attainment, from preschool through college (which may have started already).
Many business executives and economists also point to immigration policy. Done right, an overhaul could make a difference, many say, by allowing more highly skilled immigrants to enter the country and by making life easier for those immigrants already here. Historically, immigrants have started more than their share of new companies.
Perhaps the most remarkable aspect of the jobs slump is that the Americans in their 20s and 30s who have been most affected by it remain decidedly upbeat. They are much more hopeful than older generations, polls show, that the country’s future will be better than its past.
Based on what younger adults have been through, that resilience is impressive. It’s probably necessary, too. The jobs slump will not end without a large dose of optimism.
David Leonhardt is the Washington bureau chief of The New York Times.
A version of this news analysis appeared in print on May 5, 2013, on page SR5 of the New York edition with the headline: The Idled Young Americans.