There has been a large increase in the share of young high school and college graduates who are idled—neither employed nor enrolled in school, a new Economic Policy Institute (EPI) report finds. In The Class of 2014: The Weak Economy Is Idling Too Many Young Graduates, Heidi Shierholz, Alyssa Davis and Will Kimball examine the labor market conditions new graduates—specifically high school graduates age 17-20 and college age 21-24—will confront. They find that during the weak recovery, the share of young high school graduates who are neither employed nor enrolled in college increased from 13.7 percent in 2007 to 17.7 percent in 2010 and has made no sustained improvement since then. The share of recent college graduates who are neither employed nor enrolled in further schooling increased from 8.4 percent in 2007 to 11.6 percent in 2011, and has improved only modestly since then, to 11.2 percent. This represents an enormous loss of opportunities for this cohort that will have lasting consequences.
“The opportunities young adults have at the start of their careers have long-lasting effects on their trajectories and future earnings,” said Shierholz. “Through no fault of their own, many new graduates this year will suffer consequences from entering such a weak labor market, including diminished job opportunities, more spells of unemployment, and reduced earnings for a decade or more.”
Watch this short video of the report’s coauthor Heidi Shierholz explaining how the weak recovery is sidelining many new graduates and the long-term impacts this will have on their careers and earnings.
Though young workers always experience disproportionate increases in unemployment during periods of labor market weakness, they were particularly hard hit by the Great Recession and its aftermath, the longest, most severe period of economic weakness in more than seven decades. At 14.5 percent, the March 2014 unemployment rate of workers under age 25 was slightly over twice as high as the overall unemployment rate, 6.7 percent. Further, there are nearly 1 million “missing” young workers—potential workers who are neither employed nor actively seeking work (and are thus not counted in the unemployment rate) because job opportunities remain so scarce. If these missing workers were in the labor market looking for work, the unemployment rate of workers under age 25 would be 18.1 percent instead of 14.5 percent.
For young college graduates, the unemployment rate is currently 8.5 percent (compared with 5.5 percent in 2007), and the underemployment rate is 16.8 percent (compared with 9.6 percent in 2007). For young high school graduates, the unemployment rate is 22.9 percent (compared with 15.9 percent in 2007), and the underemployment rate is 41.5 percent (compared with 26.8 percent in 2007). And overall unemployment rates of young graduates mask substantial disparities in unemployment by race and ethnicity. The unemployment rates of blacks and Hispanics are substantially higher than the unemployment rates of white non-Hispanics, for both young high school graduates and young college graduates.
The long-run wage trends for young graduates are bleak, with wages substantially lower today than in 2000. Since 2000, the real (inflation-adjusted) wages of young high school graduates have dropped 10.8 percent, and those of young college graduates have dropped 7.7 percent. The erosion of job quality for young graduates is also evident in their declining likelihood of receiving employer-provided health insurance or pensions.
“The scarcity of job opportunities for the Class of 2014 is a symptom of weak demand for workers more broadly,” said Shierholz. “Like their parents, young workers would benefit from policies that will generate strong job growth overall, such as substantial additional investment in infrastructure and direct job creation programs in communities particularly hard-hit by unemployment.”