Wednesday, May 2, 2012

Younger Workers Damaged by Recession

In a previous post we mentioned that the Employment Department's Research Division has been researching key workforce challenges in Oregon. The second challenge in our series focuses on younger workers.

Unemployment among youths is always higher than it is among the older population. The unemployment rate of Oregonians ages 16 to 19 averaged close to 19 percent in the 10 years leading up to the Great Recession. The rate was more than 10 percent for Oregonians ages 20 to 24 during that period, while the overall unemployment rate was about 6 percent. 

The recession sent youth unemployment rates to record highs and rates remain at troubling levels. Three out of 10 teenagers in Oregon who would like a job are not able to find one. The unemployment rate among 20 to 24 year olds is one and a half times the overall unemployment rate and their participation is also near record lows. All age groups were damaged to some extent by the recession, but the effects on young workers could have much longer-term consequences.

Research at the national level by the Federal Reserve Board released in late 2011 suggests that, "Both demand for teen labor and the supply of teen labor play an important role in explaining why fewer teens work than ever before." According to the Board's research, the supply of adults available to work jobs traditionally held by teens explains at least half and up to two-thirds of the decline in teen employment that can't be explained by the recession.

High unemployment among recent college graduates can have a lasting impact on their careers. A 2009 study by Lisa Kahn at the Yale School of Management which looked at graduates during the 1980s found that, "the labor market consequences of graduating from college in a bad economy are large, negative and persistent." Each percentage point increase in the unemployment rate corresponds to 6 to 8 percent less earnings in their first year of employment, compared with those who graduated during better times. 

The damage isn't limited to lower earnings while they are young. According to recent research from the National Bureau of Economic Research, a graduate's first job strongly impacts long-term employment prospects. During recessions, the quality of jobs available deteriorates temporarily. Gradually, workers find new jobs according to their skill as the economy improves and more jobs become available - jobs like the graduates would likely have gotten right away if they'd graduated in a stronger economy.

You can read more about this key workforce challenge in the full article, co-authored by Economist Jessica Nelson and State Employment Economist Nick Beleiciks.

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