High Teen Unemployment Could Hurt Future Job Growth

Teenagers without jobs may be missing out on job skills, future wages.

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The youngster who takes movie tickets, scans groceries, or walks neighborhood dogs is doing much more than earning extra cash. She is investing in her future.

Yet nearly one in four Americans age 16 to 19 were unemployed in February, according to the latest numbers from the Labor Department. Even as the overall jobless rate held firm at 8.3 percent, the teen rate climbed from 23.2 to 23.8 percent. That number has far to fall before it is in healthy territory. In the mid-2000s, the rate hovered between 14 and 18 percent. For much of the late 1990s and early 2000s, it held at or below 15 percent.

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"It's a huge problem," says Heidi Shierholz, a labor market economist at the Economic Policy Institute, a liberal Washington-based think tank. The teen jobless rate is in part a function of the larger national jobs crisis, she says. "It shoots up higher during recessions...it pretty much tracks the overall unemployment rate at a much higher level."

The problem has proven persistent, even since the Great Recession ended. The national teen unemployment rate has been above 20 percent since mid-2008. And it is disproportionately affecting certain minorities. The February unemployment rate for Hispanics age 16 to 19 was 27.5 percent, and for blacks it was more than one-third, at 34.7 percent.

Beyond the effect on a teenager's wallet, the high unemployment rate among teens foreshadows economic problems for these youth as they reach adulthood.

"Many of those first-time jobs, even before a career begins, are very formative from some very basic standpoints," says Paul Conway, president of Generation Opportunity, a conservative organization aimed at young Americans. "They teach the basics of how to operate in a workplace—simple things like arriving on time, working on a team, feeling as though you are being compensated for work that you do."

The effects of youth employment go beyond responsibility and how to behave in a professional work environment. Research suggests that, if work doesn't cut into a teen's education, it can boost future earnings. He points to a 1995 National Bureau of Economic Research working paper that shows that high school seniors employed 20 hours per week were, 6 to 9 years later, expected to earn approximately 11 percent more annually than their counterparts who did not work.

While a 1995 Labor Department study on teen employment, found only a short-lived wage boost, the study's author also suggested that the experience could boost job-seeking skills "by teaching [young workers] how to locate good employment opportunities and communicate effectively with potential employers."

This much is clear: the impacts of high teen unemployment could last decades. What is unclear is what to do about it.

One way to ensure work for America's young people is to keep the minimum wage low, says Michael Saltsman, a research fellow at the Employment Policies Institute, a conservative think tank that often advocates against raising the minimum wage

"If you're a young person that doesn't have a lot of experience, the employer you work for might be a restaurant [or] retail store," he says. "When their labor costs go up they have two choices: pass prices on to customers or figure out how to cut costs." During an economic downturn, he adds, employers are particularly reluctant to increase prices.

Shierholz disagrees. Increasing the minimum wage, she says, tends to get money into the hands of people who really need it, and are more likely to spend it. "It actually increases economic activity and generates some jobs," she says.

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In her opinion, boosting teen employment may simply be question of getting more people back to work overall.

"To really move the dial on this in a significant way, you need to get back to health in the labor market overall," she says. "That's the ultimate thing that's going to do it. Then you just get back to 'How do you go about doing that?'" says Shierholz. The jobs situation now appears to finally be improving, but unemployed teens will have to wait until the unemployment lines get shorter.