The youth unemployment crisis may not be a crisis

By Zachary Karabell
November 22, 2013

“Youth Unemployment is the Next Global Crisis”

“America’s 10 Million Unemployed Youth Spell Danger for Future Economic Growth”

“Relentlessly high youth unemployment is a global time bomb”

There’s no doubting that worldwide, kids are out of work. In the United States alone, the unemployment rate for 15 to 24-year-olds is about 16 percent, nearly twice the national average. In parts of Europe, the figures are much worse, with a whopping 56 percent youth unemployment rate in Spain alone — representing about 900,000 people.

But do these high numbers represent a global labor market crisis that imperils future growth, as the headlines warn? Maybe not. Maybe instead, they’re evidence of a generation of college graduates determined not to settle, which bodes well for our future.

To understand why, it’s worth a quick detour through history. Until the early 20th century, there was no clear concept of “unemployment.” Classical economics emerged in the late 19th century at a time when there was an ample supply of labor to feed the relentless maw of industrial production in both Europe and America. Because there was no social safety net, people worked in order to generate essentials such as food, clothing and shelter. You had to work to survive, and there was always work to be done and need for bodies to do it. Many believed that “unemployment” was only an option for vagrants, who were in turn viewed as immoral.

The Great Depression threw those views into question. Millions found themselves unable to find jobs, even when they wanted to. The Bureau of Labor Statistics began to create an unemployment rate in the 1930s, and with it a definition of what qualified as “the workforce” and of what it meant to be unemployed. A key aspect of the definition was not that you were “out of work” but rather that you were actively looking for a job, yet unable to find one. It pointed to a flaw — either temporary and cyclical, or longer-lasting and structural — with the labor market and, by extension, with the economy as a whole.

Today, the high levels of youth unemployment are viewed primarily as a breakdown in the labor market and a sign of a failing system. That’s why so many call it a “crisis.” But if you start to look at the patterns of youth unemployment, a different set of conclusions is possible.

It’s best to start with the unemployment rate among recent college graduates, which attracts the lion’s share of attention. According to a recent Georgetown University study, about 8 percent of recent college graduates are unemployed, and the number is about 10 percent for students majoring in the arts, law, public policy, and most social sciences. The BLS actually says the situation is worse, with the unemployment rate for those under the age of 29 with only a bachelor’s degree above 15 percent for men and around 11 percent for women.

And the true unemployment numbers might actually be higher. For instance, in assessing unemployment among younger people the Bureau of Labor Statistics faces greater challenges in obtaining responses from cell phone users who don’t have land lines. Moreover, many of these recent grads are working in a succession of short-term jobs, which is difficult to classify in employment surveys.

Take a 25-year-old woman I met recently, who left her job to develop an app, work on a live-stream talk show, and write a book. If by some chance the Bureau of Labor Statistics contacted her, she would say that she doesn’t have a job, and hasn’t been looking. She would simply evaporate from the labor force and not be considered unemployed. But are her decisions a symbol of systemic crisis and failure? No.

Most economists believe that not having a job in your twenties has systemic repercussions for years to come. A study from the Center for American Progress claimed that, “the nearly 1 million young Americans who experienced long-term unemployment during the worst of the recession will lose more than $20 billion in earnings over the next 10 years. This equates to about $22,000 per person.”

Yet we should be wary of these statistics. The BLS has only been collecting data on age, unemployment and subsequent incomes for a few decades. That is not enough time to make conclusions. Even if accurate, the $22,000 figure doesn’t factor in how much was recouped in unemployment and other benefits, which likely would lower that figure considerably.

The larger point is that many college-educated young people are choosing not to take low-paying service-level jobs if they don’t absolutely have to. Because they can live with their parents (and as many as 45 percent of recent grads do) and because they rarely have much in the way of fixed costs such as homes and children, they can hold out for a job that matches their ambitions. They can also retool their skills as they discover that their college degree in marketing and communications may not leave them in the best position to get the type of job that they want.

This type of unemployment is one of choice — rational, legitimate choice — not of systemic failure. It is a challenge to find a meaningful job, but that hasn’t stopped people from trying. A youth cohort determined to create meaningful work should not be seen as lazy, lost or in dire straits. Instead it could be exactly the type who might actually lead the transition of our economy away from the making-stuff economy of the 20th century to an ideas economy of the 21st.

The employment picture for young people without a college degree is different. They’re being left further behind. According to the BLS, more than 30 percent of recent high school graduates who aren’t in college are unemployed, and the number is worse for those who dropped out of high school. African-Americans without a college degree, especially under the age of 20, have an unemployment rate that approaches 40 percent. African-Americans also have higher incarceration rates, especially males, and most states and companies enact punitive regulations that make employment for those with a prison record extremely challenging.

The Hispanic population faces similar, albeit slightly less acute, stats. But these are not indications of a breakdown of labor markets. They’re proof that social policies and a shift in labor markets towards rewarding different and newer skills sets are hitting these populations, especially young men without college degrees, extremely hard.

In the United States, youth unemployment is not quite what it seems. It is not a simple sign of how bad the economy is. Youth unemployment is actually a sign of ambition and expectation. Young people aren’t part of a generation of despair, but rather a generation determined not to settle. That may not always be realistic, but it is a vital fuel to propel our society forward.

PHOTO: A woman opens a glass door with a “Now Hiring” sign on it as she enters a Staples store in New York March 3, 2011. REUTERS/Lucas Jackson

19 comments

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You’re kidding, right? Sure, these kids might not have homes and children of their own yet but that’s no reason anyone want’s to live in mam and dad’s basement. Besides Zachary, you forgot to mention that load of student loan debt that’s accruing interest like a ticking time bomb. You have to be kidding because surely you understand the time value of money. Every day these kids are delayed from entering the work force in a meaningful job put’s them behind in terms of lifetime earnings and eventual retirement. You mention that they can retrain when they find that the degree they have might not land them the job they wish for. Perhaps, but at what cost? More years racking up student loan debt and fewer years earning. Zachary you can spin this anyway you’d like but I can’t buy into it. Time is money.

Posted by Missinginaction | Report as abusive

How are they supposed to pay their student debts? Tell the government to just wait a few years until they find the perfect job?

Get real – it doesn’t work that way.

Posted by AZreb | Report as abusive

This column is a classic exercise in denial.

Those who take low-paying service jobs have jobs, so they don’t count. Those who don’t, but work in the “underground economy” or otherwise “don’t report” don’t count. These people don’t CARE whether or not they are “counted”. They want to get on the bicycle of life and RIDE, and they can’t.

Those who find no one wants a Liberal Arts graduate to train to do something useful go back to school, but the REASON they do that is they can’t find a job whether they are counted or not. Those who can crash with mom and dad may look less actively than those “in the street”, may not be counted, but still can’t find a job.

This crisis is REAL if, for no other reason than at some point it will dawn on many of these people and their parents that there is NO JOB “out there” for the fruit of their loins and there. Their society has no use for them, and thus they have no “place” in it. For THEM, this is a CRISIS! A never-ending one.

Posted by OneOfTheSheep | Report as abusive

It’s a real crisis, and is not looking good any time soon. As a parent of a recent graduate with student debt, he is facing loan payments next month. Working in construction was not his plan with a new bachelors degree, but he must to pay down those loans. Also, starting to see reverse discrimination as all the interviews he has had are with older women. Finding out later on that a girl was picked to fill the position. It’s ironic that the old boys club was criticized by the feminists and now the tables have turned. Regardless trying weekly to find a real job with benefits is like looking for hens teeth. Some have even suggested leaving the US for better opportunity. This is what happens when big business buys their way into Congress’ and sells the “global economy theory” great for their profits but dam the American worker.

If this is not solved soon, kids are not going to go the college route, with only the rich being able to afford an education that is not marketable. Most kids in college today are being sold a bill of goods and come out to find themselves in low paying jobs and living in garages. The day of reckoning is coming to Americas colleges, charging what they do with little market ability. It saddens me to think our children will not live a better life then their parents. Very sad.

Posted by cheeze | Report as abusive

Link below…..Our young adults discouragement and break in momentum really concerns me. In far too many cases, in many ways, I feel it will permanently degrade their altered fates.

“Investopedia explains ‘Hysteresis’
In economics, hysteresis arises when a single disturbance affects the course of the economy. An example of hysteresis in economics is the delayed effects of unemployment. As unemployment increases, more people adjust to a lower standard of living. As they become accustomed to the lower standard of living, people may not be as determined to achieve the previously desired higher living standard. In addition, as more people become unemployed, it becomes more socially acceptable to be or remain unemployed. After the labor market returns to normal, some unemployed people may be disinterested in returning to the work force.”

http://www.investopedia.com/terms/h/hyst eresis.asp

Posted by SaveRMiddle | Report as abusive

The most marked recent change noticeable to me is an unwillingness on the part of employers to train new hires. There are so many technical specialties that it is difficult to possess knowledge in X software suite; though one may be familiar with it and knowledgeable in Y software suite. No matter; many bright and capable young people are turned away because even a week or two to get up to speed is too much. Employers complain about not being able to match talent with openings, but they are unwilling to make any commitment to a potential employee in order to address some very specific skill-set requirements. It’s a lose-lose, but companies can obviously get away with as the labor pool is so large. As the author points out, there are many fulfilling activities available to a person these days – they just don’t necessarily pay.

Posted by Nurgle | Report as abusive

I’m not sure this writer understands employment. It is a state whereby the person in question earns income. Opposed to living off someone else, the girl in the story working on an app and writing a book, is NOT employed. Duh…

Posted by agular17 | Report as abusive

It’s an odd opinion – without any opinion.

1) I absolutely believe that the term “unemployed” must include people at all ages who dropped out from the workforce for whatever reason – and hence, the status of being “unemployed.”
As it is now, we see the distorted view from the economic, social and political points of views.

2) An old argument “update your skills” doesn’t work well in this depressing economy. Using the terms mentioned above, the number of vacant position for those who know X software suite is relatively small. Three months of a course to get this qualification and to switch to X software suite from Y software suite – and those open vacancies are not in existence any longer.

For many people, it’s a mad race for obtaining skills/qualifications/degrees. You get it – and it turns out the opportunities evaporated!

There are no simple answers here. None. Nill.

Posted by OUTPOST2012.NET | Report as abusive

I don’t know your background is, but it obviously is not economics. First, a 25-year-old woman who drops out of the labor market to write a book is not unemployed, and not counted among the unemployed. To be counted, and included in the unemployment rate, you have to be actively looking for work.

Second, maybe your kids can live at home without a job, but mine cannot and would not. They have taken any job they could get, and were not shy about job hopping. They were employed.

Third, it is well established that college graduates who cannot enter their preferred profession immediately will make substantially less, over their careers, than those who find work in their field right away. And the number of college graduates who cannot find work in their field is the largest it has ever been. It is clearly a crisis, not only for them, but for our economy, which also suffers when graduates underperform.

Please confine your columns to subjects in which you have some expertise.

Posted by Jeff9207 | Report as abusive

The writer asks: “But do these high numbers represent a global labor market crisis that imperils future growth, as the headlines warn?”
First of all it is the other way around, it is the “growth crisis” that imperils youth employment and the future prospects of the young generation.
Besides I agree it is in truth not a crisis but a system failure, since constant quantitative growth is unnatural, it is a “human illusion” which is unsustainable in the closed and finite natural system we exist in.
Probably over 90% of everything we produce and consume today is artificial, obsolete, not only unnecessary for a modern, healthy, natural lifestyle but it is harmful for human beings and the natural environment alike.
Thus it is not difficult to predict as the global economy starts to shrink as all unnecessary layers “peel off” in the process, the present unemployment figures are only the start, just a preview of the real picture that will emerge within a short time, not to mention the parallel technological advances making human workforce mostly obsolete.
It will be the greatest social challenge of each nation what to do with the masses that are basically “useless” as producers of goods, and since they will have to proper income they will become “useless” as consumers too.
The present “circus and bread will not work”, not everybody can be drugged with alcohol, reality TV shows, freely sold or even distributed “light drugs”.
People will need something useful to do, they will need to feel they have some role to play in human society.
Treating this very unpredictable and volatile social tension will be the biggest challenge ahead of humanity all over the globe very soon.

Posted by ZGHerm | Report as abusive

Oh, please, every Baby Boomer I know who graduated after 1975 had student loan debt and couldn’t get a job in their chosen field. Most had also worked to put themselves through college, leaving home at 17 never to return. (Many kicked out for simply growing their hair long.) We worked crappy jobs in restaurants, ate pots of cheap spaghetti, drove beater VWs or rode bikes to those crappy jobs. It lasted into the still not very great 1980s. There have never been so many opportunities for youth as 1990 through today, so many that an entire generation takes them for granted, especially the males who still seem convinced the world revolves around them. Note that unemployment rates are lower for female youth because they get it: however you have to do it, and even it isn’t doesn’t carry a cool cache… you finish high school and go to some form of higher education, even if it’s a junior college for an associate degree that will get your foot in the door and pay the rent.

Posted by timebandit | Report as abusive

This author is not very bright.
It is a shame they permit people like this
to post.

Let us take a simple look at repercussion.

1. Let us put job skill aside for the moment, Socially and maturity, one loses interaction and growth.

2. One then often turns to drugs or other ‘entertainment’ to fill the ‘void’.

3. Once one is not employed for a number of years, say 16 – 25 – , they then have no resume, no experience, and lose common skill. .
.
They are not competitive verse the new graduate who is updated on the latest technology, technology has past them by.

4. One is often then in debt, as such their opportunity to move, change location to meet demand of a job or even own an automobile for commute, is then limited.

5. One then is often stuck in a minimum wage occupation with limited chance for improvement. An indentured servant for life ‘serving you coffee or waiting on your table ‘.

- Yes good for corporations.

NOT GOOD for a family. How will this individual
ever afford a home, a car, a child.

And thus the cycle continues.

.

. “”" Take a 25-year-old woman I met recently, who left her job to develop an app, work on a live-stream talk show, and write a book. “”"”

One out of 20 million shot her book will ever produce
any significant profit.

. You may feel better for telling her to keep going
and feeding false promises, but 10 years from now unless
married, she will likely be on the Government dole and I
will be paying for her children, unless of course her
parents will – hopefully her parents will.

. I would tell her to volunteer, intern for free,
pad her resume, do whatever she can to get a job.

. If your 25 and leaving your job to write a book
that is a 1 on 50 million odd, should probably instead
go to the deli and buy a lottery ticket every day.
Probably better odds.

.
.
..

Posted by Alexaisback | Report as abusive

.
.
.

Zachary Karabell is indeed a fool.

This is not meant as an insult, but only a simple
statement of fact. This gentleman may be handsome,
polite, nice, educated,

but this person has apparently zero common sense
and zero experience in ‘ real life ‘ .

I have but ONE question.

How on earth does he have the ability to post here ?

. Who is in charge of Reuters, and thought

‘ yes here is a good article ‘ ????

.
.
.

.
.
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.
.

Posted by Alexaisback | Report as abusive

Zachary Karabell

Educated at Columbia, Oxford, and Harvard.

.
. I will bet you Zachary never had a meaningful job in high school, or college,

never has a single callous on his hands,

Zachary never had a student loan that he was concerned with

and that Zachary’s parents paid not only his education

but contributed to his apartment and cost of living until he was 25.

- How bout it Zachary, bet I am correct.

.

My bet, Zachary fails to see others are not as privileged as he,
and therefore fails to have any understanding of what our youth face in terms of competition and debt.
.

It is a shame the high and mighty think they have even basic knowledge to tell the remainder of the world how to live or what is important.

.

. what a shame.

.

Posted by Alexaisback | Report as abusive

Your opinion / article is US centric. Whilst young Americans may have access to an employment market based on their choice and improvement in flexibility and skills, many European youth do not. Those that have University degrees and those who do not face a lack of opportunities ( especially in the south of Europe where rates top 40 percent!). Even in Germany and Denmark with their apprenticeship approaches, the unemployment rates are higher when one takes into account lack of / minimal payment for those in apprenticeships especially focused in industries where there will be no need for those workers tomorrow ( given lower costs to the east).

If the next generation goes a decade or more without meaningful skills development, economic contribution in terms of savings and expenditure, as well as delays formation of households, our future as societies will most certainly not be bright given the interdependence brought about by world trade. Furthermore, a generation of youth depending on government stipends will do nothing to help productivity of those societies and government financial budgets in the future.

Posted by WonderfulWorld | Report as abusive

I agree with @ZGHerm and @WonderfulWorld. This is not a simple temporary youth crisis. It is a systemic failure of the current western capitalistic system. We must move away form the mega global corporate growth based system. It is only surviving on junk growth now. Real growth only exists in the emerging nations that are already spurring the glut of investments from the western global financial system. Over the next decade this will become more apparent. Though the financial system will likely begin to blame China as they follow their policies set forth in the recent 3rd plenum and the world currency reserve status slips from our grasp. This will give the western media a new enemy to blame the failures of the economic system on. But blame will not provide jobs. We should begin planning for new social systems to handle have a population with a real unemployment rate of around 40% by the end of the decade. I would bet we reach 50-60% by 2030. Denial must give way to rational thinking sooner or later.

Posted by tmc | Report as abusive

RE:
“Because there was no social safety net, people worked in order to generate essentials such as food, clothing and shelter. You had to work to survive, and there was always work to be done and need for bodies to do it.”
AND
“This type of unemployment is one of choice — rational, legitimate choice…”
…..
Just two real-life stories that I heard from my circle of friends in the last couple months:
1. A young person with Bachelor of Arts from one of the top notch US private arts colleges applied for an admin. position in NYC; got a rejection letter saying that they received more than 300 applications within the first five days.
2. A software company in Upstate NY has been struggling for two months to fill a gainful engineering position with specialization in one of IBM software tools.

Posted by UauS | Report as abusive

As others have already pointed out, this article was written by someone with very limited real-world experience.

Now retired, and relatively comfortable – my wife and I split our time between two fully-paid-for homes, have 3 good cars bought with cash, etc – we worked hard to get where we are. I had my own business, starting at about age 13.

One of our sons, who has co-founded a couple of very successful companies, worked regularly (part-time) from the age of 14.

Other than a few ballyhooed examples, success comes from work, persistence, and the other time-proven ingredients. Our centralized government, excessive coddling, excessive regulations, etc are dooming our future citizens to a life of dependence and lack of success.

Posted by Beefbone | Report as abusive

Youth “determined not to settle” – too many believe that because they have a degree, they should start at the top or in the middle, at the least. No more working the way up through the ranks, just give them the high-paying, big office jobs without the years of experience it takes to know the ins and outs, the successful or disastrous plans and programs.

Not all young people feel entitled due to their degrees and are willing to start from the ground up. However, more are finding out that in today’s economy they may have little choice and will have to start with low-paying jobs.

Posted by AZreb | Report as abusive