By Keith Hall
In 2008, young Americans voted in their largest numbers in a presidential election since the Vietnam War. Recently, however, there has been considerable speculation about whether they will show up at the polls in November. When you look at how badly they’re faring in today’s economy, they could scarcely choose a worse time to stay home.
On Wednesday, President Obama and Mitt Romney swapped barbs over unemployment during their first presidential debate. For young people, the truth is even uglier than either would want to admit.
Americans who enter the workforce during a recession always face an uphill battle, but this generation is worse off than most. According to the Bureau of Labor Statistics, for 25- to 54-year-olds – the bulk of the workforce – the unemployment rate is 7.1 percent. But for 18- to 24-year-olds, the rate is more than twice that, at 15.7 percent.
Even after these young Americans find work, they will remain at a disadvantage for decades. A study published in January on Canadian college graduates by economists Philip Oreopoulos, Till von Wachter and Andrew Heisz shows that in economies like ours, during normal times the average person sees 70 percent of his or her career wage growth in the first 10 years on the job.
Further, they found that those lucky enough to get a job but unlucky enough to graduate during a recession will take a 9 percent hit on pay right off the bat. It usually takes as long as a decade to climb out of that hole.
And with average hourly wage growth at an all-time low over the last year, hard times are taking a toll on all those who manage to find work. According to the Bureau of Labor Statistics, wage growth for non-supervisors in August was just 1.3 percent, below the current rate of inflation. That number typically stands at more than 3 percent a year, and in good economic times, as high as 4 percent.
These numbers could mean real problems for all Americans, but particularly for the next generation. Maybe tomorrow’s young married couples will decide they don’t have enough money to have a child, or to raise a second or third one. Maybe day-care costs them so much, they decide it makes more sense for a spouse to stay home and care for the kids than to work. One-income families would have lower incomes, longer commutes and lower standards of living.
It’s not just lost income at stake but also lost wealth. For families in which the head of household is younger than 35, the Federal Reserve finds that household net worth has been whipsawed, falling by an average of $45,000 – or about 41 percent – since 2007.
By now, most Americans know times are hard. They may have lost their jobs or seen friends or family members lose theirs. But they might not recognize that our unemployment figures dramatically understate the severity of the situation. Many Americans are underemployed, or are unemployed and no longer actively looking for jobs, and the jobs reports don’t show them.
A better measure of employment is the employment ratio the share of the working-age population that has a job. That figure bottomed out in late 2009, when only 58.2 percent of working-age Americans had jobs, according to the Bureau of Labor Statistics. Today, three years into the recovery, that number has barely budged: 58.3 percent.
Here too things look much worse for the young. For 25- to 54-year-olds, workforce participation has fallen by 1.6 percent since the start of the recession in 2007. But for 18- to 24-year-olds, participation has fallen by 5.4 percent.
Since the recession began, only one demographic group has seen an increase in its employment rates: Americans 55 and older. Many baby boomers watched their retirement savings tank in their last years before retirement and are working longer or have gone back to work to make up the difference.
In some workplaces, this is probably great news: more senior employees with more institutional knowledge and more experience can mean more productivity. But it does no favors for workers with less experience, whom the boomers outrank and displace from the job force.
Americans between 25 and 54 years old are much more likely to vote in presidential elections than younger adults. But though they’ll probably decide who occupies the Oval Office in January and who sits in Congress, it’s the young who have much more at stake.
Keith Hall, a senior research fellow at the Mercatus Center at George Mason University, was chief economist for the White House Council of Economic Advisors from 2005 to 2008 and commissioner of the Bureau of Labor Statistics from 2008 until this year. He wrote this for the Los Angeles Times.