By: J. Brian Charles
Young adults face a grim labor market, according to recent reports that show new entrants have little access to valuable work experience.
And the bleak job picture for new entrants into the labor force is costing states like Connecticut millions of dollars in payroll taxes and social safety net benefits.
For the first time in more than 60 years, the job market shrank over the course of the last decade. The scarcity of available jobs largely affected new entrants into the workforce. The unemployment rate for 18- to 34-year-old job seekers remained higher than 10 percent for 70 consecutive months between early 2008 and the last quarter of 2013, according to an analysis of labor statistics done by Young Invincibles, a group advocating for Millennials. And according to the Brookings Institution, youth job market participation fell dramatically.
“Youth don’t currently get much experience when they get out of college. You might be lucky if you get an internship,” said Konrad Mugglestone, a research fellow with Young Invincibles and the co-author of “In This Together: The Hidden Cost of Youth Unemployment,” a new report detailing the challenges faced by younger job hunters.
“When the economy is down, if you have a choice between someone with zero experience or more years of experience, you take the person with more experience,” Mugglestone said.
Young Invincibles formed in 2009 to offer Millennials a voice in the debate over health care reform. The groups has since grown, and now is looking at the effects of the economic downturn on young adults.
Economists contend that young people’s job prospects often are suppressed by downward pressure on the labor market, a residual effect of the economic calamity of the last decade.
“There is considerable less churn in the labor market,” said Connecticut-based economist Don Klepper-Smith. “Some people are rebuilding 401(k)s (retirement funds) that got hit. There are less job opportunities because older workers are staying at their jobs longer.”
For young workers, not being able to get a toehold in the economy has long-term effects.
“The more of an employment record someone has and the greater their connectivity to the job market, the better they are going to do in life going forward,” said Pete Gioia, economist with the Connecticut Business and Industry Association.
According to the Center for American Progress, a 22-year-old man who is unemployed for six months will earn 8 percent less at age 23, and often can expect to earn $22,000 less over the course of the next decade.
Ultimately, the flagging youth labor market cost states in lost revenue and a slight increase in spending on safety net supports. Between 2010 and 2012, unemployed adults between the age of 18 and 34 cost the state of Connecticut $26,984,756.81, in mostly lost revenue and some additional social service spending, according to Young Invincible’s analysis of labor statistics.
Each Connecticut taxpayer had to chip in additional $68.82 to account for the revenues lost to youth unemployment, the seventh-highest rate in the country, according to the youth advocacy group’s study of labor statistics and the net results of youth unemployment.
The recent move by Gov. Dannel P. Malloy to push the state’s minimum wage to $10.10 by 2017 may have deleterious effects on low-wage workers and by extension the employment prospects on young adults.
“Maybe Walmart can absorb this, but a small pizza chain or a regional restaurant can’t deal with this,” Gioia said.
According to a report by the Congressional Budget Office, raising the minimum wage to $10.10 would lift 900,000 Americans out of poverty, but could cost the economy 1 million jobs.
Higher labor costs likely will drive companies, even in the service industry, to automate, according to Gioia.
“Maybe we can get by with half the waitresses by putting tablets on the tables, and allowing customers to order their food,” he said.
The current credit market, where interest rates remain low, may speed the pace of automation.
“First, I think companies will begin to take longer-term views on what can and can’t be automated. If you are going to look at automation, the next 18 months are when you are going to take a serious look at automating because of the cost and availability of credit,” he said.
However, labor advocates say the business community continues to cry wolf about the effects of increased labor costs and the ability to automate what are often service industry jobs.
“We hear the same apocalyptic scenario every time we ask businesses for similar concessions,” said Taylor Leake, spokesman for the Connecticut Working Families Party, which pushed hard for the minimum wage increase.
Leake acknowledges the increasing trend of automation, but doesn’t expect companies to move swiftly to automate.