Want to Solve Youth Unemployment? Give Us the Skills to Pay the Bills

A report released in April of this year by the public policy think tank Demos used 2012 Department of Labor data to analyze the future labor prospects for young Americans. Their analysis discovered that the late 2000s financial crisis exacerbated prior human-capital-development deficiencies, contributed to increased income inequality, and may lead to many long-lasting negative economic and social effects. 

High youth unemployment isn't just a problem here in the United States. Youth around the world are unwillingly delaying adulthood because of current global economic conditions. The financial crisis exacerbated the symptoms of unfriendly youth-employment policies practiced by some countries, such Japan. Job contractions caused educated young adults to increasingly compete for low-paying jobs with more experienced professionals, forcing many to accept positions that do not even require a college degree in order to just make ends meet. Current youth unemployment and underemployment do not only have short-run negative economic effects, they may affect future income and productivity levels, as young workers do not receive the skills, training, and extra income they would have received if they were put to more efficient use. If policymakers, businesses, and educators do not effectively respond to current youth unemployment by improving skills training and employment opportunities for teenagers and young adults, the country will become more economically and socially divided and continually lose productive capacity. 

The rise of U.S. unemployment in the late 2000s coincided with a seemingly proportional rise in youth unemployment. The rise in overall unemployment suggests a slacker labor market where older, more experienced workers compete with less experienced young adults. Millions of individuals lost their jobs during the last recession and were forced to accept positions that payed drastically less than their previous jobs. Its not surprising that young Americans with college degrees are increasingly working jobs that do not require post-secondary degrees or are delaying the start of their career until the market improves. If the labor market is bad for college graduates, less educated young adults stand to face an even harder time finding employment. Sustained unemployment has negative effects on a young worker's future earnings and costs society in the form of lost production, higher welfare demand, and higher crime rates. 

Skills development has been seen as an important tool for addressing youth employment. With young Americans graduating from college in larger numbers, wages have generally remained low following the end of the early 2000s tech bubble, which suggests wages are being suppressed by an excess of college-educated labor. The fact that college graduates from different majors have diverging rates of unemployment and that the country faces labor shortages in certain high-paying key industries despite increasing graduation rates suggests inefficient human capital development. Germany is noted as a country that adequately facilitates skill development for its youth, where a long tradition of vocational education and apprenticeships have helped keep youth unemployment down while its European neighbors with no such training structures in place suffer higher rates of youth unemployment. Management professor at the Wharton School of Business Peter Cappelli also noted that employers also spend less time and money training their workers, which suggests employers favor replacing workers over investing in them. 

The youth unemployment problem requires a concerted effort between educators, businesses, and policymakers to correct. Germany's emphasis on vocational training serves as a good model for the U.S. More young Americans need to be given the opportunity to develop vocational skills before they graduate high school. Employers should increasingly partner with high schools, trade schools, and universities to recruit, train, and hire young adults. There needs to be a better job of pinpointing industries with labor shortages and actively developing the human capital needed to fill these positions. If young adults are more aware of which industries have labor shortages, the number of young Americans graduating from college in oversaturated disciplines might self correct. Policymakers can aid in this process by offering businesses incentives to hire and train young workers through tax breaks and similar programs. The current employment situation for young adults is the natural result of a loose labor market and inefficient human capital development. In order to address to these problems action must now be taken to put young workers to more efficient use, and better prepare future generations for competition in the labor market.