In the context of the global economic crisis, the problem of the employment of the population becomes urgent. The unemployment rate is an economic index, one of the main indicators in the labor market. It reflects the relationship between unemployed citizens in society and those who have regular jobs. This phenomenon is highly dependent on economic activity; moreover, economic growth and unemployment can be seen as two sides of the same coin. During a period when economic activity is high, total output rises, and more workers are required to produce more goods and services. When it is low, companies cut jobs, and unemployment rises (Bell & Blanchflower, 2020). In this sense, this phenomenon has an anti-cyclical nature, which means that the unemployment rate rises when the rate of economic growth decreases, and vice versa. This paper focuses on unemployment rates among young college graduates and analyzes the problems of youth employment in the United States.
The study of the scale and characteristics of the spread of unemployment in the United States has been carried out regularly since the presidency of Franklin Roosevelt. In 2020, US unemployment rates hit an all-time high. The US Bureau of Labor Statistics announced that in April 2020, it increased by 10.3% to 14.7%, and this is the highest rate and the biggest raise starting from 1948 (US Bureau of Labor Statistics, February 2020). The number of unemployed US citizens rose by 15.9 to 23.1 million in April 2020 (US Bureau of Labor Statistics, May 2020). The rapid increase in these indicators represents the influence of COVID-19 and the attempts to deal with it.
It is no coincidence that during the worst economic crisis since the Great Depression, the global economy is experiencing the worst unemployment situation. How sensitive the unemployment rate is concerning economic growth depends on several factors, primarily on the conditions of the labor market and the norms governing it. The strength of this relationship for the US economy can be assessed, in particular, using Okun’s law, which states that a 1% decrease in unemployment leads to a 3% percent increase in output (Bell & Blanchflower, 2020). In the United States, the unemployment response is attributed to shrinking production, institutional differences, the nature of the crisis, and policies. The sharp increases in the US unemployment can be attributed primarily to the impact of production downturns, financial turmoil, and the impact housing price downturns. Severe financial shocks result in more workers being laid off by companies that rely more on external funding than in recessions in the absence of such shocks.
Unemployment rates remain significantly higher among the under-educated or low-skilled people, Black and Hispanic communities, as well as the youngest labor market participants (Bell & Blanchflower, 2020). Young college graduates’ unemployment tends to be higher than in other age groups. The problem is not only that the youth unemployment rates significantly and constantly exceed this indicator for other age groups of the population. Young people are characterized by longer periods of job search, instability of employment, and difficulties in finding jobs that are adequate to the received professional training. All of these phenomena are exacerbated by the often encountered mismatch in employment with the much more optimistic expectations of those who start their career.
The analysis is based on data from the US Bureau of Labor Statistics and the International Labor Organization. According to the first statistics, young people aged 16-24 at the beginning of this decade accounted for about 13.5% of the American workforce (US Bureau of Labor Statistics, February 2020). Moreover, in the period 1990–2010, there was a decrease in the share of youth in the labor force from 17.9% in 1990 to 15.8% in 2000, and 13.6% in 2010 (US Bureau of Labor Statistics, February 2020). This trend continues in 2020, and the share of 16-24-year-old Americans make up only 11.2% of the total country’s workforce (US Bureau of Labor Statistics, May 2020). The problems of finding a job in this age group remain in the conditions of economic growth as well.
A sharp increase in the number of unemployed and the persistence of a high level of unemployment in 2009 and early 2013 put the task of creating new jobs. In early 2013, the national average unemployment rate among 16-year-old and older Americans were still 1.9 times higher than in 2000 (Bell & Blanchflower, 2020). In 2016, with an average unemployment rate of 4.9%, for 16-19-year-old citizens, it was 16.0%, and for 20-24-year-old people—8.7% (Bell & Blanchflower, 2020). The highest unemployment rate was noted among black youth aged 16-19, which was 31.2% (Bell & Blanchflower, 2020). In subsequent years, the unemployment rate fell substantially across all age groups of Americans, but among young people, it remained nearly three times higher than among Americans of other ages.
It should also be noted that unemployment rates in this group decreased due to jobs that are less paid than expected. Among 16-19-year-old employees with hourly wages, about 15% receive minimal wages, compared with 3% of workers aged 25 and older (US Bureau of Labor Statistics, February 2020). The lack of other sources of income for a significant part of young college graduates makes them often agree to work in an industry that does not correspond to their professional training. Therefore, there is a growing number of those who are not satisfied with their employment. Openness to new opportunities and career growth is generally a positive phenomenon, but it is often accompanied by dissatisfaction with the workplace, which has to be taken for lack of better.
In 2020, due to the COVID-2019 outbreak, it became three times more difficult for young college graduates to get employed. When the crisis started, employers began to optimize the personnel of their companies. In April 2020, the number of unemployed young college graduates increased to 26.9%. However, from April to July 2020, the employment rates of young 16-24-year-old Americans increased by 4.4 to 17.5 million (US Bureau of Labor Statistics, August 2020). According to the US Bureau of Labor Statistics, in July 2020, 46.7% of young people were employed, in comparison with 56.2% in July 2019. The youth unemployment rate was 18.5% in July 2020 in comparison with 26.9% in April 2020 (US Bureau of Labor Statistics, August 2020). In the post-crisis period, the rate tends to decline, and a positive tendency can be seen, but it is still twice as high as in 2019. Therefore, the problem of youth unemployment is one of the key ones.
These data indicate that these problems today are not so much of an opportunistic nature as of an established structural nature, which is confirmed by their consideration over a long time. The vulnerability of this age group can be observed in the United States despite the overall improvement in the economic situation in the period from 2012 to 2015 (Schoon & Bynner, 2019). Moreover, the facts show that job opportunities increase with education level. According to surveys presented in a report by the International Labor Organization, young people with a university degree find work on average three times faster than those without a certain degree.
Representatives of the youngest age group experience the greatest difficulties in finding a job. A similar situation persists not only in the United States, but in most countries, and is explained, first of all, by the lack of work experience among young people of this age. A study of the sectoral characteristics of youth employment in the United States shows that Americans aged 16-24 are employed mainly in the private non-agricultural sector (Schoon & Bynner, 2019). The largest number of the employed youth work in the leisure and hospitality industry, retail trade, as well as education and health services. These three sectors account for 55% of all employed people aged 16-24, and the manufacturing industry takes 6.5% (Schoon & Bynner, 2019). This industry employs almost as many persons of a specified age as the public sector. This distribution of employment reflects a long-term trend towards the growth in the employment of young college graduates in the service sector.
Among the reasons why young people remain in a vulnerable position in the labor market is the lack of information about their professional skills, which makes them less preferred labor force when hiring. The education received does not always coincide with the requirements of the employer, which are changing faster than curricula and programs can change (Schoon & Bynner, 2019). The lack of experience, the acquisition of which requires not only time but also the corresponding costs for both the employee and the employer is also a significant reason.
The problem of the transition from college to work is complex and covers many issues related to forecasting the labor market, vocational guidance, as well as the information support of applicants about job opportunities. Along with the traditional long-term measures to adapt the workforce to the consequences of globalization and the information revolution, the United States should implement additional measures for vocational training and retraining, as well as assistance in finding a job (Schoon & Bynner, 2019). These challenges are entrusted to the Employment and Training Administration of the US Department of Labor, which regularly works with state authorities to promote employment for young college graduates.
Youth employment policy in the United States, as in many other countries, is one of the most important areas of labor policy. Solving this issue is important both for implementing the labor potential of young college graduates and economic growth. According to the International Labor Organization, if the level of youth unemployment in the world could be halved, then world GDP would increase to 7% (US Bureau of Labor Statistics, February 2020). The American experience shows that increasing the competitiveness of young people in the labor market is the main solution to this problem. However, it requires significant efforts and investments in vocational training.
The problems of incomplete and informal employment of youth will be no less urgent today and in the coming years. For a growing proportion of young people who have found work, the quality of jobs is below expectations. Esides, when they lose their jobs, they remain unemployed for a long time (Schoon & Bynner, 2019). Loss of hope for employment and a decrease in the motivation to find a job among young people for months is a problem in both developed and developing countries. Therefore, on the agenda, there are issues of developing new forms of stimulating youth participation in the labor force and the instruments of social protection of this age group.
The labor market plays an important role since it affects both productivity and growth rates, as well as many other economic parameters. When the global economy has entered a new era, the creation of new jobs does not keep pace with the growth of the labor force. In the United States, young people remain one of the most vulnerable groups in the labor market. With the resumption of economic growth, the level of youth unemployment falls but remains higher than in other age groups of labor market participants. In the United States, the unemployment rate among young college graduates is about three times higher than the average. The long-term downward trend in the role of young people in the US workforce is taking place against the backdrop of persistent employment problems for the youngest working-age Americans. To solve this problem, the Employment and Training Administration of the US Department of Labor should make efforts to promote the labor potential of college graduates. This will be beneficial for both young people and the growth of the country’s economy.
References
Bell, D. N., & Blanchflower, D. G. (2020). US and UK labour markets before and during the Covid-19 crash. National Institute Economic Review, 252, 52-69.
Schoon, I., & Bynner, J. (2019). Young people and the Great Recession: Variations in the school-to-work transition in Europe and the United States. Longitudinal and Life Course Studies, 10(2), 153-173.
US Bureau of Labor Statistics. Unemployment rate 2.0 percent for college grads, 3.8 percent for high school grads in January 2020. TED: The Economics Daily.
US Bureau of Labor Statistics. Unemployment rate rises to record high 14.7 percent in April 2020. TED: The Economics Daily.
US Bureau of Labor Statistics. Employment and unemployment among youth – Summer 2020. Economic News Release. Web.