What Is Happening to Youth Employment Rates?

November 1, 2004

As part of its projections of the federal budget and the economy, the Congressional
Budget Office (CBO) projects the size of the labor force over a 10-year period. Such projections
depend, in part, on the employment picture for youth. For male youth, the trend in the
employment rate is downward, but for females, it is upward.
This paper examines trends in the youth labor market from 1979 to 2000 and the changes
during the labor market downturn between 2000 and 2003. It also considers factors that may
account for the trends, such as an increase in school enrollment rates, and presents information
on the percentage of youth who are neither enrolled in school nor employed. In keeping
with CBO?s mandate to provide objective, impartial analysis, this paper makes no recommendations.
Nabeel Alsalam of CBO?s Health and Human Resources Division prepared this paper.
Lawrence Katz of Harvard University read a draft of the paper and made valuable suggestions.
Within CBO, David Brauer, Paul Cullinan, Arlene Holen, Elizabeth Robinson, Christi
Hawley Sadoti, Ralph Smith, and Bruce Vavrichek provided comments. Meena Fernandes
and Peter Richmond provided research assistance.
John Skeen edited the paper, and Loretta Lettner proofread it. Maureen Costantino designed
the cover and formatted the paper for publication. Lenny Skutnik produced the printed copies,
and Annette Kalicki produced the electronic versions for CBO?s Web site (www.cbo.gov).
Douglas Holtz-Eakin
Director
November 2004

Introduction and Summary 1
School Enrollment Rates 3
Trends in School Enrollment from 1979 to 2003 3
Some Reasons for the Increases in School
Enrollment Rates 3
Trends in the Employment of Out-of-School and
In-School Youth, 1979 to 2000 5
Trends in Employment and Labor Force Participation
Among Out-of-School Youth 5
Trends in the Work Behavior of Students 6
Changes in the Labor Markets Where Youth Work 6
Indicators of Shifting Job Opportunities: Unemployment
and Wages 7
Trends in the Sectoral Distribution of Employment and
Job Opportunities for Youth 8
Growth in the Competition for Youth in the Labor
Market: Unskilled Immigrants 9
Youth Neither Enrolled in School Nor Working 9
The Cyclical Downturn in the Employment of Youth
from 2000 to 2003 11
CONTENTS
vi DISABILITY AND RETIREMENT: THE EARLY EXIT OF BABY BOOMERS FROM THE LABOR FORCE
Tables
1. School Enrollment Rates for Youth, by Age, Sex, and Education Level,
1979 to 2003 5
2. Mean Annual Earnings of Workers Age 18 or Older, by Sex and
Educational Attainment, 1979 to 2002 6
3. Employment Rates for Youth, by Age, Sex, and School Enrollment
Status, 1979 to 2003 8
4. Labor Force Participation Rates for Out-of-School Youth,
by Age and Sex, 1979 to 2003 9
5. School Enrollment and Employment Status of Youth,
by Age and Sex, 1979 to 2003 10
6. Youth Who Are Out of School and Not Working,
by Age and Sex, 1980 to 2000 11
Figures
1. Employment Rates for Youth, by Sex and Age, 1979 to 2003 1
2. Employment Rates for Teenagers, by Sex and Status of School
Enrollment, 1979 and 2000 2
3. Employment Rates for Young Adults, by Sex and Status of School
Enrollment, 1979 and 2000 2
4. School Enrollment Rates for Teenagers in October and July
of Each Year, 1979 to 2003 7
Box
1. The Transition from School to Work 4
What is Happening to Youth Employment Rates?
Introduction and Summary
Most people get their first job when they are a teenager.
Although such jobs are likely to be low paying and to require
little expertise, they provide important opportunities
for young people to pick up practical job skills?
coming to work on time, taking responsibility for assigned
tasks, and so forth. Because early work experience
is an important part of the preparation for or the launch
of a productive work life, it can affect not only young
people?s future but also the larger economy.
Over the past few decades, trends in the percentage of
youth who are employed have been quite different depending
on whether they are male or female and on how
old they are (see Figure 1). For instance, between the peak
labor market years of 1979 and 2000, the portion of 16-
to 19-year-old males with jobs fell from 49 percent to 44
percent, but the portion of females that age with jobs was
unchanged, at 44 percent. For 20- to 24-year-old men,
the employment rate fell from 79 percent to 77 percent,
but for women that age, it rose from 62 percent to 69
percent.
What is behind the trends in youth employment? Increasing
school enrollment, in particular, puts downward pressure
on youth employment overall, because young people
who are in school are much less likely to have jobs than
are those who are not in school (37 percent versus 67 percent
among teenage males in 2000, for example). School
enrollment rates for both male and female youth increased
over the 1979-2000 period.
Half of the overall decline in the employment of teenage
males between 1979 and 2000 is attributable to a fall
from 76 percent to 67 percent in the employment rate for
those who were out of school (see Figure 2). Because that
fall occurred between two peak years in the labor market,
it cannot be attributed to a cyclical downturn.
Indications are that the drop resulted from both a reduction
in male teens? availability for work and a lessening
Figure 1.
Employment Rates for Youth, by Sex
and Age, 1979 to 2003
(Percentage of the population)
Source: Congressional Budget Office based on the Census
Bureau?s October Current Population Surveys.
Note: The figure covers the civilian noninstitutional population,
which comprises people who are 16 years of age or older
and who do not reside in institutions (for example, penal
institutions and mental facilities) and who are not on active
duty in the armed forces.
of the job opportunities for them. First, as the percentage
of male teens with jobs went down over the period, the
percentage actively looking for work did not go up.
Meanwhile, the federal minimum wage adjusted for inflation
fell over much of the period and was significantly
lower in 2000 than it was in 1979?and thus posed less
of a potential barrier to the creation of low-wage jobs.
That no more teens were actively looking for work despite
the easing of that potential barrier suggests that
1979 1989 2000 2003
0
30
40
50
60
70
80
90
Males, Ages 20 to 24
Females, Ages 20 to 24
Males, Ages 16 to 19
Females, Ages 16 to 19
2 WHAT IS HAPPENING TO YOUTH EMPLOYMENT RATES?
Figure 2.
Employment Rates for Teenagers, by
Sex and Status of School Enrollment,
1979 and 2000
(Percentage of the population)
Source: Congressional Budget Office based on the Census
Bureau?s October Current Population Surveys.
Note: The figure includes the civilian noninstitutional population,
which is defined in a note accompanying Figure 1.
fewer teens were available for work or interested in the
available jobs. Second, although job opportunities for
male teens were hurt by shrinking employment at such
establishments as gasoline stations and grocery stores,
they were helped by growing employment at other establishments
employing youth. Nevertheless, the hourly
wages paid to male teens declined during the 1980s, indicating
that employers were less interested in hiring them,
probably because employers increasingly needed skilled
workers more than unskilled ones. Furthermore, an influx
of immigrants, predominantly males, who were unskilled
but eager to work may have provided employers
with an alternative to hiring male teens.
Among female teens, the unchanged employment rate
masks two offsetting trends. On the one hand, the employment
rate both for those out of school and for those
in school increased slightly over the period. On the other
Figure 3.
Employment Rates for Young Adults, by
Sex and Status of School
Enrollment, 1979 and 2000
(Percentage of the population)
Source: Congressional Budget Office based on the Census
Bureau?s October Current Population Surveys.
Note: The figure includes the civilian noninstitutional population,
which is defined in a note accompanying Figure 1.
hand, the increase in their school enrollment rate acted to
bring their overall employment rate down.
The trends among young men and women were similar
to those among teens. For example, among young men
ages 20 to 24, the employment rates for those who were
out of school also fell (see Figure 3). Among young
women that age, the increase in the employment rates
both for those still in school and for those out of school
dominated the employment-reducing effect of a large rise
in their school enrollment rate.
In 2000, 4 million youth ages 16 to 24 (60 percent of
them female) were neither in school nor working. About
1.7 million youth in that status had not finished high
school, and most were not even looking for work. Another
half million, mostly male, were in prisons and juvenile
and other institutions.
0
20
40
60
80
100
Out of School In School
Males Females
1979 2000 1979 2000
0
20
40
60
80
100
Out of School In School
Males Females
1979 2000 1979 2000
WHAT IS HAPPENING TO YOUTH EMPLOYMENT RATES? 3
The recent downturn in the labor market has reinforced
the trends that occurred over the 1979-2000 period. Between
2000 and 2003, the employment rate of teens fell
from 44 percent to 36 percent. Among young adults, the
employment rate fell from 72 percent to 68 percent. The
number of youth both out of school and not working
rose from 4 million to 4.8 million. Altogether, the fall in
employment among teens was larger than during past
downturns, although judging from past business cycles,
most of the loss will probably be recovered.
From a policy perspective, the trends in youth employment
and school enrollment provide a decidedly mixed
picture. The rising school enrollment rates for both males
and females and the increasing employment rates for females
are positive. However, the large secular decline in
the employment rate for out-of-school teenage males is
not, and the status of many youth who are neither in
school nor working raises questions about what they are
doing and what their prospects are for the future.
School Enrollment Rates
Youth who are enrolled in school are much less likely to
have a job or to be looking for a job than are youth who
are not in school. Furthermore, if in-school youth do
have a job, it is rarely a full-time job?in 2003, only 14
percent of teenage males who were employed and in
school worked full time, compared with 62 percent of
those who were employed and out of school. So any
change in the percentage of youth who are in school can
affect the overall percentage who are working and the
percentage who are working full time. (See Box 1 for a
discussion of the transition from school to work.)
Trends in School Enrollment from 1979 to 2003
School enrollment rates for young people have increased
substantially over the past 25 years. Between 1979 and
2003, they increased more for teenage females (14 percentage
points) than for teenage males (9 percentage
points) (see Table 1).
Predictably, school enrollment rates are lower for young
adults than for teenagers, because many young adults
have completed their education. However, over the 1979-
2003 period, enrollment rates for young adults increased
substantially?by over one-quarter for young adult males
and by three-quarters for young adult females.
Had employment rates among in-school and out-ofschool
teenage males remained the same as those in 1979,
the increases in their school enrollment rate between
1979 and 2003 would have reduced their overall employment
rate by 3.4 percentage points (see Table 1). For
other groups of youth, the effect of increased school enrollment
in reducing or limiting employment rates was
similar?2.8 percentage points for teenage females, 2.5
for young adult males, and 2.1 for young adult females.
School enrollment rates increased even more in the summer
months than they did during the school year. From
1985 to 2003, the enrollment rate of teens for the month
of July more than tripled, increasing from 10 percent to
33 percent (see Figure 4).1 It was 38 percent in July 2004.
For young adults, the rate doubled, increasing from 9
percent in 1985 to 19 percent in 2003 (17 percent
among males and 22 percent among females).
The teens enrolled during the summer months appear to
be similar to those enrolled during the school year. In
2003, the group was equally divided between males and
females, and the distributions of their ages and family incomes
were the same as those for teens enrolled during
the regular school year. However, summer students were
somewhat more likely to be enrolled in college than were
students enrolled during the regular school year (34 percent
versus 28 percent in 2003).
Some Reasons for the Increases in School
Enrollment Rates
The most likely reason for the growth in school enrollment
rates is the attraction of better job opportunities
available to those who complete more education.2 One
indication of those opportunities is the substantially
higher earnings of college graduates compared with those
of high school graduates of the same age. For example, in
2002, male college graduates (without an advanced degree)
earned 94 percent more than high school graduates
($64,000 versus $33,000) (see Table 2). That earnings
advantage grew from approximately 50 percent during
1. Since 1985, the Census Bureau has been measuring school enrollment
rates every month in the Current Population Survey. Before
then, school enrollment rates were measured only in October.
2. Orley Ashenfelter, Colm Harmon, and Hessel Oosterbeek, ?A
Review of Estimates of the Schooling/Earnings Relationship, with
Tests for Publication Bias,? Labour Economics, vol. 6, no. 4
(November 1999), pp. 453-470.
4 WHAT IS HAPPENING TO YOUTH EMPLOYMENT RATES?
the late 1970s. In addition to higher earnings, workers
with more education typically have jobs with better fringe
benefits and are less likely to be unemployed.3
However, higher school enrollment rates for youth have
not necessarily led to parallel increases in their educational
attainment. Among recent cohorts of young males,
no more are finishing high school, no more are getting
some postsecondary education, and no more are obtaining
a bachelor?s degree. Female youth, however, are completing
more education. More are finishing high school,
more are getting some postsecondary education, and
more are obtaining a bachelor?s degree.
A possible reason for higher school enrollment rates
among males without a parallel increase in their educational
attainment is that students are generally taking
longer to finish their education. At the high school level,
the longer time may reflect the stricter graduation standards
that many states have adopted since the early 1980s
in an effort to increase graduates? academic qualifications.
At the college level, students appear to be stretching out
their time as undergraduates. For example, among bachelor?s
degree recipients in 1992, 59 percent had completed
3. Henry S. Farber and Helen Levy, ?Recent Trends in Employer-
Sponsored Health Insurance Coverage: Are Bad Jobs Getting
Worse?? Journal of Health Economics, vol. 19, no. 1 (2000), pp.
93-119; and Janet Currie and Aaron Yelowitz, ?Health Insurance
and Less Skilled Workers,? in David Card and Rebecca M. Blank,
eds., Finding Jobs: Work and Welfare Reform (New York: Russell
Sage Foundation, 2000), pp. 233-261.
Box 1.
The Transition from School to Work
Between the ages of 16 and 24, young people generally
make the transition from full-time education to
full-time work. The vast majority of 16-year-olds are
enrolled in high school. Then, some young people
leave school, and the enrollment rates for young people
in high school and in college fall.
In 2003 (outside the summer months), the school
enrollment rate ranged from 97 percent for 16-yearolds
to 20 percent for 24-year-olds.1 However, very
few 16 year-olds work, especially full time. As young
people age, more and more take on jobs, and their
employment rates rise. In 2003, 2 percent of 16-
year-olds were employed full time and 19 percent,
part time. Among 24-year-old men, those employment
rates were 69 percent and 11 percent, respectively,
and among 24-year-old women, 55 percent
and 15 percent. That shift to employment reflects
not only leaving school to go to work but also students?
increasingly taking jobs while attending
school. Among 16 year-olds, the percentage of students
with jobs was 18 percent, whereas among 24-
year-old men and women, the percentages were 59
and 62, respectively.
When young people leave school, those who have attained
a higher level of education are more likely to
be employed. For example, in 2003, among 19-yearolds
who were out of school, 68 percent of those
who graduated from high school had jobs, compared
with 50 percent of those who had not graduated.
Among out-of-school 21-year-olds, 77 percent of
those with some college had jobs, compared with 70
percent of those with a high school diploma but no
time in college. Among out-of-school 24-year-olds,
88 percent of those with at least an associate?s degree
had jobs, compared with 81 percent with some time
in college but no degree. Greater educational attainment
leads to more job opportunities, and people
with a greater interest in work also are more likely to
invest in education.
1. All statistics apply to the civilian noninstitutional population.
As a point of reference, there are about 36 million 16-
to 24-year-olds in that population and roughly another million
in prison or in the military.
WHAT IS HAPPENING TO YOUTH EMPLOYMENT RATES? 5
Table 1.
School Enrollment Rates for Youth, by Age, Sex, and Education Level,
1979 to 2003
(Percentage of the population)
Source: Congressional Budget Office based on the Census Bureau's October Current Population Surveys.
Notes: The table covers the civilian noninstitutional population, which is defined in a note accompanying Figure 1.
Data are rounded to the nearest percent or 10th of 1 percent. Changes are calculated from unrounded data and then rounded.
a. The difference in 1979 between the employment rates of those in school and those out of school (see Table 3) times the change between
1979 and 2003 in their enrollment rate. For males ages 16 to 19, for example, this effect is (38-76) x (80-71) = -3.4 percentage points.
their degree within five years of starting, but by 2000,
that figure had slid to 55 percent.4
Trends in the Employment of Out-of-
School and In-School Youth, 1979 to
2000
To distinguish longer-term trends in behavior from shortterm
cyclical effects of downturns in the labor market,
most of the analysis in this paper is based on changes between
the peak labor market years of 1979 and 2000.5
The last section briefly examines the recent cyclical
downturn in the employment rate for teenagers between
2000 and 2003 and compares that with what happened
during earlier downturns.
Trends in Employment and Labor Force Participation
Among Out-of-School Youth
Fewer than a quarter of teens are not in school.6 Although
some of those teens may later continue their education,
most are probably beginning a career. Those early
experiences in the labor market can have lasting consequences
for their earnings.
1979 71 53 18 67 47 21 25 3 23 22 3 19
1982 71 52 19 69 47 22 26 2 24 23 2 22
1989 74 53 21 73 48 25 27 1 26 27 1 27
1992 79 58 21 77 51 26 31 1 30 32 1 32
2000 76 55 20 78 51 27 31 1 30 34 1 33
2003 80 60 20 81 56 26 33 1 31 39 1 37
1979 to 2000 4.4 2.3 2.1 10.9 4.6 6.3 5.6 -1.5 7.0 12.1 -1.6 13.7
2000 to 2003 4.5 4.6 -0.2 3.2 4.4 -1.2 1.8 0.2 1.6 4.5 0.4 4.2
Memorandum:
1979 to 2003
(Percentage points) -3.4 -2.8 -2.5 -2.1
Levels
High
Change in Enrollment Rate
Employment-Reducing Effect of the Change in the Enrollment Ratea
School College Levels School College Levels School College Levels School College
Females
Both High Both High Both Both High
Males Females
16- to 19-Year-Olds 20- to 24-Year-Olds
Males
4. U.S. Department of Education, National Center for Education
Statistics, A Descriptive Summary of 1999-2000 Bachelor?s Degree
Recipients 1 Year Later With an Analysis of Time to Degree, NCES
2003-165, (Washington, D.C.: Government Printing Office,
2003).
5. Measured using the annual average employment rate of teenagers.
There are slight differences in the timing of peak and trough
employment rates across demographic groups.
6. Among male teens, the figure was 24 percent in 2000, down from
29 percent in 1979 (see Table 1).
6 WHAT IS HAPPENING TO YOUTH EMPLOYMENT RATES?
Table 2.
Mean Annual Earnings of Workers Age 18 or Older, by Sex and Educational
Attainment, 1979 to 2002
(As a percentage of the earnings of high school graduates)
Source: U.S. Department of Commerce, Bureau of the Census, Current Population Surveys (March).
Note: Based on people in the civilian noninstitutional population with some earnings during the calendar year. That population is defined in a
note accompanying Figure 1.
Among out-of-school youth, between 1979 and 2000,
the percentage of teenage males who were employed fell
from 76 percent to 67 percent. For young adult males,
the employment rate fell more modestly, from 87 percent
to 85 percent (see Table 3). The decrease for teenage
males is very large, considering that it is measured between
two years with strong labor markets.7 As the percentage
of out-of-school teenage males who were employed
declined between 1979 and 2000, the percentage
actively looking for work did not rise. Thus, the labor
force participation rate (which is the sum of the percentage
employed and the percentage actively looking for
work) dropped as well?suggesting that, over time, more
out-of-school teenage males were either not available for
work, were not interested in taking the available jobs, or
had become discouraged about their job prospects and
stopped looking for work (see Table 4).
Among out-of-school teenage females, the percentage
employed rose from 58 percent to 60 percent, and among
young adult women, it rose from 65 percent to 72 percent
(see Table 3). Although teenage females and young
adult women who were out of school were less likely than
their male counterparts to have jobs, that gap got smaller.
Trends in the Work Behavior of Students
More than three-quarters of teenagers are students, and,
in 2000, almost 40 percent of teenage students worked
(averaging 20 hours a week), and more than 60 percent of
young adult students worked (averaging 28 hours a
week). Research has found no detrimental effects on educational
achievement when high school students make a
light to moderate commitment to working. Instead,
when people reach their mid-20s, their earnings and
fringe benefits are positively associated with the hours
they worked as seniors in high school.8
The tendency for students to work has generally risen
over past three decades. Among teenagers, most of that
increase occurred during the 1970s, so their employment
rate was about the same in 2000 as it was in 1979.
Among young adults, it increased throughout the period
(see Table 3).
Changes in the Labor Markets Where
Youth Work
Several sources of evidence on the job opportunities for
youth point both to a decline in teenage and young adult
males? availability for work and to a decline in the relative
job opportunities for males.
Less Than High Some Bachelor's Advanced Less Than High Some Bachelor's Advanced
High School School College Degree Degree High School School College Degree Degree
1979 74 100 103 150 184 72 100 107 141 189
1989 65 100 114 172 223 66 100 118 169 216
2000 67 100 119 199 280 66 100 119 184 258
2002 68 100 117 194 278 64 100 113 179 240
Men Women
7. The increasing enrollment rate for youth raises the question of
whether those teens with the poorest skills in the labor market are
becoming more concentrated in the shrinking out-of-school
group. However, one measure of preparation for the labor market?
the percentage who finished high school?did not fall
among out-of-school teens over the 1979-2000 period.
8. See Christopher J. Ruhm, ?Is High School Employment Consumption
or Investment?? Journal of Labor Economics, vol. 15, no.
4 (1997), pp. 735-776.
WHAT IS HAPPENING TO YOUTH EMPLOYMENT RATES? 7
Figure 4.
School Enrollment Rates for Teenagers
in October and July of Each Year,
1979 to 2003
Source: Congressional Budget Office based on the Census
Bureau?s monthly Current Population Surveys.
Notes: Before 1985, the Census Bureau measured school enrollment
rates only in October.
The figure includes the civilian noninstitutional population,
which is defined in a note to Figure 1.
As the percentage of male youth with jobs declined over
the 1979-2000 period, the percentage actively looking for
work did not go up. Meanwhile, the inflation-adjusted
minimum wage dropped substantially, which could have
led to the creation of more low-wage jobs. That no more
male youth were actively looking for a job despite the easing
of a potential barrier suggests that fewer were available
for work or interested in the available jobs.
The shifts in employment among sectors of the economy
are consistent with improving job opportunities for female
youth along with stagnant or declining opportunities
for their male counterparts. Also, the entry of many
unskilled immigrants into the labor force, two-thirds of
whom were male, probably reinforced the decline of job
opportunities for male as compared to female youth.
Overall, the declining hourly wages of youth suggest that
employers were less interested in hiring them, at least
during the 1980s, probably both because employers increasingly
needed more skilled workers and because immigrants
provided an alternative source of unskilled
workers.
Indicators of Shifting Job Opportunities: Unemployment
and Wages
Trends in the percentage of out-of-school male youth
who do not have a job but are actively looking for one do
not suggest a pattern of declining job opportunities. For
teenage males, the percentage actively looking for work
was about the same in 2000 as it was in 1979. Among
young adult males, it was just slightly lower. However,
those facts do not rule out the possibility that job opportunities
had declined and youth who wanted a job
stopped looking because they became discouraged about
their prospects for finding one. (Between 1979 and 2000,
the percentage of teenage females and young adult females
who were employed rose a few percentage points,
and the percentage actively looking for work fell a few
points, which is not a pattern that suggests declining job
opportunities.)
The trends in wages generally suggest that teenagers may
have lost job opportunities after 1979 but then regained
some of them by 2000. Between 1979 and 1985, the average
wages earned by youth (adjusted for inflation) fell
dramatically, and they did not rebound by the next peak
in the labor market, in 1989. Increases began in the later
part of the recovery of the 1990s, so by the next peak, in
2000, average wages for young workers had rebounded to
some extent. For example, among male teens, the average
hourly wage (in 2003 dollars) fell from about $8.90 in
1979 to $7.10 in 1985 and 1989, but then it increased to
about $7.50 in 2000.
Declining job opportunities for less skilled workers may
have been a part of the reason for the decline in teens?
wages in the early 1980s.9 Wages also fell for low-skilled
adult males during that period as developments in many
sectors of the economy led to an increase in the demand
1979 1982 1985 1988 1991 1994 1997 2000 2003
0
10
20
30
40
50
60
70
80
90
October of Each Year
July of Each Year
9. Much economic research concludes that the so-called skilledbiased
technical change is an important factor behind the increasing
earnings of college graduates relative to high school graduates.
Over time, firms have changed their methods for producing goods
and services in ways that have increased their demand for moreeducated
workers. See, for example, Lawrence Katz and Kevin
Murphy, ?Changes in Relative Wages, 1963-1987: Supply and
Demand Factors,? Quarterly Journal of Economics, vol. 107, no. 1
(1992), pp. 35-78.
8 WHAT IS HAPPENING TO YOUTH EMPLOYMENT RATES?
Table 3.
Employment Rates for Youth, by Age, Sex, and School Enrollment Status,
1979 to 2003
(Percentage of the population)
Source: Congressional Budget Office based on the Census Bureau's October Current Population Surveys.
Note: The table covers the civilian noninstitutional population, as defined in a note accompanying Figure 1.
for skilled relative to unskilled workers. Furthermore, the
minimum wage (adjusted for inflation) was relatively
high in the late 1970s and, despite increases during the
early 1980s, was eroded by the high inflation rates of
those years. Although the minimum wage (in 2003 dollars)
stood at $7.13 per hour in 1979, it was $5.63 per
hour in 1985, and, consequently, posed less of a potential
barrier to the employment of teenagers.
Trends in the Sectoral Distribution of Employment
and Job Opportunities for Youth
Over the past 25 years, youth have shifted where they
work and what they do at work in response to changing
opportunities in the labor market. However, the growth
of some sectors of the U.S. economy and the contraction
of other sectors may have contributed to the growth of
employment rates for female youth and to the decline of
employment rates for males.
Female youth may have benefited from the sectoral shifts
in employment over the past 25 years. If their share of
employment within each sector had stayed the same as it
was in 1979, the shifting distribution of employment
across sectors would have increased their overall employment
rate in 2000 by 1.6 percentage points for teenage
females and by 3.6 percentage points for young adult females.
Job opportunities for male youth, however, may have
weakened with sectoral shifts in employment. If their
share of employment within each sector had stayed the
same as it was in 1979, the shifting distribution across
sectors would have decreased the employment rates in
2000 by 0.1 percentage points for teenage males and by
2.5 percentage points for young adult males.
Young people work in relatively few sectors of the economy,
so the growth or contraction of those sectors can
have significant effects on their job opportunities. For example,
many young people work in eating and drinking
establishments. Between 1979 and 2000, the share of all
employment in those establishments grew 19 percent,
which benefited youth. In 2000, a quarter of employed
teenagers worked in those establishments. They also benefited
from the growth of recreation and entertainment
services, health services, and transportation services.
However, other traditional places of employment for
teenagers shrank over the period. For example, employment
at gasoline stations, an important source of employment
for teenage males in 1979, shrank substantially over
the period.
1979 49 38 76 44 38 58 79 53 87 62 53 65
1982 40 31 62 39 34 50 70 49 78 60 53 62
1989 47 38 71 45 42 54 77 55 85 66 60 68
1992 41 34 66 38 35 48 74 56 81 63 56 66
2000 44 37 67 44 40 60 77 59 85 69 64 72
2003 36 29 61 36 32 52 72 57 80 64 57 68
1979 to 2000 -4.8 -1.0 -9.7 0.0 2.2 1.9 -1.9 5.9 -2.7 6.9 11.1 7.0
2000 to 2003 -8.8 -7.9 -5.7 -8.2 -7.5 -7.9 -4.6 -1.8 -5.2 -5.6 -6.9 -4.1
Change (Percentage points)
In Out of
16- to 19-Year-Olds 20- to 24-Year-Olds
All School All School All School School
In Out of
All School School School School
Males Males Females
In Out of In
Females
Out of
WHAT IS HAPPENING TO YOUTH EMPLOYMENT RATES? 9
Table 4.
Labor Force Participation Rates for Out-of-School Youth, by Age and Sex,
1979 to 2003
(Percentage of the population)
Source: Congressional Budget Office based on the Census Bureau's October Current Population Surveys.
Note: The labor force participation rate is the percentage of the civilian noninstitutional population (as defined in a note accompanying Figure
1) that either have a job or are actively looking for one.
Growth in the Competition for Youth in the Labor
Market: Unskilled Immigrants
Immigrant labor has been the largest source of growth in
the labor force, accounting for about half of that growth
between 1990 and 2003.10 Increasingly, immigrants have
little formal education, so the native workers whose earnings
and employment are most likely to have been affected
are unskilled and young workers, particularly those
who have not finished high school.11 Hence, the influx of
immigrants may have contributed to the fall in the employment
of male youth, particularly the large decline for
out-of-school male teens.
The increase in the foreign-born population may have increased
the competition for the jobs that out-of-school
native-born males seek more than it has for the jobs that
native-born females seek. Foreign-born men are more
likely to be in the labor force than are native-born men
(89 percent versus 85 percent for those ages 20 to 64).
However, foreign-born women are significantly less likely
to be in the labor force than are native-born women (74
percent versus 63 percent).
Youth Neither Enrolled in School Nor
Working
During the months of the school year in 2000, an average
of 4 million youth ages 16 to 24 were neither in school
nor working (60 percent of them were female).12 Nearly
40 percent of those youth had not finished high school,
and most were not even looking for work. That status
raises the question of what they were doing and their
prospects for the future.
Family background plays a role. Teens from low-income
families are much more likely to be neither enrolled in
school nor employed than are those from higher-income
families. Teens whose parents did not finish high school
1979 89 72 95 72
1982 86 69 94 73
1989 87 67 93 74
1992 81 62 92 74
2000 79 73 92 77
2003 78 67 90 77
1979 to 2000 -9.6 0.8 -3.3 5.0
2000 to 2003 -1.0 -6.2 -2.0 -0.7
Change (Percentage points)
Males Females Males Females
16- to 19-Year-Olds 20- to 24-Year-Olds
10. See Andrew Sum and others, ?New Immigrants in the Labor
Force and the Number of Employed New Immigrants in the U.S.
from 2000 Through 2003: Continued Growth Amidst Declining
Employment Among the Native Born Population,? Center for
Labor Market Studies, Northeastern University (December 2003).
11. For a recent analysis, see George Borjas, ?The Labor Demand
Curve Is Downward-Sloping: Reexamining the Impact of Immigration
on the Labor Market,? Quarterly Journal of Economics, vol.
118, no. 4 (November 2003), pp. 1335-1374.
12. Excluding residents of institutions and members of the Armed
Forces.
10 WHAT IS HAPPENING TO YOUTH EMPLOYMENT RATES?
Table 5.
School Enrollment and Employment Status of Youth, by Age and Sex,
1979 to 2003
(Percentage of the population)
Source: Congressional Budget Office based on the Census Bureau's March Current Population Surveys.
Note: The table covers the civilian noninstitutional population, as defined in a note to accompanying Figure 1.
are twice as likely to be in that status as those whose parents
have at least some postsecondary education.
In 2000, more than a quarter of a million female youth
were neither enrolled in school nor employed, had not
finished high school, and had a young child but no
spouse at home. In that situation, such youth are particularly
likely to have little income and to rely on government
programs such as Temporary Assistance for Needy
Families and Food Stamps. The number was up from
about 210,000 in 1989 despite the increases in school enrollment
and employment rates and a decline in pregnancy
rates among teens. However, in percentage terms,
the portion of female teens who were both not in school
and not employed dropped from 14 percent in 1979 to 9
percent in 2000; the portion of young women in that situation
dropped from 27 percent to 18 percent (see
Table 5).
In contrast, the percentage of male youth who were neither
enrolled in school nor working was slightly higher in
2000 than in 1979. However, those data do not take account
of those who were residents of institutions and
those who were in the armed forces.
In 2000, almost 500,000 young men were in prisons and
juvenile and mental institutions, up from about 270,000
in 1980. After being released, youth who have been incarcerated
have lower employment rates than other youth.
In turn, low employment rates are associated with higher
rates of recidivism.13
In 2000, the number of youth in the armed forces, at
450,000, was down from its level in 1980, which was
840,000. Taking account of the increasing number who
were in institutions and the decreasing number who were
in the armed forces raises the percentage of all male youth
who were either out of school and not working or in institutions
(see Table 6).
Not Not Not Not
Employed Employed Employed Employed Total Employed Employed Employed Employed Total
1979 27 44 22 7 100 25 42 19 14 100
1982 22 49 18 11 100 23 46 16 15 100
1989 28 46 18 7 100 30 42 15 12 100
1992 27 52 14 7 100 27 50 11 12 100
2000 28 47 16 8 100 31 47 13 9 100
2003 24 57 12 8 100 26 55 10 9 100
1979 13 12 65 9 100 12 10 51 27 100
1982 13 13 57 16 100 12 11 48 29 100
1989 15 12 62 11 100 16 11 49 24 100
1992 17 14 56 13 100 18 14 44 23 100
2000 18 13 59 11 100 22 12 48 18 100
2003 19 14 54 14 100 22 17 42 20 100
Enrolled in School Not Enrolled in School
16- to 19-Year-Old Females 16- to 19-Year-Old Males
20- to 24-Year-Old Males 20- to 24-Year-Old Females
Enrolled in School Not Enrolled in School
13. Harry J. Holzer, Steven Raphael, and Michael A. Stoll, ?Employment
Barriers Facing Ex-Offenders,? Urban Institute Discussion
Paper No. 410885 (May 2003).
WHAT IS HAPPENING TO YOUTH EMPLOYMENT RATES? 11
Table 6.
Youth Who Are Out of School and Not Working, by Age and Sex, 1980 to 2000
Sources: U.S. Department of Commerce, Bureau of the Census, Decennial Census of the Population; and Congressional Budget Office based
on the Census Bureau's October Current Population Surveys.
Note: Differences are calculated from unrounded percentages and then rounded to the nearest 10th of 1 percent.
a. For instance, people residing in penal and mental facilities.
b. Active-duty personnel.
c. The total population is the sum of the civilian noninstitutional population (as defined in a note accompanying Figure 1), active-duty personnel
in the armed forces, and residents of institutions.
The Cyclical Downturn in the
Employment of Youth from
2000 to 2003
During weak labor markets, the employment rate of teens
generally falls more than it does for adults. Between 2000
and 2003, the employment rate for teenagers fell dramatically,
from 44 percent to 36 percent, its lowest level in
the post-World War II period. Furthermore, that drop
was greater than those that occurred during the cyclical
downturns of 1979 to 1982 and 1989 to 1992 and was
across the board in that it affected both males and females
and both in-school and out-of-school teens. Among
young adults, the employment rate fell about 5 percentage
points.
However, employment rates among youth can be expected
to rebound when the labor market strengthens, as
they have done in earlier upturns in the labor market
from 1982 to 1989 and from 1992 to 2000, but perhaps
not uniformly. For example, in contrast to earlier downturns,
that of 2000 to 2003 saw the employment rate of
male teens fall less for out-of-school youth than it did for
students. Going forward, high school enrollment rates
will continue to have an influence on employment rates.
1980 98 222 9 9
1990 129 128 8 9
2000 181 83 8 10
1980 28 27 14 14
1990 24 22 12 12
2000 25 19 9 9
1980 173 531 14 14
1990 220 452 11 12
2000 313 293 11 13
1980 28 58 27 27
1990 25 62 23 23
2000 26 54 18 18
Institutionsa
Members of the
Armed Forcesb
Civilian Noninstitutional
Population Out of School
and Not Working
Residents of and Not Working
or in an Institution
Number (Thousands) Percentage of the
Total Populationc
Either Out of School
16- to 19-Year-Old Males
16- to 19-Year-Old Females
20- to 24-Year-Old Males
20- to 24-Year-Old Females


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