Report of Congressional Budget OfficeConference on

THE TEENAGE UNEMPLOYMENTPROBLEM: WHAT ARE THE OPTIONS?

October 14, 1976

CONGRESS OF THE UNITED STATES

Congressional Budget Office

Washington, D.C.

For sale by the Superintendent of Documents, U.S. Government Printing OfficeWashington, D.C. 20402 - Price $1.20

PREFACE

On April 30, 1976, the Congressional Budget Office con-vened a one-day conference on teenage unemployment. The con-ference was part of a CBO study of teenage unemployment whichresulted in a report to the Congress on Policy Options forthe Teenage Unemployment Problem released on September 21,1976.The conference was held to exchange views on thenature and causes of high teenage unemployment and to dis-cuss policy options. To initiate the discussion, six pane-lists were invited to make statements. Following the state-ments there was general discussion among panelists and otherparticipants, who included CBO staff, other Congressionalstaff, Senator Peter V. Domenici, and myself as moderator.The conference was coordinated by George Iden of CBO's FiscalAnalysis Division. This document contains the statements ofthe panelists, together with a brief overall summary and asummary of the ensuing discussion. The opinions expressedare those of the participants and do not necessarily reflectthe views of the Congressional Budget Office.

The Congressional Budget Office wishes to thank theparticipants in the conference, especially the six panelists.

Alice M. RivlinDirector

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C O N T E N T S

PageSummary 1Perspectives on Teenage Unemployment 5

"The Teenage Unemployment Problem—How Much Will MacroPolicies Matter?" Ralph Smith, The Urban Institute 7

"Youth Employment Problems in the Inner City," Bernard E. An-derson, The Wharton School of the University of Pennsylvania 18

Discussion 27Issues and Options in Education 33

"The School to Work Transition," James S. Coleman, Departmentof Sociology, University of Chicago 35

"Teenage Unemployment: Can Reallocating Educational ResourcesHelp?" Richard B. Freeman, Department of Economics, HarvardUniversity 41

Discussion 48Manpower Policy Issues and Options 51

"Foreign Experience," Beatrice Reubens Center for Human Re-sources, Columbia University 53

"Coping With Teenage Unemployment," Sar A. Levitan, Center forSocial Policy Studies, George Washington University 62

Discussion 67

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TABLES

Page

1. Labor market impacts of the recession, selected quarters 122. Labor market implications of recovery 173. Employment status of labor force, 16 to 19 years old, by school enroll-

ment status, age, sex, race, October 1974 204. Unemployment rates by school status and for high school graduates

and dropouts, by age, sex, race, October 1974 225. Labor force participation and unemployment among youth 16-19,

1960 to 1974 24

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SUMMARY OF CONFERENCE

Perspectives on Teenage Unemployment

This session was devoted to a discussion of the dimen-sions, causes, and implications of the recent high levelsof teenage unemployment. Part of the explanation relatesto the recession, and part to the way teenagers participatein the labor market. Also, unemployment is a particularlyserious problem for certain groups of teenagers, for example,nonwhites and high school dropouts.

Ralph Smith's paper presents some quantitative esti-mates of the effects of the 1974-75 recession on teenageunemployment rates and jobless rates.1 Dr. Smith reportsthat teenagers bear a disproportionate share of the lossof jobs from the recession. One out of four job lossesassociated with the recession was incurred by a teenager,although teenagers accounted for only about 9 percent ofthe total employment at the start of the recession.

On the impact of macroeconomic policies, Dr. Smithconcludes that "teenage joblessness should decline sharplyas the economy recovers, with the strength of the recoveryof utmost importance to youth." However, macroeconomicpolicies alone will leave the teenage jobless rate sub-stantially higher than that of adults.

Bernard Anderson's paper stresses that the job marketsituation of nonwhite youths is much worse than for whiteyouths and that the disparities in terms of higher unemploy-ment rates and lower labor force participation rates for

1. The jobless rate includes, in addition to thosecounted as unemployed, an estimate of the number of per-sons who are not actively searching for a job (and there-fore are not counted as unemployed) but who would be inthe labor market if the economy were operating in therange of 4 percent overall unemployment.

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77-208 O - 76 - 2

nonwhites have become greater over a long period of time.Among the causes of labor market problems for nonwhiteyouths, Professor Anderson cites weak job markets in centralcities, racial discrimination, educational problems, andchanging attitudes among youths. In the policy area, Dr.Anderson reviews some pluses and minuses of past manpowerprograms for youths and outlines the types of programswhich he feels would be most effective. Among other recom-mendations, he emphasizes the importance of the quality ofwork experience. He suggests for consideration a year-round, work-study program for inner-city youths.

The discussion brought out some of the unique aspectsof teenage unemployment compared to adult unemployment.For example, a disproportionate share of unemployed teen-agers are new entrants and reentrants to the labor force;and the duration of unemployment among teenagers tends tobe shorter than among unemployed adults. Some of theteenage unemployment is associated with the transition fromschool to finding the first post-school job.

Issues and Options in Education

James Coleman's paper focuses on the complex processby which young people enter the labor market and eventuallybecome full-time workers. He states that in a marketsystem there is an inherent difficulty in this transitionfrom a subsidized environment, the school, to an unsubsi-dized one, the job market. Professor Coleman's paper dis-cusses some of the broad approaches that might be taken tomeet this problem. Among his suggestions for considerationare work-study arrangements for students and the possibleuse of entitlement vouchers to provide youths with morelatitude in their choices of education and training programs

Richard Freeman's paper discusses the difficultquestion: "How serious is the youth labor market problem?"before considering: "How might schooling help?" He pointsout that unemployment rates diminish as youths mature,and he cites a lack of information about the effects ofunemployment on youths. Professor Freeman identifies theplacement of school graduates as a potentially criticallink and suggests that an emphasis on placement and onwork-study arrangements might lead to lower unemploymentrates for youths.

The discussion led to a consideration of the roles ofaspirations and mobility. Some unemployment accompaniesthe process of adjusting aspirations to available opportun-ities. However, perhaps unemployment among teenagers couldbe reduced somewhat without sacrificing the goals of free-dom and widespread opportunity.

Manpower Issues and Options

Beatrice Reubens' paper provides an international com-parative approach to the study of teenage unemployment andrelated policies. Her paper suggests that, while severalindustrialized countries experienced comparatviely lowteenage unemployment throughout much of the post-World War IIperiod, teenage unemployment in these countries has beenaffected by the recent recession. Moreover, she questionswhether the conditions that supported lower unemploymentin those countries might now be on the wane. Specifically,Dr. Reubens cites demographic factors, apprenticeship andtransition programs (such as job placement of school grad-uates) as being significant determinants of teenage unem-ployment. Comparing youth programs in the U.S. with thoseof other countries, she observes "a greater variety abroadbut also less dependence on public service employment."

The experience of foreign countries with wage subsidieswas of special interest to the participants. In additionthe discussion included such intangible factors as variousdegrees of paternalism by firms and unions toward youthsin different countries. The significance of socio-economicmobility was also discussed as one of the influences af-fecting unemployment among youths.

Sar Levitan's paper focuses on the situation in theUnited States. It addresses the question of whether ornot specific, targeted policies, such as changes in minimumwage legislation and various public employment and trainingprograms, can play a major role in dealing with teenagers'problems in the labor market. Professor Levitan statesthat general labor market conditions have a major impact onthe unemployment situation for teenagers. He argues againstthe differential minimum wage as an approach in the currentcontext because of the potentially adverse effect on othergroups. Until the economy returns to tight labor markets,he proposes that policies be focused on the approximately

425,000 long-term unemployed teenagers, He suggests suchpolicies as community job creation, the expansion of stipendsfor institutional and apprenticeship training, and an ex-pansion in the Job Corps.

Much of the discussion of manpower policy in the UnitedStates centered on the problem of establishing priorities.To what extent should policies be targeted on particulargroups of unemployed teenagers, such as nonwhites? Whatpriority should be attached to year-round versus summerjob programs? What should be the relative emphasis oncyclical versus structural problems of teenagers in thelabor market?

PERSPECTIVES ON TEENAGE UNEMPLOYMENT

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THE TEENAGE UNEMPLOYMENT PROBLEM--HOW MUCH WILL MACRO POLICIES MATTER?

by

Ralph E. Smith*

Nearly one out of five teenagers in the labor markettoday does not have a job. The difficulties youth experi-ence in finding and holding jobs are important because ofthe immediate losses associated with joblessness and be-cause of the missed opportunities for learning about work,coming in contact with adults, and developing good workhabits and credentials. The purpose of this conferenceis to consider the options for improving this condition.I will focus my presentation on the role of macroeconomicpolicies and on the outlook for teenagers through theremainder of the decade as the overall economy recovers.

The basic points I want to make are: (1) a largepart of the current youth jobless problem is associatedwith the general state of the economy; (2) the conven-tional unemployment statistics considerably understatethe impact of the recession on teenage job opportunities;(3) teenage joblessness should decline sharply as theeconomy recovers, with the strength of the recovery ofutmost importance to youth; (4) macroeconomic policies,alone, will leave the teenage jobless rate substantiallyhigher than that of adults; and (5) structural policiesand programs, within a high-growth economic environment,will be necessary to significantly narrow this teen-adultgap.

My points are based largely on an analysis ofCurrent Population Survey data, using concepts andtechniques that have been described elsewhere. HereI will summarize the key aspects of my approach and thenpresent the empirical findings that are the basis of mystatements.

*The author is a Senior Research Associate at The UrbanInstitute. The opinions expressed are those of theauthor and do not necessarily reflect the views of TheUrban Institute or its sponsors.

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8

Methods

Research by myself and colleagues at The Urban Insti-tute indicates that the conventional unemployment measure,which excludes people who have not actively sought workor have become discouraged and given up the search, under-states the job losses associated with a slack economy anddistorts their demographic incidence.! We have developeda jobless statistic that is more comprehensive than theunemployment series. We have also developed a labor marketmodel that simulates the labor market consequences forvarious demographic groups of alternative aggregate jobmarket conditions.

When aggregate demand fluctuates cyclically, theunemployment effects differ substantially for populationgroups, but the labor force effects differ even more.In order to reflect more accurately the impacts of cycli-cal fluctations on the availability of jobs, we use asupplementary measure, the jobless rate, that combinesboth unemployment and labor force variation. The joblessrate is equivalent to what others have called an "adjustedunemployment rate," where the adjustment consists of adding"hidden unemployment" to the official unemployment rate.The unemployment rate indicates the percentage of thecurrent labor force without jobs; the jobless rate is anestimate of the percentage of the potential labor forcewithout jobs. The difference between the number of peoplewho would be available and the number who are actuallyworking is our estimate of joblessness. The jobless rateis computed as:

Jobless rate = Potential Labor Force - Employment 10QPotential Labor Force

where potential labor force is an estimate of the sizeof the labor force at full employment, and employment is

1. R.E. Smith and J.E. Vanski, "The Jobless Rate: AnotherDimension of the Employment Picture," Urban Institute Paper350-76 (December 1975), and R.E. Smith and J.E. Vanski"Recent Performance of Unemployment as an Indicator ofLabor Market Conditions," Journal of Economics and Business(forthcoming).

the number of people employed that month according to theCurrent Population Survey, We use a four percent unemploy-ment rate in defining the full employment economy, the ratecurrently used by the Council of Economic Advisers indetermining the nation's potential GNP and the full employ-ment government surplus or deficit.^

Our estimates are based on the Urban Institute'smonthly model of the labor market.3 Through simulation,the model provides conditional forecasts of employment,unemployment, and nonlabor force levels for sixteendemographic groups,^ as well as the monthly probabilitiesof transition between the three labor market states. Thekey exogenous variable is the total job stock, as measuredby the sum of aggregate employment and job vacancies. Themodel's parameters are from a set of equations that relateeach group's labor market transition probabilities tocyclical, trend and seasonal variables. These were estimatedwith monthly Current Population Survey data for the period,July 1967 through December 1973.

Two sets of estimates are relevant here. The firstinvolves the experience of teenagers in the recent recession.How much of their labor market problem can be blamed on therecession? For this it is helpful to examine both theiractual employment conditions and what these conditions wouldhave been in the absence of the recession. The latter isinferred from trends in their labor market status in recentyears.

2. Economic Report of the President, January 1976, p. 54.The CEA is currently reviewing its procedure.

3. For a brief description of the model, see R.E. Smith,J.E. Vanski, and C.C. Holt, "Recession and the Employmentof Demographic Groups," Brookings Papers on EconomicActivity, (3:1974), pp. 737-760.

4. Ages 16-19, 20-24, 25-59, and 60 and over for whiteand nonwhite males and females. The forecast variables areintended to correspond to the Current Population Surveydefinitions. Jobless statistics are then calculated bysubtracting predicted employment from the estimated size ofthe groups's labor force under full employment conditions.

77-208 O - 76 - !

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The second set of estimates involves the degree towhich teenagers will share in the economy's recovery.Forecasting this is an inherently risky undertaking.But it is important to do so in order to have some notionof the magnitude of the teenage unemployment probelm wewill be facing for the remainder of the decade. The Con-gressional Budget Office has provided two sets of macro-economic assumptions to make budget estimates throughfiscal year 1981.5 Path A assumes a six percent per yeargrowth in real GNP, with the aggregate unemployment ratedeclining to 4.5 percent by 1980. Path B proides a fivepercent annual growth rate, with unemployment remainingabove six percent until 1981. These are not predictionsof expected economic conditions, but rather are two bench-marks that were used by CBO to illustrate the impact ofalternative economic assumptions on budget projections.Similarly, I am using them as benchmarks for illustratingthe impact of the macroeconomic setting on the labormarket conditions of teenagers.

Our estimates of the size of the potential laborforce and of the outlook under each macro scenario aresubject to errors associated with limitations in our labormarket model, the data used to estimate the model, andthe assumption that future events will follow patternsakin to those found in the period in which the model wasestimated. From past analyses, we expect that our pre-diction errors will vary inversely with the sizes ofthe groups.6

Impact of the Recession

The recession began in the fourth quarter of 1973.At that time, teenagers held about nine percent of alljobs, but accounted for close to thirty percent of theunemployed; the 14.6 percent teenage unemployment rate

5. CBO, "Five-Year Budget Projections, Fiscal Years 1977-81," January 26, 1976. As noted by CBO, even their slowergrowth rate is nearly as large as the most rapid five-yeargrowth rate since World War II.

6. "Recession and the Employment of Demographic Groups,"pp. 743-744.

7. For a fuller discussion of my estimates of the aggre-gate impacts of the recession and its effects on job mar-ket opportunities for women, see "Has the Recession Been anEqual Opportunity Dis-Employer?" Urban Institute WorkingPaper 876-01 (1976).

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was triple the 4.8 percent aggregate rate. Using ourmore comprehensive jobless measure, 16.1 percent of thepotential teenage labor force was without work, comparedwith 5.8 percent of the aggregate potential work force.

Over the next two years, aggregate employment fellby 200,000, while the potential labor force rose by 4.3million people, resulting in a 4,5 million net increasein the number of potential workers without jobs. Allbut 900,000 of the jobless increase is included in thegrowth in unemployment, with the remainder reflected inthe slower growth in the labor force.

Table 1 provides Current Population Survey tabula-tions for teens during this period, including statisticsfor the 1974:111-1975:1 period, during which the declinein aggregate employment was the steepest.° Also shownare my estimates of the potential labor force for each groupand the corresponding jobless estimates.

Teenagers bore a very large share of these losses.During this two-year period, teenage employment fell by420,000, while adult employment increased. Much of theimpact of the recession on teenagers was reflected in thedrop in their labor force participation, rather than inincreased unemployment. Between 1973:IV and 1975:IV,their participation rate fell from 55.0 to 53.4 percent.While the teenage civilian noninstitutional population grewby a half million, their labor force remained, nearlyconstant. Had the recession not occurred, their laborforce probably would have grown by about 270,000 frompopulation growth and 400,000 from a continuation oftheir participation rate trend.9

8. Based on the revised seasonally adjusted statisticspublished in Employment and Earnings, Vol. 22 (Feb. 1976).The seasonal revision reduced the growth in the teenagelabor force over the 1973:IV-1975:IV period by 65,000.

9. Estimates from our model indicate that the potentialteenage labor force--the number of teenagers who would bein the labor market under prolonged full employment con-ditions --was growing by about 670,000 per year and thattheir participation rate under these conditions wasrising by 1.2 percentage points per year. The latter issimilar to their actual participation rate increase between1970 and 1974.

TABLE 1

LABOR MARKET IMPACTS OF THE RECESSION. SELECTED QUARTERS(in thousands,'except as indicated)

Change Change1974 III- 1973 IV-

1973 IV 1974 III 1975 I 1975 IV 1975 I 1975 IVAGGREGATE

Labor Force 89,746 91,343 91,789 93,153 446 3,407Employment 85,428 86,206 84,313 85,241 -1,893 -187Unemployment 4,318 5,138 7,476 7,912 2,338 3,594Unemployment Rate (%) 4.8 5.6 8.1 8.5 2.5 3.7Participation Rate (%) 61.1 61.3 61.1 61.2 -0.2 0.1Potential Labor Force 90,716 92,327 93,401 95,012 1,074 4,296Jobless 5,288 6,121 9,088 9,771 2,967 4,483Jobless Rate (%) 5.8 .6.6 9.7 10.3 3.1 4.5

TEENLabor Force 8,729 8,793 8,797 8,738 4 9Employment 7,456 7,362 7,056 7,036 -306 -420Unemployment 1,273 1,431 1,741 1,702 310 . 429Unemployment Rate (%) 14.6 16.3 19.8 19.5 3.5 4.9Participation Rate (%) 55.0 54.6 54.4 53.4 -0.2 -1.6Potential Labor Force 8,889 9,141 9,309 9,561 168 672Jobless 1,433 1,779 2,253 2,525 474 1,092Jobless Rate (%) 16.1 19.5 24.2 26.4 4.7 10.3

TEEN SHARE3

Labor Force 9.7% 9.6% 9.6% 9.4% 0.9% 0.3%Employment 8.7 8.5 8.4 8.3 16.2 224.6Unemployment 29.5 27.9 23.3 21.5 13.3 11.9Potential Labor Force 9.8 9.9 10.0 10.1 15.6 15.6Jobless 27.1 29.1 24.8 25.8 16.0 24.4

aTeen level or change in level as a percent of corresponding aggregate level or change.

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Combining the unemployment and participation effects,I estimate that the number of teenagers without jobs as aresult of the slack labor market rose by 1.1 million bythe end of 1975: 420,000 more unemployed and 660,000 fewerteenagers in the labor force than there would have beenhad the economy continued to grow. One out of four joblosses associated with the recession was incurred by ateenager, with the teenage jobless rate increasing bytwice the increase experienced by the aggregate population.

The experience of teenagers in this recession variedby demographic group, location, and other circumstances.Over the past two years, girls fared slightly better thanboys, so that by the end of 1975, their jobless rate wasone point below that of boys.10 Black teenagers faceconditions in the labor market that are far worse thanthose confronting whites. At the start of the recessiontheir jobless rate was double that of whites (31.8 vs.14.1 percent of the potential labor force). By the endof 1975 two out of five potential participants amongBlack teens were jobless, with a slight reduction in thegap with whites.ll Bernard Anderson will be discussingthe labor market for inner-city youth--probably the groupwith the most severe set of problems.

Forces and events other than the recession itselfmay have contributed to the deterioration in the teenagelabor market during this period. Increases in the minimumwage and its coverage and the small reduction in the sizeof the armed forces, for example, may have decreased theirjob opportunities. School enrollment increased, whichcould account for some of the labor force reduction,

10. From 1973:IV to 197:IV the jobless rate of females,ages 16-19, rose from 17.2 to 25.8 percent, while that ofmales in this age group rose from 15.1 to 26.8 percent.The size of the girls' labor force increased by over100,000, while that of the boys fell by a similar amount,so that girls had a larger unemployment rate increasethan boys (4.5 vs. 2.8 percentage points).

11. In 1975:IV their jobless rates was 40.1 percent vs.24.7 percent for white teenagers, increases of 8.3 per-centage points and 10.6 points, respectively. The Blackteen labor force grew, while that of whites declined.As a result, the Black unemployment rate rose more thanthat of whites (6.9 vs. 4.6 points).

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but the causation could go either way. It is doubtfulthat these factors could have been very important, relativeto the recession itself.

Outlook As the Economy Recovers

One way of assessing both the outlook for youth andthe role of macroeconomic policies in solving their marketproblems is to compare the job outlook for teenagers usingthe two growth paths projected by CBO. I have used ourlabor market model to simulate the demographic compositionsof employment and unemployment under each path, assuming thecontinuation of past cyclical and trend patterns depictedin the model. The results are shown in a table at theend of this paper. The estimates provide at least a roughidea of the conditions teenagers will face, assuming therecovery of the overall economy continues through the endof the decade.

Teenagers should benefit from both the economic re-covery and the decline in their numbers relative to thetotal population. Between 1975 and 1980 the teenage popu-lation should decline by about 100,000, while the totalpopulation, age 16 and over, is expected to increase byabout 12 million people. The favorable demographic shift,however, is likely to be partially offset by the resumptionof the trend increase in teenage labor participation ratesthat was interrupted by the recession.

Under the relatively slow growth conditions projectedwith Path B, the teenage jobless rate in 1980 is estimatedto fall 8 percentage points below its 1975 average (25.3to 17.6). Their unemployment rate is expected to declineby a smaller amount (19.9 to 15.4 percent), since therecovery should induce increased labor force participationbeyond its trend growth. Indeed, this is already occurring.12

12. From 1975:IV to 1976:1, 156,000 of the 400,000 netadditions to the labor force were teenagers. The teenparticipation rate has increased from 53.4 to 54.3 percentin one quarter. Consequently, their jobless rate has fallen0.7 points, while their unemployment rate has decreased byonly 0.1 points. Quarter-to quarter comparisons for thisgroup, of course, are also subject to more measurementerror than for the total labor force; seasonal adjustmentis particularly difficult.

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These gains are considerably larger than the correspondingstatistics for the total population (a 2,3 percentage pointfall in the jobless rate and a 2,2 point fall in the un-employment rate).

The gains to teenagers from more stimulative macropolicies can be seen by comparing these estimates withthose for the Path A scenario. Teenage jobless and un-employment rates would decline, respectively, by anadditional 4.6 and 2.9 percentage points. My estimatesare that the aggregate difference between Path A and Path Bis 2.8 million jobs in 1980--1.8 million fewer people un-employed and one million more people in the active laborforce. For teenagers, the difference is close to 500,000jobs--300,000 less unemployed and 200,000 more in the labormarket. Teenagers--who account for one out of ten peoplein the labor force—would gain one out of six additionaljobs created by a higher-growth economy.

However, even with a favorable macroeconomic environ-ment, the teenage labor market would continue to be weak.The 13.0 percent jobless rate estimated for teenagersunder Path A is much better than last year's 25.3 percent,but would still be over triple the adult rate (4.1 percent).Macro policies, alone, cannot go much further.13 Even in1969--with the national unemployment rate at 3.5 percent--the teenage unemployment rate was over twelve percent.

If the teenage jobless rate is to be reduced muchbelow twelve or thirteen percent, programs or policieswill be needed that address their particular needs. Thevery high turnover rates of young people seems to be amajor cause of their higher joblessness, as well as a problemof its own.14 job hopping is one way of learning about theworld of work, but it has its costs. Additional assistance

13. Under the 4.0 percent unemployment scenario I usedto generate the potential labor force, the teenage unemploy-ment rate was 11.5 percent.

14. The most recent analysis of the turnover-unemploymentrelationship is by S.T. Marston, "Employment Instabilityand High Unemployment Rates," presented before the BrookingsPanel on Economic Activity, April 8-9, 1976.

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in finding both permanent jobs and after-school and summerjobs might have a large payoff in guiding young workersinto better work and learning experiences.

The problems are particularly complex since they arewrapped up in the whole, sometimes painful, process ofachieving adulthood. The educational establishment playsa major role in that process and I understand that educa-tional policies will be discussed later in this session.The problems are not insolvable. Many people survivetheir teenage years with little or no unemployment. Manynations have much lower youth unemployment rates.

During the last two years, the impact of programsand policies that might have improved the structure ofthe youth labor market would have been swamped by therecession. The recovery will provide a better environ-ment within which structural changes could be combinedwith momentum of economic growth to substantially diminishthe teenage jobless problem.

TABLE 2

LABOR MARKET IMPLICATIONS OF RECOVERY(annual average in thousands . except as indicated)

AGGREGATE

Jobless Rate (7»)

TEEN

Participation Rate (%)

Jobless Rate (7.)

AGGREGATE

Participation Rate (%)

Jobless Rate (7.)TEEN

Participation Rate (7=)

Jobless Kate (7.)

1975

92,61384,7837,8308.561.2

94,2069,42310.0

8,7987,0461,75219.954.19,4302,38425.3

1975factual)

92,61384,7837,8308.561.2

94,2069,42310.0

8,7987,0461,75219.954.19,4302,38425.3

Five Percent Annual Real GNP Growth (Path B)

1976

94,36387,0507,3137.761.4

96,3239,2739.6

9,2517,5371,71418.556.49,7462,20922.7

Six Percent

1976

94,41387,3947,0197.461.4

96,3238,9299.3

9,2737,6071,66618.056.59,7462,13921.9

1977

96,55189,2737,2787.561.8

98,4779,2049.3

9,5807,8701,71017.858.29,9872,11721.2

Annual

1977

96,84590,5766,2696.562.0

98,4777,9018.0

9,6808,1261,55416.158.89,9871,86118.6

1978

98,64491,6876,9777.162.2

100,5128,8258.8

9,8088,1501,65816.959.8

10,1652,01519.8

Real GNP Growth

1978

99,23093,8025,4285.562.6

100,5126,7106.7

9,9748,5541,42014.260.8

10,1651,61115.8

1979

100,75194,0396,7116.762.6

102,4368,3978.2

10,0018,3851,61616.261.3

10,3061,92118.6

(Path A)

1979

101,55996,6344,9254.863.1

102,4365,8025.7

10,1968,8591,33713.162.5

10,3061,44714.0

1980

102,64996,2146,4356.362.9

104,2558,0407.7

10,1498,5851,56415.462.8

10,4171,83217.6

1980

103,70099,0274,6734.563.6

104,2555,2285.0

10,3519,0611,29012.564.0

10,4171,35613.0

18

YOUTH EMPLOYMENT PROBLEMS IN THE INNER CITY

by

Bernard E. Anderson*

The employment problems of youth in the inner city areperhaps the most serious of any demographic group in theAmerican labor force. Almost all measures of economic andsocial well-being are less favorable for inner city youththan for other, and most important, have shown little ten-dency toward improvement even during periods of generallyvibrant economic activity. For this reason, public policyprescriptions for improving the economic status of youthmust take specific account of conditions in the inner citywhich constrain income and employment opportunities.

Measuring the Problem

Although a cursory examination of jobs and income inthe inner city will reveal serious disparities in compari-son with conditions in other areas, reliable statisticalinformation on labor force status, trends, and behavioralmotivation among inner city residents, especially youth,are not available. As a result, there is insufficientpublic awareness of the dimensions or real significanceof the labor market problems of inner city youth. In theabsence of reliable information, analysts and public officialsmust rely on conflicting data and perhaps conflicting valuejudgments in formulating effective public policies to dealwith the employment problems of youth.

Faced with inadequate information, some observershave been led to speculate on the real causes of joblessnessamong inner city youth. One argument often presented indiscussions of this issue is that the unemployment rate isan inadequate measure for understanding the problem of job-lessness among youth. Many believe that because youths areattending school in large numbers, they seek only part-timejobs in order to supplement their discretionary income.

^Professor, The Wharton School of the University ofPennsylvania.

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Yet a substantial majority of those aged 18 and 19 haveleft school and are interested in full^-time jobs. Further?a significant number of inner city youth aged 16 and 17 wantfull-time jobs, and often those who are in school, whileseeking part-time jobs, need employment as a condition forcompleting school. Adequate statistical data on the schoolattendance, work experience status of youth are not avail-able for local areas, so we do not know the magnitude ofthis aspect of the problem for inner city youth. Much ofthe available information on this question is derived fromdirect observation of community workers and others involvedin the administration of government funded manpower programs.

Narrowing the Issue

Despite the deficiencies of existing statistical data,some useful information on youth unemployment can be ob-tained from reports periodically issued by the U. S. Bureauof Labor Statistics. In the following discussion, emphasiswill be placed on the employment status of black youth be-cause a large segment of this group resides in the innercity. There is little question that the "inner city" problemis heavily burdened with race (and Spanish-speaking) impli-cations. Thus, to the extent that one focuses on the problemof black youth, one can obtain insight into the special problemsof inner city youth.

Some Recent Trends: School and Job Status

A much smaller proportion of black teenagers than whiteare in the labor force at any time. Among blacks who are inschool and in the labor market, however, the job findingexperience is less favorable than for white youth. Forexample, in 1974, black teenage males accounted for 9.9 per-cent of all males aged 16 to 19 in school and in the laborforce, but only 8.0 percent of those employed; black femalescomprised almost 9.0 percent of the female teenagers inschool and in the labor force, but only 6.1 percent of thosewith jobs.

About 4.2 million teenagers were in the labor force,but not in school. This group, only slightly smaller thanthe number in school, were less successful in finding jobs.Undoubtedly, employers use age as an index of maturity, andas a result, young men and women out of school, especiallythose who are single, find it difficult to obtain jobs duringthe later teen years.

EMPLOYMENT STATUS OF LABOR FORCE, 16 to 19 YEARS OLD, BY SCHOOLENROLLMENT STATUS, AGE, SEX, RACEa, OCTOBER 1974

(Numbers In Thousands)

Race and Sex

Both SexesMaleFemale

White MaleBlack MalePercent Black

White FemaleBlack FemalePercent Black

Enrolled In School

In LaborForce

443423832051

21482359.9

18721778.6

Percent ofPopulation

41.643.839.3

46.329.2

42.322.3

Employed

375020471705

18811658.0

15991046.1

Not Enrolled In School

In LaborForce

415522141941

193727812.6

172022011.3

Percent ofPopulation

76.287.566.4

88.084.2

68.851.6

Employed

343918511589

166119010.3

14441449.1

IsSO

SOURCE: Bureau of Labor Statistics, "Students, Graduates, and Dropouts," SpecialLabor Force Report, No. 180, (1975).

a. Statistical reports show data for "nonwhites". Because blacks representabout 92 percent of all persons classified as nonwhite, the term "black" will beused throughout the paper.

21

A closer look at school and labor market experience canbe obtained by comparing the unemployment rates of schoolenrollees, graduates, and dropouts, A cursory examinationof the evidence for 1974 shows high unemployment rates amongyouth regardless of school status. Yet, there are significantdifferences in the labor market experience of graduates anddropouts, and among blacks and whites. Among whites, highschool graduates experienced somewhat less joblessness thandropouts, but among blacks, high school graduation failed toprovide a ticket to greater labor market success. Instead,black high shool youth who graduated in May 1974 had an un-employment rate in October 1974 of 7.0 percentage pointshigher than that among those who dropped out of schoolduring 1974-75.

The difference in unemployment experience by schoolstatus may reflect several forces at work in the labormarket. First, the relatively high unemployment rate amongyouth in all age categories suggests a high degree ofshifting about between jobs, and in and out of the laborforce. Through this process, young workers gain importantknowledge about the world of work, and begin to form pre-ferences regarding lifetime career goals and aspirations.Some of the joblessness might be reduced through bettercounseling and job market information, but job changingamong youth will probably always exceed that among adults.

Second, the relatively greater labor market diffi-culties among black youth are undoubtedly related totheir concentration in inner city communities where thereis a dwindling pool of semiskilled jobs, and fewer opportuni-ties for employment except in menial service occupations.Racial discrimination in employment must also be identifiedas one of the major barriers to greater labor market successfor black youth. In fact, these and other unfavorable con-ditions in urban labor markets help explain the high rateof nonparticipation among black youth in the labor force.One of the reasons black high school graduates have alower unemployment rate than black graduates is that manyof the dropouts have given up the search for work and thus,are not counted among the unemployed.

Unemployment Trends

The unemployment problem of black youth has worsenedprogressively over the past decade. One measure of thetrend can be obtained by comparative examination of youthunemployment relative to that for the labor force at large.

UNEMPLOYMENT RATES BY SCHOOL STATUS AND FOR HIGH SCHOOL GRADUATESAND DROPOUTS, BY AGE, SEX, AND RACE, OCTOBER 1974a

Enrolled InSchool Not Enrolled In School

Both Sexes16 to 24 years16 and 1718 to 1920 to 24

Men, 16 to 24Women, 16 to 24

Total Graduates0

White

11.514.910.17.2

Black

28.036.831.116.5

White

9.320.814.07.1

Black

21.0a

31.416.9

White Black

14.6 38.6

DropoutsWhite Black

16.2 31.6

Both Races

11.0 24.1 8.8 19.4 15.312.0 33.9 9.9 22.8 18.6

Both Races

24.536.2

tot\3

SOURCE: Bureau of Labor Statistics, "Students, Graduates, and Dropouts,"Special Labor Force Report, No. 180, (1975).

a. Percent not shown where base is less than 75,000.b. Graduating or dropping out during the academic year, 1973-74.

23

Since 1960, the black teenage unemployment rate has in-creased from almost 25 percent to nearly 40 percent in1975 and 1976. It is important to note, however, thatduring this period, the ratio of black youth unemploy-ment relative that of adults increased markedly, while asimilar comparison of the unemployment rate of youngwhites relative to adults showed little change.

It is also important to note the conflicting trendsin labor force participation among black and white youth.Since 1960, (and the trend would be even more evident ifthe comparison began with 1950) the labor force participationrate among black youth has declined by 4.3 percentage points,while that among white youth actually increased by 8.4 per-centage points. No doubt, worsening job prospects helpexplain this divergent trend.

The withdrawal of large numbers of black teenagersfrom the labor force, even those seeking part-time jobs,means the standard unemployment rate fails to capture thefull impact of the problem of joblessness. In reportingthe black youth unemployment rate, it is important toremember that the 35.2 percent unemployed (first quarter,1976) represent less than half of those in the 16-19 agegroup.

Sources of Inner City Job Problems

The employment difficulties of inner city youth havebeen exacerbated by unfavorable trends in job opportunitiesin the cities. The well documented evidence of industryrelocation reducing the number of semiskilled jobs in thecity compared with areas outside the city contributes to ashortfall in employment opportunities for youth, especiallythose 18 and 19 years of age.

Perhaps even more important is the continuously changingstructure of labor demand in expanding occupations withinthe city. Increasingly, the jobs located in the city segmentof major metropolitan areas call for a level education andskills not available among the large numbers of inner cityyouth. The widespread inadequacies in the quality of publicschool education (reflected in the annual surveys of studentachievement) do little to prepare youth for even the avail-able entry level jobs which require only modest educationalattainment. For example, in Philadelphia, a recent studysponsored by the State Department of Education reported thatabout 40 percent of the high school graduates failed to

LABOR FORCE PARTICIPATION AND UNEMPLOYMENT AMONG YOUTH 16-19,1960 to 1974

Labor ForceParticipation

Rate3 Unemployment Rate

Ratio Teento Total Un-ployment Rate

Year

1960

1961

1965

1966

1967

1968

1969

1970

1971

1972

1973

1974

White

49.3

48.0

47.5

49.4

49.8

49.9

51.2

52.0

54.6

54.6

56.4

57.7

Black

45.8

44.8

41.7

43.1

43.9

42.9

42.7

41.4

38.7

39.7

41.1

41.5

White

13.4

15.3

13.4

11.2

11.0

11.0

10.7

13.5

15.1

14.2

12.6

14.0

Black

24.4

27.6

26.2

25.4

26.5

25.0

24.0

29.1

31.7

33.5

30.2

32.9

White

2.43

2.28

2.98

2.94

2.89

3.06

3.06

2.76

2.56

2.54

2.57

2.50

Black

4.44

4.12

5.82

6.68

6.97

6.94

6.86

5.94

5.37

5.98

6.16

5.88

SOURCE: U.S. Department of Labor, Manpower Report of the President (1975).

a. The ratio of the noninstitutionalized population, 16-19, employed or seekingjobs .

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attain a level of literacy comparable to a tenth gradeeducation. As a result of such disparities between theeducational preparation of youth, and the hiring standardsof employers, large scale unemployment among inner cityyouth often exists simultaneously with significant numbersof job vacancies in entry level white collar jobs in manycities.

In addition to these factors, the changing attitudesof youth toward labor market participation undoubtedly con-tribute to the problem of joblessness. Many inner cityyouth reject menial, service type jobs previously acceptedby youth newly entering the labor market. The preferencetoday seems to be for "good" jobs, or at least entry levelpositions which appear to lead toward higher status andhigher income in the near future. The attitudes and moti-vation of youth toward the labor market and job opportuni-ties play a large role in determining their employmentexperience.

Public Policy Prescriptions

Remedial manpower programs developed during the pastdecade were beamed heavily toward youth. Between 1965 and1972, for example, 73,2 percent of all first time enrolleesin major manpower programs were under 22 years of age. •*-The Neighborhood Youth Corps and the Job Corps were themajor youth programs, but substantial numbers of dis-advantaged youth also participated in MDTA InstitutionalTraining, the Concentrated Employment Program, JOBS, andthe Opportunities Industrialization Centers.

Although many observers have criticized social actionprograms, there is evidence that youth participation inmanpower programs had a beneficial impact. The evidenceon post-training job experience of both JOBS and MDTAinstitutional enrollees shows earnings gains in excess ofthose for similar persons who did not participate in theprogram.^ Some studies of the Jobs Corps also reveal netgains for disadvantaged inner city youth.

1. C.R. Perry, B.E. Anderson, R,L. Rowan and H.R. Northrup,The Impact of Government Manpower Programs (Philadelphia:Industrial Research Unit, University of Pennsylvania, 1975),p. 22.

2. Robert Taggard, "Employment and Training Programs forYouths," (published M.S., December 1975).

77-208 O - 76 - 5

26

Despite this evidence, there are several questions re-garding manpower programs that should be considered in anyattempt to formulate new policy initiatives for dealingwith inner city youth employment problems. First, manyNYC programs currently suffer because of their short termfunding, lack of focus, lack of supervision, and exclusivereliance on public sector employers. The time has come toseriously question the value and purpose of the annualrush toward summer youth employment programs in preferenceto more ambitious, year-round efforts. Much of the current"work experience" in the summer program is little or no work,and a negative demeaning experience. Perhaps a year-round,work-study program would produce better results; a programof that type would certainly be more valuable than currentefforts for inner city youth.

Finally, it is important to recognize the changingattitudes of youth toward the world of work, and fashionpolicy prescritpions that will meet the needs and interestsof today's youth. To the extent that youth feel a need tobe "useful" as well as to earn income, perhaps some changein the funding arrangements for youth programs might facili-tate the development of programs that will combine socialutility and income earning opportunities. Experimentationwith federal funding of community based organizationsworking with youth might produce viable models of effectiveprograms that give youth a sense of self reliance and atthe same time, contribute to community betterment. Someconsideration of such alternatives seems warranted at thistime.

27

DISCUSSION: PERSPECTIVES

Cyclical Factors

Ralph Smith stressed that a substantial part of thecurrent high unemployment rate and jobless rate among teen-agers was due to the recession and that teenage unemploy-ment would be strongly affected by the recovery and by thepace of the recovery.

There was general agreement that recovery from therecession would help the teenage unemployment situationand that the recovery was a crucial factor affecting theoutlook for teenage unemployment. Macroeconomic policiesalone, however, will leave the teenage joblessness ratesubstantially higher than that of adults. Structuralpolicies and programs--programs that are targeted on teen-agers within a high-growth economic environment--will benecessary if the teen unemployment gap is to be narrowed.

Demographic Factors

Several of the panelists cited the bulge in the sizeof the teenage population as having exacerbated the prob-lem of teenage unemployment in the past. The number ofteenagers is now near peak levels and is projected to de-cline over the next five-to-ten-year period.

Richard Freeman stated that the declining number ofteenagers would not have a large effect in reducing theteenage unemployment rate during the next few years.Peter Henle (Senior Specialist, Congressional ResearchService) called attention to the racial differences: Thegrowth in the nonwhite teenage population will continue forseveral years yet, while the number of white teenagers willbe declining. In addition, several participants calledattention to the increasing number of adult women in thelabor force who, in many instances, compete with teenagersfor jobs.

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Nonwhite Teenagers

Bernard Anderson emphasized that the nonwhite teenageunemployment rate has been increasing secularly. Moreover,labor force participation rates have been declining fornonwhite teenagers, and are substantially below the parti-cipation rates for white teenagers. He stated that, al-though the recovery could help, it was not likely to pro-duce much decline in the unemployment rate for nonwhiteteenagers. However, he pointed out that the recovery couldgenerate tax revenues for youth programs. He felt thatspecific attention must be given to the unique problemsof youths residing in the inner city.

Among the causes of high unemployment rates among non-white youths, Professor Anderson stressed the weak jobmarket in urban low-income areas and racial discrimination.He stated that requirements for entry-level jobs have risen.At the same time, the public school system has not ade-quately prepared young people in the inner city for what-ever jobs might be available. He also felt that many youngpeople do not want the menial jobs that might be availableto them in the inner city. He stated that income mainten-ance programs and the possibilities for obtaining incomethrough criminal activities have reduced the necessity foryouths to accept menial jobs.

Professor Anderson expressed reservations about thereal benefits of summer jobs programs, aside from providingincome to participants. He said that, in instances inwhich the jobs were make work, employment programs can havenegative effects on the participants. He argued that rela-tively less emphasis should be placed on summer jobs pro-grams and more on year-round work and training programs.He felt that it was generally important to combine trainingand education with youth employment programs.

There was general agreement among conference partici-pants that the labor market problems of nonwhite teenagersare severe, that they have been worsening over a long

29

period of time, and are not apt to be improved substantiallyby the recovery.

The moderator, Dr. Rivlin, asked Professor Andersonto elaborate on the reasons for the declining labor forceparticipation rates among nonwhite teenagers. He respondedthat, in addition to rising school enrollment rates, itwas a combination of discouragement and the progressivelyworsening employment situation.

Nancy Barrett of CBO observed that the low quality ofjobs available to inner-city youth, coupled with risingaspirations, might be part of the explanation for declininglabor force participation rates among nonwhite teenagers.

The Nature of the Problem

The significance of teenage unemployment as a longer-run phenomenon (apart from the recession) stirred substan-tial comment and discussion.

Several panelists emphasized the special attributesof teenage unemployment compared to unemployment amongadults. To some degree, the teenage unemployment rate ishigher than for adults because of the characteristics ofteenagers' participation in the labor market. A substan-tial proportion of unemployed teenagers are either newentrants or reentrants to the labor market. Teenagers fre-quently enter the labor market for short periods of time;and, when in the labor market, they change jobs more fre-quently than adults.

According to Professor Freeman it was not an "unem-ployment problem," per se, but rather a "youth labormarket problem." In his view, the youth labor market prob-lem included the problem of the poor quality of jobs avail-able to many young people, even for some groups of recentcollege graduates.

Professor Freeman argued that the unemployment rateis not a good indicator of hardship. The majority of un-employed teenagers have not lost a job. In general, muchof teenage unemployment is associated with a limited periodof job search upon initial entry into the labor market.Moreover, teenagers are highly mobile--moving in and outof the labor force, from school to work, back to school

30

(perhaps with a part-time job) etc. He felt that, ingeneral--excluding inner-city youths--unemployment is ashort-term problem for most teenagers.

Ralph Smith agreed that a large proportion of teenageunemployment is due to their being recent entrants to thelabor market. However, he felt that it should not be dis-missed as being less of a problem but rather a differentkind of problem.

Robert Levine of CBO questioned whether, in the absenceof recession, unemployment for white teenagers constituteda serious social problem.

Richard Freeman pointed out that not much was knownabout the long-term effects of unemployment among youngpeople. Does it cause long-term damage to individuals ornot? In addition, both Professors Freeman and Andersonfelt that there was a dearth of information on the labormarket activities of youths. This topic came up severaltimes, especially in the discussion of unemployment in theinner city.

Bernard Anderson stated that inaction has resultedfrom confusion over what the problem is and whether, infact, there is a problem. He said that in his view theproblem is that large numbers of young people have unfavor-able experiences in the labor market. This has importantimplications for how youth feel about themselves and abouttheir commitment to the basic values of the country, suchas patriotism and the role of the family.

Beatrice Reubens pointed out that it was not inevitablefor teenage unemployment rates to be substantially higherthan adult rates, since some industrial countries, especiallybefore the most recent recession, had avoided high teenageunemployment rates. She emphasized the importance of whatshe referred to as "prearrangement of jobs" for youngentrants into the labor market. She stated that there aresome countries in which 85 to 90 percent of new entrantsto the labor market have jobs several months before theyleave school.

Professor Reubens felt that teenagers in school shouldnot be lumped together with those out of school in unem-ployment statistics. She stated that, although there issome overlap, the in-school groups is predominantly aged

31

16-17 and the out-of-school group, aged 18-19. She feltthat the recession had hit the out-of-school group especiallyhard.

Senator Domenici stated that, in his opinion, thesubject of the conference was one of the most difficultproblems faced by the country. He felt that the typicaleconomic recovery will not solve the problem of teenageunemployment and it will be here for a substantial periodof time.

ISSUES AND OPTIONS IN EDUCATION

33

THE SCHOOL TO WORK TRANSITION

by

James S. Coleman*

I would like to discuss several points, beginning witha plea for research of the sort that does not exist now, orat least is infrequent. Current research allows us to saya great deal about unemployment rates for a given age group,and we can say a great deal about the current educationalor occupational status of persons of different ages and ofdifferent racial groups.

What we cannot do well, and what the Parnes data hasonly begun to allow in a small way, is to follow this verycrucial period (between ages 14 and 25) during which aperson makes his transition between school and work. Nearlyall of our work is cross-sectional rather than longitudinalin form.

To illustrate the value of longitudinal data, I willcomment briefly on research which I carried out severalyears ago with some colleagues covering a national sampleof men who were between the ages of 30 and 39 in 1968,when they were interviewed. This research examined, throughretrospective response, their experience in education andoccupation from age 14 to their current age, 30 to 39.Some of this information, particularly that on periods ofunemployment, is not good when obtained retrospectively,but other information on a man's work history seems to bevery good.

One of the points that is most striking from thisinformation is that the process of leaving school and goingto work is a very complex one for many people. To illustratethis, I will give five different definitions of the pointof transition from school to work. We found it necessaryto distinguish all five of these. One is the first entryinto the labor force. That is often a part-time job,

^Professor, Department of Sociology, University of Chicago

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36

sometimes a full-time job, Many times first entry into thelabor force has no connection with any other aspects of thistransition from school to work.

The second definition is the first exit from educationfor a more than three-month period, that is, more than thesummer period. This, of course, is a different thing thanthe first entry into the labor force, for most young peopleoccurring at a later age.

Third is the first full-time job, which is still adifferent thing.

Fourth is the last exit from education, because formany people there is a difference between the first exitfrom education and the last exit from education.

Fifth is the first full-time job after the last exitfrom education, which one might conceive of as his finallaunching into the labor force.

There are a number of things that can be said aboutthese different definitions of the point of transition fromschool to work. The first is that there is a large amountof time between the first and the last. On the average,there is a very large amount of time between the first entryinto the labor force and the first full-time job after thelast exit from education. To look at it in a different way,for most men there is a long period, or some period of time,during which they have both labor force and educationalexperience.

My second point is that this overlay between educationand work is considerably higher for whites than it is forblacks. That is, we spoke earlier about unemployment. NowI am looking at a different phenomenon, doing two things atonce, attending school and working. Most people have anoverlap between education and work, and blacks have a muchsmaller overlap than do whites.

A black's first entry into the labor force is later,not earlier than that of the average white. And a black'slast exit from education is earlier than that of the averagewhite. He gets a job later and leaves school earlier.

The last result I want to mention from this researchis that a great deal of a man's occupational mobility overhis career occurs during this transition period. Aboutthree-quarters of the mobility for blacks and for whites

37

occurs during the period between the first entry into thelabor market and the last exit from education. His incomegrowth, in contrast, occurs very largely after the last exitfrom education.

That result surprised me very much. However, when wethink about the first entry into the labor force that manypeople have, it may not be so surprising. Many of thepersons who ultimately end up taking a job after collegehave had, early in life, jobs that they never intended tokeep. These may have been part-time jobs, summer jobs,or even a longer full-time job. Thus the result is notsurprising when you think about it, but it is neverthelessan important point: about three-quarters of the occupationalmobility of a man's experience over his career does occurbetween the time he enters the labor force and the time helast leaves education.

Now I would like to shift to a general observationthat stems from a look that I took in 1962 at two things:the rate of new job formation and the rate of new personsformation. In a sense, the problem we are addressingtoday has to do with keeping these two things in balancein some way. Our present difficulties stem in part fromthe fact that the rate of new job formation in the 60sand early 70s and the rate of new person formation inthe late 40s and 50s were not at all in balance. Therewas a much larger rate of new person formation in thelate 40s and 50s than there was of new job formation inthe 60s.

If one looked at the demographic changes beginning in1946, the year in which there was an enormous increase inthe birth rate, and projected the rate of new job formation--I did this around 1962--one would have predicted a muchlarger increase in youth unemployment than in fact occurred.What surprises me is that we digested this period, thisenormous engorgement of youth that the society was con-fronted with in the past decade.

I think that there are changes of two kinds that areimportant to look at. There is one general trend andanother particular phenomenon which characerized thedecade of the 1960s. The particular phenomenon was merelythe large increase in numbers of young persons in the 1960s.The general long-term, secular trend, which we can see overa longer period of time, is increasing difficulty in thelabor force for young people. That is a fairly slow seculartrend that was greatly compounded in the 1960s by thisvery "Large work force.

38

I believe it; is difficult to predict whether in 1980youth unemployment problems will be worse than they arenow, or not as bad as they are now. We can say, however,because of the reduced birth rate, that the problem willnot be as much worse in 1980, compared to 1976, as theywere in 1970 compared to 1966. One of these phenomena,the particular phenomenon of the swollen age chart, hasbeen removed.

We can predict other things equally well or evenbetter. We can predict, for example, that crime willdecline. I would be willing to bet that we will haveless crime in 1980 than we do in 1976, because we knowmost crimes that are committed are by 18, 19 and 20year-olds, and will have fewer of them in 1980 than wehave in 1976.

Finally, what I want to say is the fundamental problemas I see it is that a capitalist economy or a marketeconomy has not a natural place for an intermediate statusbetween full dependence and full productivity. A capital-ist economy or market economy has no natural place foran intermediate status between full dependency, which aperson is in when he is in school, and full productivitythat he is in when he is in the labor force, If thereare managed budgets (budgets of the sort that govern-mental or non-profit organizations have, and as exist insocialist countries), rather than budgets that must haveprofit and loss statements and must be competitive in amarket, then it is quite possible to combine in the samebudget activities that create private goods with publicservice activities.

If, as in a capitalist economy, there are marketinstitutions on the one hand, and governmental institutionson the other, it is almost impossible to combine thoseactivities in the same budget without some sort of specialconsideration such as subsidies. Given this difficulty,there is no natural place in a market economy for an inter-mediate status between full dependency and full productivity,This means that the problem of the transition from depen-dency to productivity is more difficult in the UnitedStates than it is in a socialist country.

There have been several institutional devices of onesort or another, which have attempted to make up for this.

One general class of devices is a special competitiveposition for youth. The best example of that would be a

39

lower minimum wage. Given that there is no status ofpartial dependency and partial productivity, one way ofresolving this is to have special competitive positionsfor youth, such as a lower minimum wage.

A second is to have special temporary institutionswhich are not in a competitive market, such things as thePeace Corps, the Army, VISTA, CCC, Neighborhood Youth Corps.Whether they are full year-round activities, summer acti-vities, whatever they are, they are things that may bethought of as sheltered work shops in the sense that theyare outside the private economy. They have the characterof being temporary holding institutions which are not ina market economy and which have room for youth or aredesigned for youth.

Sometimes these are brought about by natural conditions,such as the existence of a war. Other times, they arespecially devised, as the CCC was in the 1930s. But themajor point is that this is the second institutional so-lution for this problem.

A third institutional device is to use education as acushion, that is, to extend the dependency status longer.I think this is the institutional device that we have usedmost in this country.

To go back over these three devices: The first is tohave a special competitive position for youth as they enterthis market economy. The second is to have special temporaryinstitutions which are neither full dependency nor fullproductivity, but are specially created for youth, such asthe CCC or the Army. The third is to extend the periodof dependency longer, that is to extend the educationalstatus longer.

I think the third device, extension of education isthe principal reason why in the 1960s we did not have thevery extensive unemployment among youth that one couldvery easily have predicted in 1960.

There is, I believe, a serious defect to this thirddevice, that is using education as a cushion. ProfessorAnderson described the way in which some jobs, for example,the Neighborhood Youth Corps, and in some of the jobs thatyoung people move into as their first jobs make youth ill-fitted for subsequent work. The fact that those jobs arenot real jobs makes young people less well-prepared for

40

real jobs later on. Similarly, the fact that this cushionof education is not real education, or the fact that theeducational institution is being used as a holding station,means that it ill-prepares young people, or prepares themvery poorly, or unprepares them, for productive activityafterwards.

TEENAGE UNEMPLOYMENT: CAN REALLOCATINGEDUCATIONAL RESOURCES HELP?

by

Richard Freeman*

What is the nature of the teenage unemployment problem?Can the high rates observed in the U.S. be reduced by chang-ing educational resources and the school system? Whatadditional information and analysis are needed to providefirm answers to these questions?

Discussions of the Problem

At the outset, it is important to recognize what is andwhat is not involved in the teenage unemployment problemor what I prefer to call the youth labor market problembecause it extends to young persons beyond the teenageyears and involves other market problems such as: lowrates of labor participation among young persons no longerenrolled in school; lack of jobs with training for thefuture for many young persons; significant and risingrates of crime by teenagers.

With respect to the unemployment dimension with whichthis conference is concerned, it is important to recognize:

1. That the unemployment of teenagers is high bothamong those enrolled in school and presumably looking forpart-time or temporary work, and among those no longerenrolled. In 1973 (before the recession) the rate for thelatter was not that different from the rate for the formeras is shown below.

^Professor, Department of Economics, Harvard University.

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42

Male Female

Age Enrolled Not Enrolled Enrolled Not Enrolled

16-17 14.5 20.6 16.9 19.7

18-19 11.2 9.9 10.5 13.8

20-24 6.9 5.3 4.8 7.7

The percentage unemployed drops for both groups as they age ?falling especially rapidly among not enrolled males.

2. The extraordinary rates of unemployment and non-participation in the work force among black teenagers,particularly men. In 1973 unemployment among black maleteenagers aged 18-19 was 26.6 percent compared to 12.5percent for their white peers, Among high school graduatesaged 16-24 in October 1973, 28.3 percent of all black andother nonwhite graduates from the class that graduated inJune 1973 were unemployed; 22.3 percent of those who hadgraduated in 1971 were unemployed, and 9.2 percent of thosefrom the class of 1971 and 10.4 percent from the earlierclasses—rates nearly triple those among comparable whites.Rates for school dropouts were on the order of 20 percent.Moreover, because the labor participation of young blacksis relatively low, the proportion employed was exceptionallysmall. In the high school graduating class of 1973, 49percent of blacks (versus 74.1 percent of whites) not en-rolled in college were employed, as of October 1973; in theclass of 1971, 69 percent of blacks versus 80,0 percentwhites were employed,

3. Unemployment has suddenly become a problem foryoung college graduates as well as high school graduatesand dropouts. In the college class of 1972, 13.2 percentof graduates under 25 years were unemployed six months upongraduation, creating a problem not only for them but forthe less educated nonenrolled teenagers with whom theycompete for jobs. College graduate unemployment wasespecially severe among humanities and social science majors,with rates of 15-16 percent.

43

4. Unemployment and nonemployment among young personsis not limited to the "teenage" years, particularly forblacks. In 1972, 14,8 percent of 20-21 year old men notenrolled and 22.1 percent of 20-21 year old black mennot enrolled were either unemployed or out of the laborforce.

5. Substantial youth labor market problems, whichshow up in high rates of unemployment, are essentiallya U.S. phenomenon. In other western countries, unemploy-ment rates among the young are reasonably similar to thoseamong older workers, in contrast to the markedly higherrates found in the U.S. The better performance of foreignyouth labor markets suggest that the problem in the U.S.is remediable.

How Serious is the Youth Labor Market Problem?

Unfortunately, the young get older. Fortunately, whenthey do, the rate of unemployment and related labor marketproblems diminish. The fact that youth unemployment declinesas persons age and the distinct characteristics of unemploy-ment among the young raise important questions regardingthe significance of the problem. Some of the factors whichmust be considered in evaluating the significance of youthunemployment include:

6. That youth unemployment tends to be of shortduration and due, in large measure, to entry and reentryin the work force. In 1973, 54 percent of the unemployedaged 16 to 21 not enrolled in college were unemployed forless than 5 weeks compared to 51 percent of all workers;just 3 percent of high school graduates had spells of 27weeks or more compared to about 8 percent of all workers.Two-thirds of unemployed youth in 1974 were either re-entrants or new entrants compared to 41 percent of allunemployed persons. Over one-third had never worked before.If reentrants and new entrants are excluded, the rate ofunemployment among 16-19 year olds in 1974 would be 5.1percent, which is not that much greater than the equivalent3.2 percent for all workers. Much of the youth unemploy-ment problem is a problem of the transition from schooland nonlabor force activity to employment.

7. When young men marry and assume family responsi-bilities, rates of unemployment fall sharply. The rateof unemployment for young heads of households was aboutone-half that for all young males in 1974. Similarly, as

44 ,

they age, the unemployed young person becomes employed.Rates of unemployment drop sharply both cross-sectionallyand longitudinally, so that by the time young persons are,say 25 to 34, rates are quite low for whites and muchsmaller though still non-negligible among blacks (7.2 percentamong black men compared to 3.5 percent among white men in1974).

8. There is no evidence that having considerableunemployment and related poor work experiences at a youngage "scars" a person for life. Teenage unemployment mayhave deleterious effects on work attitudes, investment injob skills, and lifetime income and related labor marketexperiences but this has not been documented. Teenage un-employment may be purely a transitional problem withoutlong-term consequences.

9. While the magnitude of the teenage unemploymentproblem has been enhanced by the demographic changes ofrecent years, which made the number of young persons experi-encing unemployment much larger than ever before and pre-sumably contributed to the high rates of unemployment, itappears unlikely that the problem will disapper as thesize of the youth cohort declines. The number of youngunemployed persons will of course drop in the next decadebut, according to unpublished calculations by Feldsteinand Wright, this will not significantly lower the ratesof unemployment among the young. Moreover, over the sameperiod that the number of young persons seeking work hasincreased, so to has the number of women, without similarunemployment problems. More is involved than the demo-graphic bust.1

10. Not all data sets show high rates of unemploymentamong teenagers as is found in the Current PopulationSurvey reports used in official government statistics.

1. It is intriguing to hypothesize that the growth of thefemale work force may have reduced demand for teenagers.Many women work part-time or at entry-level jobs which mightalso be filled by teenagers. To the extent that employersprefer, at existing relative wages, women to teenagers forthese jobs, the teenager may have been "pushed" out ofcertain job areas by the increased availability of women.Similarly if the female-teenage wage rate has fallen.

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The National Longitudinal Survey of young men, for example,yields much lower rates of unemployment, raising questionsabout the statistical measurement of the problem.

How Might Schooling Help?

As has been widely recognized in recent years, educa-tion and the school system are not the cure-all for socio-economic problems. Nonetheless, there are some ways inwhich changing the allocation of resources and incentivestructure in education might contribute to reducing theyouth unemployment problem. Significant changes in thejob market may, however, be needed to make a significantdent in the problem.

11. Because much of the youth unemployment problem isdue to the relatively long period before new entrants andreentrants find jobs and the unsatisfactory nature of manyof these jobs, a strengthened placement function at highschools could reduce unemployment by providing a betterschool-work transition. I believe that the public edu-cational system has something to learn in placement fromproprietary vocational schools. These schools have longstressed job placement and are obligated to make availabletheir placement records. In my visits with reputable pro-prietary schools and with business colleges and technicalinstitutes, the importance attached to job placement acti-vities has stood out. The stress on placement pervadesthe student body and teaching staff. I would favor a pro-gram that makes job placement of young persons an importantactivity within the school system, with employment service-type personnel and activities expanded therein. Publicschools, like proprietary schools, should keep records onthe job success or lack thereof of students in variouscurricula. Making job placement contribute more visiblyand schools be more accountable for what happens to theirgraduates ought to improve the school-work transitionprocess. The placement facilities at schools should beavailable to dropouts and other young persons as well as tograduates in each year's class.

12. Experiments with new work-study arrangements alongthe lines suggested by the Coleman Panel should be encouraged,Work-study arrangements, in particular during the last yearsof high school, can be made which make the transition of

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school to work more gradually. One possibility is to offerhalf day of work and half day of school alternatives tostudents. Another is to offer periods of full-time schoolingtogether with periods (such as in the summer) of full-timework. Either of these schemes can be made attractive byproviding special certificates of work accomplishment, aswell as the standard high school diploma, to graduates.There is no evidence in the National Longitudinal Surveythat students who do part-time work during school sufferin their academic progress, though because of the nature ofmost part-time teenage jobs, there is also no evidence ofgreater labor market success thereafter. The types of jobsavailable to young persons under such a program, and inparticular the training and skills afforded, must becarefully scrutinized, particularly if minimum wages arelowered or employers subsidized to hire teenage learners.

13. With respect to Career Education, it is importantto recognize that: perhaps 1 million young persons enrollin proprietary business schools and technical institutesto obtain occupational training while many more enroll injunior and community college vocational courses. Theseschools have, I believe, been generally more successfulin career education than public high schools, in partbecause they "sell" career education only and are judgedby its relevance and value. Some public vocational schoolscompete in this market (Blue Hills in Massachusetts is acase in point), but there is, I believe, substantial roomfor cooperative ventures between high schools and proprietaryschools, community, and junior colleges in provision ofcareer education. The young person who wants to studytruck-driving to obtain the relevant license with the in-tention of a trucking career should be given that optionwhile in high school. Similarly for other areas. Whilethe institutional arrangements may be complex, we shouldexploit the expertise and experience outside of the publichigh school system and create greater opportunities forstudents to pursxie alternatives.

What Evidence is Needed?

We know less about the wages, job characteristics, andwork experience of human beings than we know about the pricesand characteristics of grain, hogs, and agricultural com-modities , Different surveys show different rates ofyouth unemployment. It is important to obtain better infor-mation in several areas,

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14. The Bureau of the Census October survey of high schoolgraduates should be strengthened to obtain additional dataon the wages and labor force experiences of those who donot go to college. Additional methods of obtaining infor-mation on high school graduates, possibly along the linesof the Endicott Placement Survey of college graduates,should be encouraged. We need annual information on theeconomic position of young high school graduates and drop-outs beyond that currently available to understand betterthe nature of the youth labor market problem. With respectto college graduates, the 1972 survey of the employmentof the class of 1972, which apparently is not going to bereplicated, should be made annually or biennially.

15. The National Longitudinal Survey of the HighSchool Class of 1972 and the National Longitudinal Surveyof men aged 14-24 in 1966 should be continued, with parti-cular emphasis placed on the work and school experience ofthose who do not go to college. As the class of 1972 sur-vey contains extraordinary detail on the school experiencesof young persons, including various federal programs, thisdata set provides our best fix on the different impactsor different types of schooling on job success.

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DISCUSSION: TRANSITION PROBLEMS

The Transition from School to Work

Several participants focused on the process of youths'transition from school to work, especially the transitionto the first post-school jobs. For example, is there neces-sarily a tradeoff between upward mobility and freedom forteenagers on the one hand, and high teenage unemploymentrates on the other?

James Coleman suggested that a tradeoff had been madein this country: Young people experience more unemploymentbut hold relatively fewer dead-end jobs compared to thecountries of Western Europe and Japan. Young people inthose countries tend to have more limited aspirations, andthey fit into job patterns without much search and experi-mentation. He observed that no one has been able to de-termine a way to keep young people's options open, whileat the same time focusing on a limited set of concreteopportunities of the type available in the job market.

Senator Domenici felt that a large proportion of youngpeople, who are about to graduate from high school, do nothave a specific idea of what they are going to do in thejob market. Thus, there is typically a period of searchand experimentation in the job market after youths leavehigh school. He felt that, in general, schools seemed tobe unwilling to address the issue with young people.

Peter Henle felt that the period of exploration foryouths was partly an economic phenomenon, since a hundredor even fifty years ago, youths had to go to work. Theirfamilies needed income to survive.

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Nancy Barrett questioned whether schools foster un-realistic expectations on the part of youth--especially ininner-city schools.

James Coleman stated that he saw a growing dichotomybetween the career aspirations of youths and the types ofjobs available. This dichotomy is not limited to blackyouth. However, it is more pronounced for youth livingin lower-income environments. Such an environment tendsto generate unrealistically high aspirations--"perhaps akinto day-dreaming."

David Mundel of CBO suggested that the situation inlower-income schools may present a dilemma: Unrealisticexpectations lead to frustrations; and yet it is not clearwhat role, if any, schools should adopt in affecting teen-agers' career expectations in such circumstances.

Professors Freeman and Coleman stated that variouswork-education arrangements may be a promising approachto helping youth make the transition from school to thelabor market.

Professor Coleman stated that youth, not only in thiscountry but others, were becoming less tolerant ofauthority. He proposed that, in view of these changes,entitlements might receive consideration--a policy in whichyouth would be allowed wider choices in selecting theireducation and training.

Senator Domenici expressed particular interest in thepossibilities for some new institutional thrusts that mighthave some short-term impact on teenage unemployment--possibly similar to the Civilian Conservation Corps approachof the 1930s.

Job Placement of Graduates

Responding to Professor Freeman's statement that transi-tional services, such as placement, might reduce teenageunemployment, Beatrice Reubens cautioned that it would notbe sufficient to have schools become much more active inthe placement area without also involving the U.S. Employ-ment Service, manpower agencies, unions, and employers.She also questioned whether proprietary schools had done agood job in placing graduates.

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Bernard Anderson emphasized the possibly fruitful rolethat the Public Employment Service could play since publicschools had not in the past taken an active role in placinggraduates. Moreover, budgetary problems were likely toconstrain the actions of schools in this area.

MANPOWER POLICY ISSUES AND OPTIONS

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FOREIGN EXPERIENCE

by

Beatrice G, Reubens*

Unemployment Levels

In the 1960s Americans could look with envy at the lowteenage unemployment rates and ratios in other countries.But in recent years and especially since the recent re-cession began, many countries fear that they are entering"An American Way of Unemployment," as a recent article ina British magazine put it. At the beginning of 1976Australia registered a 15.6 percent unemployment rate forteenagers, in contrast to an average of 3.9 percentthroughout the 1960s. The corresponding adult rates were3.2 and 1.1 percent. Among the other countries where theratio of teenage to adult unemployment rates have reachedor exceeded American levels in recent years are Sweden,Italy, France, Denmark, and Belgium. It is rare to finda country with a ratio of less than 3:1 for youth to adultunemployment rates. One example is Japan where job vacan-cies for new entrants were much more numerous than the1975 graduates from junior high school (7:1) and seniorhigh school (4:1). But correspondingly the burden ofunemployment falls heavily on workers of 45 and over.

Unlike the American situation during the latestrecession where teenage unemployment rates rose relativelyless than adult rates and the ratio actually dropped from4.2 in 1974 to 3.1 for the first nine months of 1975,foreign countries have shown rising ratios during therecession years. It will therefore be necessary to waitfor the data on the recovery period to judge whetherpermanent teenage unemployment problems have emerged incountries which earlier were free of them. From other typesof analysis, however, it is safe to say that problem groupswithin the teenage sector have been identified and that

^Senior Research Associate, Conservation of Human Resources,Columbia University.

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these represent structural difficulties. Moreover, severalof the foreign countries face the prospect of an increasingnumber and share of young people in the population and laborforce, while the United States will have a decline in thenumber of teenagers at least into the mid-1990s at the sametime as the total population and the working age populationabove 20 will continue to increase.

Most foreign countries do not count as unemployedteenagers in full-time education who are seeking jobsduring the school year. The proportion of teenagers bothin school and the labor force tends to be much lower inother countries than in the United States, partly becauseschool is more demanding and partly because some countriespay allowances to youth who continue their education be-yond the compulsory level, especially if they come fromlow-income families. Since other countries are not com-plaining of the decline in academic performance reportedin the United States and studies in several countriesshow that part-time jobs during the school week are notfavorable to school work, several policy implications forthe United States emerge:

a. Distinguish sharply in statistics and analysisbetween unemployed teenagers according to their schoolstatus. This will also result in a useful distinctionbetween 16-17 year-olds and 18-19 year-olds.

b. Consider that the needs of unemployed in-school youthmay be met as well or better through educational and incomemaintenance policies as through job policies. Paid serviceswithin the schools or community may also be used for thispurpose and also to reduce the competition for jobs be-tween in-and out-of-school youth.

Surveys among countries on the unemployment experienceof new entrants indicate that a substantial proportionenter their first jobs without suffering any unemploymentat all. Differences in the proportions who succeed inavoiding unemployment are related to the state of the labormarket for youth, the degree of organization in the youthlabor market (existence of apprenticeship and other formaltraining openings and degree of employer cooperation inrecruiting), the prevailing work ethic and acceptance ofgoing directly to work upon leaving school, the season ofthe year when school ends, and to a lesser extent the

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deliberate efforts of the official information, guidanceand placement services to pre-arrange jobs. In the caseof Japan where all of the factors are favorable, 85 to 90percent of junior and senior high school graduates avoidentrance unemployment.

Countries with strong transition services seem toshorten the entrance unemployment of disadvantaged orhandicapped teenagers, those with inferior academic cre-dentials, those whose occupational aims are higher thanthe achievement of their relatives and peers, and thosewho cannot find work close to home. The existence ofremedial, social, intensive counseling and other servicesas well as training programs aid in the placement ofthese groups.

While those who remain with the same employer suffersome lay-off unemployment, it is much less than the un-employment of those who change jobs. However, a large pro-portion of youths do change jobs without any unemploymentat all. The National Longitudinal Survey of Americanyouth indicates that for youth 16-21 years old who hadchanged employers between 1968 and 1971, three-fourths hadexperienced no unemployment during the preceding twelvemonths. Among countries, success in job-changing withoutunemployment is related to the tightness of labor markets,since the proportion of voluntary job-changing is higherin such circumstances and voluntary job-changers sufferless unemployment than involuntary.

American teenagers who are full-time in the labormarket appear to change jobs somewhat more frequently thanyoungsters in other countries, allowing for differencesin the tightness of labor markets. In every countrysmall groups of very frequent job-changers have beenidentified among teenagers and young adults. They usuallyaccount for a disproportionate share of all youth unemploy-ment, although under favorable economic circumstances, theduration of their unemployment may be the same as theaverage for all youth. These young people often havepersonal or social problems as well as employment problems.A suspected but unmeasured differential is the willingnessand economic ability of teenagers in various countries toabstain from job search between jobs.

There is some evidence that those who enter the labormarket and change jobs without unemployment do somewhatbetter in terms of type of job and earnings than those

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who have some unemployment. Some doubt is cast on the job-search theory which posits that unemployment may have valuefor job-seekers.

Apprenticeship and Formal Training

Among the attractions of apprenticeship and otherformal training for youth are the ease of pre-arrangementwhich avoids entrance unemployment and the tendency ofapprentices and trainees to remain with the first employer.Apprentices are not immune to unemployment but they haveshown greater stability during training than other youth.Historically, countries with such programs have had lowerunemployment rates than others. However, the result maybe due as much to the general willingness of employersin these countries to hire untrained youth as to theapprenticeship system itself. In Great Britain, whereyoung girl school-leavers have relatively few apprentice-ship and training openings compared with boys, the girls'unemployment rates have usually been lower than those ofboys who enter apprenticeship in relatively large numbers.

Apprenticeship is of course also valued because ofits access to skilled status and good pay. Not allapprenticeship is of this character, however, and someapprenticeship programs which place young people in smallstores, workshops, offices and the artisan trades areunder attack because they offer poor training, inadequatepay for production work, and no real future in the occu-pation since there is an oversupply of trainees. AGerman study of men in the labor force who had undergoneapprenticeship in craft or artisan trades showed that about60 percent of them were not working in such workplaces in1970.

Perhaps the most serious restriction on apprenticeshipas a method of easing the transition from school to workis the declining interest of employers in providing it.In absolute terms and as a proportion of all skilledworkers, the number of apprenticeship places has declinedin several countries where the system has been wellestablished—West Germany, Great Britain, Australia areamong them. The reasons given are the rising cost oftraining, prolonged schooling which deprives the employerof the preferred age-group and wide selection of youngpeople, and technological and organizational changes whichreduce the needs for well-rounded craftsmen. In short,

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production conditions in Europe are coming closer to thosein the U.S. However, Japanese enterprise training con-tinues to operate successfully as a bridge between schooland work.

It appears that the institution of apprenticeshipas it has been organized is likely to decline rather thanexpand, although certain strongholds such as the con-struction trades are unlikely to wither away. While wemay not have reached the upper limit of apprenticeshipin the United States, it is hardly likely to provide amajor avenue for youth to avoid entrance unemployment.

Differential Wage Rates for Youth

Many foreign countries have legal provisions, col-lective bargaining arrangements or traditions which permitor specify that youth may be paid less than adults, oftenin a fixed percentage varying by year of age. Theseprovisions have been cited in the past as a cause of lowyouth unemployment rates. However, the relevant com-parison is not between legal or contract provisions andactual adult wage rates. It is between the actual hourlyor weekly earnings of youth and those of the relevant adultsThe minimum is not a maximum and it does not limit thewage increases available to youth. Moreover, the uniformminimum wage which prevails in the United States cannotbe judged in the absence of wage rate distributions forcovered youth which indicate what proportion are paidat or very close to the prevailing legal minimum wage.If an insignificant proportion are at that level, it isalmost certain that a reduced minimum for youth wouldproduce very few new job acceptances by youth. Conversely,a heavy clustering of youth wage rates at the minimumwould suggest that a pay reduction might increase thenumber of youth jobs, but not necessarily the total numberof people at work. Surprisingly little analysis of actualyouth earnings has been done, either in the U.S. or abroad.Preliminary comparative study of youth earnings suggeststhe following:

a. The actual movement of youth earnings abroad sincethe end of World War II has been more in favor of youththan any other age group, with only slight variations dueto demographic or economic trends.

b. Several countries report a growing reluctanceon the part of employers to hire young workers because

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there may be a cost disadvantage over other age groups,especially if induction and training costs for youth areincluded.

c. Apprentice wages in Britain have in some casesequalled or exceeded those of comparable young workers.In other countries where apprentices are paid educationalallowances, these have risen so steeply that some employerssee them as competitive with regular wages.

d. Youth earnings in the United States, taken yearby year and separately for industries, probably are not ahigher percentage of adult earnings in the same industriesthan is the case in many other advanced nations.

e. Although no harm can come from establishing aseparate youth minimum in the United States, it is unlikelythat it will result in many new youth jobs so long asactual wage rates are at present levels. A county-widehigh school employment office in Westchester, New York,reported recently that any offers of part-time jobs whichdid not pay at: least $2.00-$2.50 an hour were a waste of.time. Similarly, the national permit system which enablesemployers to pay students less than the minimum has pro-duced relatively few applications and even fewer actualutilizations, Youth wages are as sticky as all others.

Youth Transition Programs

To a surprising extent nations are following aparallel course in appraising and prescribing for thestructural problems affecting at least a portion of theirteenagers. The dissatisfaction expressed in the UnitedStates with high school education and the consequentattention to Career Education has not been repeated pre-cisely eleswhere, but other nations are seeking tobring education into closer proximity to the world ofwork, to inform young people about the options and con-ditions they will face, to combine school and the work-place, to bring general and vocational education intoharmony, and to devise new forms of education/training forthe segment of youth which will not or cannot master thebasic cognitive skills. The last group, varying in sizefrom country to country, is not a new phenomenon, but itcauses increasing concern as the economy provides fewer

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and fewer jobs for such youth. Special programs have beeninstituted for remedial work and second-chance opportuni-ties, but it is too early to appraise them.

In the very best of European programs to build bridgesbetween education and work some elements are present whichcontribute to effective operations. The legislature setsforth the objectives, guidelines and financing, but leavesto executive agencies the working out of details. Thelegislation provides for a delay in the start-up of theprogram, as much as four or five years, in order thatadequate preparation may occur. A combination of theeducation and manpower agencies does the overall planning,establishes the responsibilities of the various agenciesat all levels of government and sets up advance trainingor retraining courses for those who will deliver theactual services. Such advance training is a key factor,too often neglected in American social programs. Afterthe preliminaries are well under way, the new programis introduced gradually, starting in one part of thecountry or one type of school and expanding to nationalcoverage as trained personnel emerge from the specialcourses. The entire program is reviewed after it hasbeen in operation for a stipulated number of years, butmodifications may be made by the executive agencies with-out recourse to legislative action within the experimentalperiod.

Uhemployment Programs

The ingenuity of man has not produced a staggeringnumber of specific programs to cope with unemployment.A recent statement of the Council of OECD classifies theselective policy instruments under the following six broadheadings: selective promotion of employment opportunitiesfor specific areas, industries, groups or periods oftime; maintaining job attachments and employment; facili-tating manpower adaptation, better labor market functioningand work environment improvements; flexibility of workinglife; organization of migratory flows; income maintenancefor persons out of work.

In identifying the countries whose unemployment pro-grams seem outstanding, the following characteristicsappear significant:

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a. Programs are prepared in prosperousperiods and go into effect promptlyas economic indicators show declines.

b. General monetary and fiscal measuresare well integrated with specific unemploy-ment measures.

c. Within the specific unemploymentmeasures, special programs for youthoccupy a position which reflects thesocial priority attached to this seg-ment of the population.

d. A sufficient variety of measures andlarge enough programs are provided to coverthe needs of a diverse unemployed population.

e. Provisions for reducing or closing downof programs are set as a response to changesin the economy and programs are not endedsimply for financial reasons.

f. A set of basic programs for training,mobility, income maintenance and othermeasures is kept permanently in placewith cyclical variations in the utili-zation.

Comparing the actual programs in the U.S. with thoseof other countries in the present recession, one observesnot only a greater variety abroad but also relatively lessdependence on public service employment. Instead, one ofthe newer and most widely used types of measure in bothall-age and youth specific unemployment programs has beenthe subsidy to encourage training and employment or com-binations of both. Subsidies have been offered to privateemployers and to various levels of government in an effortto encourage the same intake of young trainees, apprenticesand workers as before the recession. Such programs alsoare advocated for their contribution to output at littlecost above the income maintenance payments.

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Countries vary considerably in the scope, flexibilityand administration of their programs and in the responseof employers to incentives. But little can be said asyet about the effectiveness, advantages and disadvantagesof individual programs for youth or about the longer-runimpact on individuals and the economy.

COPING WITH TEENAGE UNEMPLOYMENT

by

Sar A. Levitan*

This brief statement was prepared in responseto Dr. Alice Rivlin's invitation to comment"on the potential use and limitations of con-ventional monetary and fiscal policies indealing with teenage unemployment. Canspecific more targeted policies, such aschanges in minimum wages legislation and thevarious types of public employment trainingprograms, play a very major role in dealingwith teenagers' problems in the labor market?"

In Good Times

Let's first do away with the myth that the overallstate of the labor market has limited or no impact onteenage employment. The fact is that during the 1960swhen we last experienced sustained tight labor marketsteenage unemployment plummetted down to acceptable levels,at least for white youth. The unemployment rate of whitemale youths 18 and 19 years old declined to a respectable8 percent in 1969 from 14 percent six years earlier,even while the labor market was absorbing the initial de-luge of post World War II babies. Similarly, in the pre-ceding tight labor markets during the early 1950s un-employment of 18 and 19 year old white males declinedeven more, to 7 percent.

Lest we think that the decline was all due to thedraft, a look at the number employed in civilian jobswould show that the number of employed 18 and 19 yearolds rose by half a million, or 40 percent, during the

''̂ Professor of Economics and Director of the Center forSocial Studies, the George Washington University.

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same period. Young females who were not directly affectedby conscription also fared better in the labor market.The number of employed 18 and 19 year old white femalesalso rose by 50 percent to 1.5 million and their unemploy-ment rate declined from 13 to 10 percent.

The employment problem of black youth appears to bemuch more intractable and did not melt away in the warmthgenerated by tight labor markets of the 1960s. The unemploy-ment rate of 18- and 19-year-old black males never droppedbelow 19 percent and the lowest unemployment of blackfemales in the same age category did not decline below 26percent.

The evidence is clear then that tight labor marketswould largely resolve, not just ameliorate, the problemsof white youth unemployment. A small minority of whiteyouth and a larger proportion of black youth will continueto require special assistance to ease them into self-support. The assistance that black youth require will haveto reach out, however, beyond the usual employment andtraining measures and encompass desegregation in housingas well as improved schooling. No doubt the high blackyouth unemployment is also connected with the increase inwelfare during the 1960s and early 1970s and a comprehen-sive effort to reduce unemployment among black teenagerswould have to overhaul the various rules and practicesthat treat work and welfare as separate worlds. Arrange-ments will have to be designed that would allow youthfrom poor homes to combine work and welfare until theywork themselves out of poverty.

The Work Ethic Is Not Dead

But do teenagers want to work? Have America's younggiven up on the work ethic? The numbers are revealing. It istrue that the labor force participation rate of 18- and 19-year-old male youths continued to decline during the firsttwo decades following World War II. The culprit, however,was not rejection of the work ethic, but a commitment tolonger education and preparation for work. Increased af-fluence, partly due to more mothers opting for work thanhome care, also reduced the pressures on teenagers to sup-plement family budgets.

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But the past decade, which presumably witnessed thedemise of the work ethic, has not affected America's youth.Labor force participation (including armed forces) of 18-and 19-year-old males has been on the increase from 69percent in 1965 to 73 percent a decade later, while femalesin the same age category have registered the highestlabor force participation rate since the end of World WarII. During these years their labor force participationrate rose from 49 percent to 58 percent.

Excepting a minority of youths who need specialassistance to find and retain jobs, it would seem thatall the help that most teenagers needed to functioneffectively in the work force was enough jobs to go around.In labor markets with large job deficits it's only to beexpected that the inexperienced will be shoved to the endof the line arid some will give up completely. My prescrip-tion for the day is that the best way to reduce unemploy-ment—for youth as well as adults--is to create jobs.

Minimum Wage s

But this approach, although effective, lacks appealto the administration and to many in Congress. Instead ofopting to create new jobs, they seek the reasons for youthunemployment elsewhere. A favorite whipping boy (or girl)of the disturbingly high youth unemployment rate is theminimum wage. The explanation is simple; by imposing aminimum wage, the government prices youth out of the labormarket. The solution is equally straightforward—abolishthe statutory minimum wage and let youth work for lowerwages. Like most simple solutions, this is also thewrong s olut i on.

A confession is in order. I once testified beforeanother congressional committee in favor of a lower dualminimum wage for youth. At that time tight labor marketsand increasing numbers of teenagers seemed to suggestthat the dual minimum wage may have made economic sense.But Congress in its wisdom rejected the recommendationand whatever its merits in the past there is little tobe said in its favor in today's labor market, given theprojected decrease in the supply of teenagers by the endof this decade and continued high unemployment possiblyfor the rest of this decade. Anyway, there is room toquestion the salutory impact of a dual minimum wage. Whilethe rhetoric on the subject abounds, Dr. Robert Goldfarb, a

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colleage at The George Washington University, has examinedthe evidence. Based on the plethora of econometric studieshe concluded that a 25 percent increase in the minimum wagewould lower teenage employment by 3.5 to 5.5 percent. Thiswould appear indeed a significant reduction. But theseblessings cannot be taken in isolation. While a dual mini-mum wage may reduce teenage unemployment what will it do totheir elders? Dr. Allan Fisher addressed himself to theissue in a paper he prepared last year for the U.S. Depart-ment of Labor. His conclusion was that the additionalemployment of about 800,000 teenagers will result in thedisemployment of some 500,000 adults. Is this a worthwhiletradeoff, considering that in the years ahead the numberof teenagers will be on the decline while the number ofyoung adults will still be on the rise for several yearslonger?

What Can We Do?

Does this mean that we have to settle for burdensomehigh youth unemployment and to risk the eruption of thesocial dynamite (to borrow Dr. James B. Conant's apt phrase)that is inherent in a high youth unemployment economy? Dr.Conant's warning of 1960 has been well supported by thecrime statistics and other social ills that dominated theAmerican scene during recent years.

Is youth unemployment an insurmountable problem? Wedon't have to wait for tight labor markets before thequestion can be answered. Altogether the job deficit ofthe long-term unemployed teenagers stood at 425,000 atthe latest count. A combination of public job creation,the expansion of stipends for institutional and apprentice-ship training, and the expansion of the Job Corps couldabsorb the bulk of the long-term unemployed teenagersand reduce the total job deficit in the process.

The arithmetic is simple. If Congress revives thevetoed job creation bills, the measures would create aboutone million jobs by funding public works, community-basedorganizations and public service jobs. Congress couldrequire that teenagers share in the new jobs in proportionto their share in the total unemployment. Community-basedorganizations would be in the best position to serve minorityyouth and could be required to give them priority in thefederally funded jobs.

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Another and possibly sounder strategy for creating jobsis the expansion of apprenticeship and institutional vo-cational training. We should not just wish for better timesbut plan for them. When the economy recovers there will bea demand for skilled workers. A long-term investment intoday's unemployed youth would result in a large payoffwhen the economy recovers.

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DISCUSSION: MANPOWER POLICIES

Foreign Manpower Policies

Beatrice Reubens began the discussion by commenting onthe limitations of, and the value of, comparative studiesamong countries. She stated that it was difficult to iso-late the effects of policies from differences in underlyingeconomic and social conditions. She felt that inter-country differences in attitudes on the part of employersplayed an important role. In some countries, employersseem more willing to cooperate in assisting youth to getestablished in the job market than in others. As a reasonfor studying experiences of different countries, she sug-gested that there are similarities among countries in thesense that phenomena appearing in one advanced industrialcountry may be either present or may eventually appear inother industrial countries.

While some industrial countries have managed to avoidhigh teenage unemployment rates as an endemic or long-termphenomenon, she questioned whether or not the underlyingconditions which have contributed to low unemployment inthose countries in the past may now be changing. The rela-tive importance of apprenticeship may be on the wane, andyouths' attitudes toward work and careers are changing.Demographic factors are becoming less favorable to lowteenage unemployment in some countries of Western Europethat enjoyed low teenage unemployment rates during the1950s and 1960s.

William Stringer (of the Senate Budget Committee staff)asked about the foreign experience with wage subsidies as amethod for dealing with youth unemployment. Dr. Reubensresponded that the policy has been more effective in Swedenthan in France. In addition, she observed that firms insome countries are more interested in cooperating with man-power policies than in other countries. In some countriesfirms and unions are relatively more paternalistic towardyouth. She felt that some, but not all, of this differencein attitudes toward youths was due to differences amongcountries in unemployment conditions.

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U.S. Manpower Policies

Sar Levitan took issue with the position that youthunemployment does not respond to aggregate (monetary andfiscal) policies, or that youths do not want to work. Asevidence for the view that aggregate policies do affectteenage unemployment rates and that the strength of thework ethic has not declined, he cited the experience of thelate 1960s, when teenage unemployment rates were much lowerthan currently prevailing levels. Moreover, teenagers'labor force participation rates have trended upward inrecent years (except during recessionary periods and fornonwhites). However, Professor Levitan felt that the nationshould not rely only on tight labor markets to meet theteenage unemployment problem. He argued that the costs ofhigh teenage unemployment are great, although difficult toquantify. For one thing, he cited a connection between un-employment and crime. For another, he mentioned the in-creased welfare burden caused by unemployment.

While the key to a longer-term solution is a tightlabor market, Professor Levitan suggested that severalpolicies could be implemented in the interim. First, jobscould be created. Rather than create these jobs in thegovernment sector he emphasized the private, nonprofitsector, such as community action agencies. His other sug-gestions included expansion of apprenticeship programs andan expansion in the Job Corps. In terms of financial re-quirements, he calculated that an addition $2 billioncould have a significant effect in serving the approximately425,000 long-term unemployed teenagers.

On the topic of minimum wages, Professor Levitan statedthat, in the tight labor markets in the late 1960s, he hadsupported the idea of a differentially lower minimum wagefor teenagers. However, he did not support such a policyin the current context, or in the foreseeable future,because it would displace more mature workers.

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Bernard Anderson argued that a lower minimum wage wouldexacerbate the problems (including high quit rates) whichcharacterize the secondary labor markets in inner cities.Beatrice Reubens pointed out that regional differences inwage structure are important and that in some foreigncountries allowances are made for this in minimum wagepolicies. None of the panelists advocated the differ-ential minimum wage as a strategy for attempting toreduce teenage unemployment.

Professor Levitan felt that the problem of teenage un-employment was not insurmountable and that much of thereason for its existance was a failure of will to solve theproblem.

Dr. Rivlin felt that there is a substantial amount ofconfusion that does not relate to a failure of will, butrather to real uncertainty over what ought to be done,assuming that one wanted to do something. She observedthat a whole menu of possible policies is being proposedin response to high teenage unemployment. These includepolicies that were opposed by some of the panelists, suchas a differentially lower minimum wage for teenagers orthe summer job program. The group was asked for commentson priorities.

Bernard Anderson cited the need to improve the qualityof public education and the need for policies to ease thetransition from school to work. He also stressed the impor-tance of providing opportunities for meaningful work experi-ence for youths, and for combining learning with earning.

Ralph Smith asked what was really known about whichprograms do and don't work. Professor Levitan pointed outthat the notion of success or failure depended to a largedegree on the criteria used to judge programs.

Several participants expressed the opinion that theunemployment problem among white teenagers is relativelylimited, but that there is a very serious problem withregard to the inner city, particularly minority teenagers.Peter Henle felt that the unemployment problem for inner-city youth has to be approached in comprehensive terms--education, work, and the corrective justice system as well.While acknowledging that there were serious long-term,structural problems, Professor Levitan felt that it wasimportant to focus on specific measures for countering themost serious effects of a slack job market.

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