Oregon Office of Economic Analysis

Yesterday in Part 1 we briefly examined educational attainment by age cohort in Oregon, while today in Part 2 we’ll discuss labor force participation rates a little bit.

Now, obtaining a degree and finding a good job do not always go hand in hand, unfortunately and the biggest issue for an individual is being able to find a job. We’ve been seeing the labor force participation rate fall considerably in the past decade and while about half of the decline is due to aging demographics and the Baby Boomers, the largest declines are seen amongst the youth. 16-19 year olds are either employed or looking for a job about 20 percentage points less than back in 2000, while those aged 20-24 are about 10 percentage points lower than a decade ago. These trends among the young account for about 25% of the overall labor force participation declines, according the the Employment Department report.

That’s an awful large share of the overall decline accounted for by the youth. There are a few theories here as to why these participation rates are falling. The youth today are spending more time getting prepared for college and applying for colleges — both by studying more and doing more extracurricular activities that help one stand out during the application process. That’s the good version of the story and based on anecdotal evidence I hear that from recent high schoolers today, but there are certainly a lot more other things going on here.

You have the broken job ladder where more educated or more skilled workers get pushed down into jobs they’re technically overqualified for, forcing other workers even further down the ladder. This means that while job opportunities are scarce overall, they’re even more scarce for teenagers with no work experience. This process has been ongoing for the past decade or so and is not just a reflection of the Great Recession.

Foreshadowing what is coming next week, here are the changes in the employment to population ratios by age. Measuring the labor force participation rate can be tricky and figuring out why people are leaving or entering the labor force is not always cut and dry, so focusing on this ratio cuts through all of this and directly shows what share of the population has a job. Clearly the youth were the hardest hit during the Great Recession however even during the mid-2000s expansion their emp-pop ratio didn’t recover following the dotcom recession. With such a lack of job opportunities for the youth, it is no wonder they’re not as actively participating in the labor market today as in years past.

In and of themselves, these trends for the youth do not worry me too much on their face. Especially if they are in school, furthering their education, it can in fact be a good thing for the economy in the longer run. I am much more concerned about mid-career adults losing their jobs and having difficulty finding another one, especially in tough economic times. See the RV Industry in Oregon, for example.

However the problem with such declines among the younger generations is if they’re discouraged and believe there are no jobs for them even if they should need or want one. Do such beliefs persist moving forward into adulthood? It really becomes a concern when you have a 30 year old applying for his/her first job and have no work experience on their resume; this goes for those with or without a degree. In fact, many of the employer surveys in recent years have shown that employers are having a hard time finding workers with “soft skills.” Among these are: communication, interpersonal skills, critical thinking, creatively, writing, collaboration, being a team player, appearance, punctuality, flexibility and the like. Many of these are more likely learned on the job or something akin to an apprentice program or internship, where one is required to show up on time, work in a professional environment and interact with coworkers. Employer concerns are much lower for technical abilities and classroom learned skills.

In summary, given the tough economic conditions, employers have a wider range of candidates from which to choose. This makes it more difficult for younger workers to compete given their lack of experience and skills. As such, it is no surprise to see fewer youth participating in the labor force. In the short run, these trends are likely not too much of a concern, particularly if educational attainment rises as a result. However, should these patterns persist and carry forward as a characteristic or trait of today’s younger generations, it will have a negative impact on the economy from an overall growth and productivity perspective. So add yet another item to the list of things that are potentially worrisome and need to monitor moving forward.