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October 19th, 2020 
Awake Goy 
Taken together, Figures I and J suggest that young workers’ wages are far more responsive to labor market conditions than older workers’ wages, underlining the critical importance of achieving a full-employment economy in order to boost labor market outcomes and mitigate the disadvantages faced by young workers just starting out. When we achieve a full-employment economy, it will not only help young workers, but will boost outcomes for all historically disadvantaged groups.
Policy matters for young workers
Young workers are among the most vulnerable in this economy. They tend to have high unemployment and underemployment rates compared with older workers; they tend to work in the industries and occupations that have had the largest job losses due to the COVID-19 shutdown; and they are least likely to be able to work from home.
During recessions, young workers experience more sustained and worse labor market outcomes than their older counterparts. This coronavirus-led recession may continue for months, if not years. Given what we know about the long-lasting effects of recessions on young workers, young workers will likely suffer negative consequences for years to come.
While young workers have a tougher time in weak labor markets, they also have the potential to see enormous benefits when the overall unemployment rate is very low and remains that way for a sustained period of time. In a recent statement, Federal Reserve Chair Jerome Powell acknowledged the importance of sustained low unemployment and noted that the full-employment economy of the late 1990s, which led to more broad-based improvements in labor market outcomes, did not lead to spiraling inflation (Powell 2020). When we get back to low unemployment, he argues, it is vital that we allow the labor market to fully develop to benefit those too often left behind.
The Federal Reserve’s monetary policy tools are not the only way policymakers can improve the labor market outcomes for young workers today. Actions by lawmakers are also critical. While the provisions of the Coronavirus Aid, Relief, and Economic Security Act, also known as the CARES Act, were vital for millions of workers and their families across the country, it unfortunately left many young workers wanting. Because many young college students are dependents of their parents for tax purposes, they were not eligible for the one-time $1,200 stimulus checks. Their parents also did not receive the $500 check for dependents because that age cutoff is 17. Furthermore, the CARES Act made several very important, though temporary, improvements to the unemployment insurance program, including the $600 enhanced benefit as well as expanded eligibility. Unfortunately, many young workers who had yet to secure any employment were ineligible for these benefits. Expanding the unemployment insurance program to include a job-seekers allowance would provide important support for young workers who have yet to launch their careers (Georgetown Center on Poverty and Inequality et al. 2020).
The CARES Act also established the Paycheck Protection Program (PPP), which offered loans to small businesses to use for payroll costs, mortgage interest, rent, and utilities—loans that are forgivable on the condition that the businesses retain or rehire employees at their pre-pandemic levels of pay (SBA 2020). Given the enormous pressures faced by sectors that disproportionately employ young workers (restaurants, other leisure and hospitality, and retail, in particular), a well-functioning payroll protection program that ensured workers were paid even as business revenues cratered would have been invaluable. Unfortunately, the PPP, as well-intentioned as it might have been, largely failed, for several reasons (Bivens 2020). The most important failure was the initial appropriation being capped at a too-low level, which made the PPP a zero-sum rush to apply for many businesses, with the advantage going to those with stronger preexisting relationships with banks. While a second round of funding was approved in late April 2020 to cover unmet demand, if the program had initially been uncapped and everyone who qualified had been guaranteed to get the loans, there may have been less harm in terms of businesses having to wait longer to get an application processed.
Congress has also failed to make sufficient investments in state and local governments in their coronavirus response so far, while declining state and local revenues, compounded by increased demand on resources, are inhibiting recovery. Most relevant, perhaps, to young workers is that without substantial federal aid to state and local governments, it is a near certainty that public university tuition will rise significantly in coming years, just as it did when there was state fiscal austerity following the Great Recession. The majority of young workers who do not have (and may never obtain) a college degree face an even tougher labor market than their college-degreed counterparts, while those pursuing additional education can find rising tuition and mounting debt insurmountable.
Strengthening and enforcing labor standards would also have an outsized advantage for young workers in the economy, particularly in weaker labor markets when their leverage is acutely diminished.
Policymakers have allowed the federal minimum wage to erode in value over the last 50 years. While increasing the minimum wage would aid workers across the age spectrum, young workers, who are the most likely to be earning very low wages, would see meaningful wage growth (Zipperer and Schmitt 2020). Policymakers can also it easier for young workers to form unions and can make it more difficult for employers to impede workers’ attempt to organize. Expansive collective bargaining rights benefits workers of all ages, including setting standards in nonunion workplaces (Shierholz 2019). By enforcing and enhancing these labor standards, policymakers can improve the labor market for young workers while providing a boost to the economy as well. This is all the more important in today’s faltering economy.
Notes
1. Authors’ analysis of Economic Policy Institute Current Population Survey Extracts, Version 1.0.9 (2020), https://microdata.epi.org.
2. Examples include Altonji, Kahn, and Speer 2016; Kahn 2010; Oreopoulos, von Wachter, and Heisz 2012; Schwandt and von Wachter 2018; Rinz 2019; and Rothstein 2020. Some of these studies are discussed in further detail below.
3. Gen-Xers are those born between 1965 and 1980. Baby boomers are those born between 1946 and 1964.
4. Authors’ analysis of Economic Policy Institute Current Population Survey Extracts, Version 1.0.9 (2020), https://microdata.epi.org.
References
Abel, Jaison R., and Richard Deitz. 2014. “Are the Job Prospects of Recent College Graduates Improving?” Liberty Street Economics (Federal Reserve Bank of New York blog), September 4, 2014.
Altonji, Joseph G., Lisa B. Kahn, and Jamin D. Speer. 2016. “Cashier or Consultant? Entry Labor Market Conditions, Field of Study, and Career Success.” Journal of Labor Economics 34, no. S1, part 2: S361–S401. https://doi.org/10.1086/682938.
Bivens, Josh, and Ben Zipperer. 2018. The Importance of Locking in Full Employment for the Long Haul. Economic Policy Institute, August 2018.
Bivens, Josh. 2018. “Recommendations for Creating Jobs and Economic Security in the U.S.: Making Sense of Debates About Full Employment, Public Investment, and Public Job Creation.” Working Economics Blog (Economic Policy Institute), March 27, 2018.
Bivens, Josh. 2020. “How Can the U.S. Get More Transformative With its Coronavirus-Shock Response? With Payroll Guarantees and an Economic ‘Deep Freeze’ Plan.” Working Economics Blog (Economic Policy Institute), April 8, 2020.
Bureau of Labor Statistics (BLS). 2020. “Employment and Unemployment Among Youth—Summer 2020” (news release). August 18, 2020.
Economic Policy Institute. 2020. Current Population Survey Extracts, Version 1.0.9, https://microdata.epi.org.
Federal Reserve Bank of New York. 2020. “The Labor Market for Recent College Graduates” (interactive). Last updated July 17, 2020.
Forsythe, Elizabeth Carla. 2019. “Why Don’t Firms Hire Young Workers During Recessions?” Working paper, University of Illinois, March 2019.
Georgetown Center on Poverty and Inequality, Employ America, Economic Policy Institute, National Women’s Law Center, National Employment Law Project, and The Century Foundation. 2020. A Jobseeker’s Allowance Would Respond to COVID-19 & Beyond (fact sheet). May 2020.
Gould, Elise. 2020. “Slowdown in Jobs Added Means We Could Be Years Away from a Full Recovery.” Economic Policy Institute Economic Indicators, October 2, 2020.
Gould, Elise, Daniel Perez, and Valerie Wilson. 2020. Latinx Workers—Particularly Women—Face Devastating Job Losses in the COVID-19 Recession. Economic Policy Institute, August 2020.
Gould, Elise, and Valerie Wilson. 2020. Black Workers Face Two of the Most Lethal Preexisting Conditions for Coronavirus—Racism and Economic Inequality. Economic Policy Institute, June 2020.
Kahn, Lisa B. 2010. “The Long-Term Labor Market Consequences of Graduating from College in a Bad Economy.” Labour Economics 17, no. 2: 303–316. https://doi.org/10.1016/j.labeco.2009.09.002.
Katz, Lawrence F., and Alan B. Krueger. 1999. “The High-Pressure U.S. Labor Market of the 1990s.” Brookings Papers on Economic Activity 30, no. 1: 1–87.
Oreopoulos, Philip, Till von Wachter, and Andrew Heisz. 2012. “The Short- and Long-Term Career Effects of Graduating in a Recession.” American Economic Journal: Applied Economics 4, no. 1: 1–29. https://doi.org/10.1257/app.4.1.1.
Powell, Jerome. 2020. “New Economic Challenges and the Fed’s Monetary Policy Review.” Speech to the Board of Governors of the Federal Reserve System, August 27, 2020.
Rothbaum, Jonathan, and Adam Bee. 2020. “Coronavirus Infects Surveys, Too: Nonresponse Bias During the Pandemic in the CPS ASEC.” Social, Economic, and Housing Statistics Division Working Paper no. 2020-10, September 2020.
Rothstein, Jesse. 2020. “The Lost Generation? Labor Market Outcomes for Post Great Recession Entrants.” National Bureau of Economic Research Working Paper no. 27516, July 2020. https://doi.org/10.3386/w27516.
Rinz, Kevin. 2019. “Did Timing Matter? Life Cycle Differences in Effects of Exposure to the Great Recession.” Center for Economic Studies Working Paper, U.S. Census Bureau, September 2019.
Schwandt, Hannes, and Till von Wachter. 2018. “Unlucky Cohorts: Estimating the Long-Term Effects of Entering the Labor Market in a Recession in Large Cross-Sectional Data Sets.” National Bureau of Economic Research Working Paper no. 25141, October 2018. https://doi.org/10.3386/w25141.
Shierholz, Heidi. 2019. Working People Have Been Thwarted in Their Efforts to Bargain for Better Wages by Attacks on Unions. Economic Policy Institute, August 2019.
Small Business Administration (SBA). 2020. “Paycheck Protection Program” (web page). Accessed May 2020.
Topel, Robert H., and Michael P. Ward. 1992. “Job Mobility and the Careers of Young Men.” Quarterly Journal of Economics 107, no. 2: 439–479. https://doi.org/10.2307/2118478.
Williams, Jhacova, and Valerie Wilson. 2019. Black Workers Endure Persistent Racial Disparities in Employment Outcomes. Economic Policy Institute, August 2019.
Wilson, Valerie. 2015. The Impact of Full Employment on African American Employment and Wages. Economic Policy Institute, March 2015.
Zipperer, Ben, and John Schmitt. 2020. “Raising the Minimum Wage to $15 by 2025 Will Restore Bargaining Power to Workers During the Recovery from the Pandemic.” Working Economics Blog (Economic Policy Institute), September 14, 2020.
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