The long-term effects of unemployment among young workers
ALISON STEWART: In his weekly radio address today, President Obama urged Congress to extend unemployment benefits for more than a million long-term unemployed Americans. The federal benefits kick in once state benefits expire. Caring for the long-termed unemployed is one challenge… So is finding jobs for those young workers — those between 16 and 24 years old.
Despite the improving jobs market, their unemployment rate is still stuck in the mid-teens. And it's even higher than that among young minorities. For more about all this, we are joined by Victoria Stilwell of Bloomberg News. Victoria, thanks for being with us.
VICTORIA STILWELL: Thanks for having me.
ALISON STEWART: There was a recession in the early 70s, huge stock market crash in 1987 and jobs were scarce. What makes this situation so different for young Americans, as opposed to those times of other economic hardship?
VICTORIA STILWELL: Well, the great recession was unprecedented so it took trends that were already in place prior to them and exasperated. So, like you said, we've been seeing unemployment for people ages 16 to 24 high – it's been high, it's always been higher than the national average, but right now that spread has really widened out.
So in the last recovery the spread between unemployment for young people and for everyone else was about 5-6 percentage points, now it's widened out to about 7 percentage points. So we have an unemployment rate for young people that's double the national average. That's a problem.
ALISON STEWART: One of the things that's interesting about this is we're not just talking about low income, starter, part-time jobs, we're talking about people who are getting ready to start their careers. They've been to college and grad school. What's the long-term implication of those people being out of work?
VICTORIA STILWELL: So if we have people that have put in all this money into getting an education, who've made a real investment in trying to secure better careers and their stuck with a waitressing job or a retail job there's a lot of implications that come along with that. So they may have student loans that they may not be able to pay off as a result. That increases their probability of being delinquent or defaulting on those loans. They also lower their lifetime earnings potential.
Center for American Progress did a study on what happens, what are the long-term implications of this and they found that for the one million Americans who are young and were unemployed because of the great recession, we've probably lost a collective $20 billion in earnings over the next 10 years.
ALISON STEWART: With that in mind, what are the implications for the larger economy?
VICTORIA STILWELL: Well one of the most important components of our economy is the housing market. So if we have young people that are living with relatives, living with friends, you know, couch surfing, renting, instead of buying a home because they don't have the money to do that, or they don't have the credit built up to do that, or they have bad credit because they've been delinquent on loans or credit card bills. That pushes back the timeline when they can build a home , if they do it at all.
It also has big implications for consumer spending, which is the biggest part of our economy. If people are earning less over their lifetimes they're going to be buying less they're going to be consuming less.
ALISON STEWART: So they can't begin their economic lives so everything gets pushed back down the line?
VICTORIA STILWELL: Exactly.
ALISON STEWART: I'm wondering if the way we've thought about these jobs for young people, that it's over, that these jobs have been taken by people who have maybe two or three of these jobs to make up for a salary that they had once. They're family people, they're taking care of their families with these what we once thought of as kids jobs. Is this a new normal?
VICTORIA STILWELL: Well, so the hope is that as the economy improves, as we get higher demand, as companies see a need to take on more workers they'll do exactly that and it will open up some of those entry level jobs for the people that have typically have had them. Like you said, the great recession caused a lot of ripple effects and one of those is that people who were making 50, 60, 70 thousand dollars a year had to settle for flipping burgers or hanging up dresses on a coat rack. So the hope is that as things get better, like they are, that we will be able to get young people back into more of those jobs so they can add skills, add experience, and get on the track that they need to be.
ALISON STEWART: Victoria Stilwell from Bloomberg, thanks for being with us.
VICTORIA STILWELL: Thanks.