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Persistent employment gaps for young Americans could have devastating consequences later

May 19, 2022, 12:30 PM UTC

The U.S. is experiencing one of the tightest labor markets since World War II, but employment rates among younger Americans (ages 16 to 24 years) with only a high school degree have just returned to pre-pandemic levels within the last few months, according to new research out Tuesday from the Federal Reserve Bank of St. Louis.

Overall, it’s been an “uneven” recovery for younger workers, especially Black and Latino Americans, says Bill Rodgers, vice president and director of the Institute for Economic Equity at the St. Louis Fed.

Previously, strong economic recoveries—like the one the U.S. has experienced in the wake of the blink-and-you-missed-it pandemic recession—typically have an outsized impact on young, Black workers without a college degree.

But despite all of the U.S. relief efforts and pledges to reduce racial inequity, Black and Latino Americans have experienced persistent employment disadvantages. Moreover, there’s been no real narrowing in racial and ethnic employment gaps. 

Following the COVID-19 recession, for example, the employment gap between young Black men and similarly situated white men was at times as wide as 21 percentage points. The gap between prime-age Black and white men (ages 25 to 54) ranged from 8.1 to 13.1 percentage points.

Prior to the pandemic, there was an “unevenness” when it came to employment among younger Black men, Rodgers says. That’s continued even as the recovery kicked in, even in this “moment of opportunity” when jobs have been plentiful, this cohort hasn’t been able to narrow the gap.

This unevenness, as Rodgers calls it, can be even more challenging for younger workers who typically have fewer job skills, less experience, and a weaker professional network to help them find jobs. 

Time is of the essence in getting more of these younger workers back. “If they don’t get re-engaged in the economy, that can then lead to longer-term losses—economic losses and losses in their income, or the inability to recover to even where they were pre-pandemic,” Rodgers says. 

There are a number of persistent challenges facing this group that contributes to this problem: a skills gap, discrimination, shifting labor trends, and even the state of our criminal justice system, Rodgers says. It all adds up. “There’s no silver bullet that explains these chronic differences.”

A tight labor market, like the one the U.S. is experiencing, can help because typically employers are less picky when hiring, but Rodgers says additional fiscal policies are needed to narrow the gap. These can range from education and training opportunities to employer incentives to hire these workers to raising the minimum wage or expanding the earned income tax credit.

But with the Great Resignation still in full swing, and 11.5 million open jobs as of the end of April, could some of these challenges ease? Rodgers says the next few months may prove to be critical, but he notes there are a lot of headwinds facing the labor market, as well as young American minorities without college degrees. 

COVID cases, for instance, have started to climb again. That could erode the current economic expansion, but if the U.S. weathers the storm without too much upheaval, then that potential pitfall may not be a factor. 

Inflation and Russia’s war against Ukraine, however, are more substantial threats that could eat away at economic growth and cause the hot labor market to cool, Rodgers says. “As a result of these headwinds, the folks who are on the lowest rungs in the ladder, this group of young, 16- to 24-year-olds, will be the first ones to suffer,” he says. 

“We’re not back to full employment. Yes, we’ve recovered as a group, as a nation, back to where we were prior to the pandemic—or we’re close,” Rodgers says. But there’s still a big chunk of the population facing major challenges and are still quite vulnerable.

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