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February 25, 2014

LADWIG: Where are the young workers?

“Voters under 30, the millennial generation, produced numbers for Barack Obama 13 percentage points above the national average in 2008 and 9 points above in 2012. But in recent polls, Obama approval among those under 30 has been higher than the national average by only 1 percentage point (Quinnipiac), 2 points (ABC/Washington Post) and 3 points (YouGov/Economist).”  — Michael Barone

Being young is complicated. Getting a job is complicated. The social-services bureaucracy is complicated. What is changing, suggests a study released by two Indiana economists, is that young people age 26 to 31 are dropping out of the game entirely, choosing to spend their time in ways unlikely to result in a full-time job, a home or a family.

Is it economic malaise, cultural collapse or just laziness? Maybe an amalgam of all three, nobody is specifying. For policymakers, though, the study, “Characteristics of Young Adults Participating Full Time in the U.S. Labor Force,” offers two points for concern:

For some individuals, the present hodgepodge of rules, regulations and incentives designed to help may be thwarting the basic human desire to earn a living through wage income.

There may be a national interest in avoiding policies that discourage young adults from launching careers (such as those policies that reduce their take-home pay).

The yearlong study by a husband-wife team of economists statistically evaluated characteristics associated with an individual’s labor-force participation. Dr. Barry Keating, professor of finance and economics and the University of Notre Dame, and Dr. Maryann O. Keating, adjunct scholar of the Indiana Policy Review Foundation, set out to determine the likelihood of full-time employment for an individual in their late 20s based on his or her educational and wage characteristics. An excerpt from their paper to be published in the spring issue of The Indiana Policy Review:

“Participation rate in the U.S. labor force declined one-fifth of a percentage point to 62.8 percent in December, which was the lowest since 1978. This rate is not much different from that in other industrialized countries, but the U.S. decline is disturbing in that the rate for those in their 50s, 60s and even 70s is increasing while declining for younger age groups. Time-use surveys from 2003 to 2010 find that 19- 24-year-olds reduced both their average working hours and hours per day in school or school-related activities.”

The study compared the characteristics of young adults engaged in full-time employment with those who work part-time or opt out altogether. The economic analysis hinged on actual wages offered to these individuals and a reservation or expected wage of someone with similar educational credentials.

But take-home pay only partially accounted for the overall odds that a particular young adult works full time. Nor did changes in real minimum wage or a drop in earnings relative to older workers explain the increased time spent on personal care and other non-work activities. Certain cultural attributes, however, seemed to delay or permanently reduce work participation.

Indeed, the study suggests that social characteristics associated with marriage, providing for one’s own children, social connectedness and industriousness increase the odds that a young adult will approximate full-time employment.

— Craig Ladwig is editor of the Indiana Policy Review.

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