Having a summer job used to be a rite of passage for teenagers. Changes in economic conditions and preferences are contributing to a decline in the numbers of young people seeking summer work. The implications for both young people and employers are significant.
Data from the US Bureau of Labor Statistics (BLS) indicates that teen labor force participation peaked in 1979 at just under 58%. (The labor force participation rate is the proportion of the civilian noninstitutional population either working or looking and available for work.) In 2000, prior to the 2001 recession, it stood at 52%, but fell sharply after that. During the recent (2007-2009) recession, it reached 34%, and has changed little since that time. The latest projections from BLS indicate even lower teen participation rates in the future. Summer participation rates have followed a similar pattern, with a July 2016 rate of 43% compared to 72% in July 1978.
The reasons for the decline are varied. Labor force participation across all age ranges has been dropping since the 1990s, when it peaked at just over 67% (after increasing for more than 60 years). At the beginning of the recent recession in 2007, it stood at 66%, and fell during the downturn. Even with job market improvement over the past several years, the labor force participation rate has continued to fall and is now below 63%.
For teens, there are additional considerations. Some high school students pursue experiences such as classes, research projects, or intense volunteer efforts which they hope will positively influence college admissions prospects. Others are involved in summer leagues, camps, and workouts or practices related to their sports or extracurricular activities which require substantial amounts of time. The percentage who are attending school in the summer (whether high school, college, or professional schools of learning) has also risen significantly, from about 10% in 1985 to 42% in 2016 (according to BLS data). All of these factors decrease the likelihood of working.
Another reason for the decline in teen labor force participation is that one of the primary reasons for having a summer job, to help pay for college, is less compelling than it was decades ago. The sharp rise in tuition rates and the perceived lack of progress which can be made in earning money to offset those costs (as well as the increase in student loan availability) have changed the decision process for some young people.
According to College Board, the average published tuition and fees for in-state students at public four-year colleges and universities in 2016-17 was $9,650, with room and board pushing the total to $20,090. Even when tax benefits and grants are considered, the typical full-time in-state student at a public four-year institution paid about $14,210. Twenty years prior in 1996-97, published tuition and fees were $4,560, with total net cost including room and board (adjusted for tax benefits and grants) of $8,730.
However, if you consider a worker earning the minimum wage, the number of hours of work required to pay for a year’s college cost has actually fallen over the past decade. In 1996, it would take more than 2,054 hours at the minimum wage at the time ($4.25 per hour) to pay the net cost of a year of college. For the past school year at the current minimum wage ($7.25), it would take 1,960 hours. Even with this slight decline, however, it would require basically full-time work all year at minimum wage to pay for college, which illustrates one aspect of the problem of college affordability.
From the perspective of businesses and the economy, the loss of a relatively inexpensive source of labor is never a good thing. While shifts in the workforce and technology are changing the parameters of entry-level jobs and the number of people available to fill them, many businesses rely on low-wage employees for certain tasks. With fewer teens participating in the workforce, the supply shrinks. On the other hand, the growing complexity in many industries has reduced the value of workers who will only be available for a few months.
Young people learn valuable lessons by being in the workforce. First jobs can help later decisions regarding college majors or other training as well as career paths. They can also teach soft skills important to success in later employment, such as working effectively with others, dealing with supervisors, communicating with customers, and maintaining basic habits as simple as arriving on time. Without the proving ground of summer employment, young people miss opportunities to learn how to navigate the world of work, which can make it more difficult to transition to full-time employment. Employers also need to be aware that many new hires will be entering the workplace with far less experience than in years past, with implications for training and assimilating new hires.
What was once typical is no longer standard, with summer employment becoming less common for a number of reasons. Going forward, I think the trend will continue. Some of the options teens are choosing (such as additional coursework) can be beneficial both to them and to the economy, and society benefits from teen volunteerism. At the same time, there is a downside in terms of less preparation for future work and fewer available workers. The emerging pattern is the result of a complex set of economic and social phenomena and is likely to be a defining feature of business activity for the foreseeable future.
Dr. M. Ray Perryman is President and Chief Executive Officer of The Perryman Group (www.perrymangroup.com). He also serves as Institute Distinguished Professor of Economic Theory and Method at the International Institute for Advanced Studies.