Why don’t you all f-fade away (talkin’ ’bout my generation). Don’t try to dig what we all s-s-s-say (talkin’ ’bout my generation). I’m not trying to ’cause a big s-s-sensation (talkin’ ’bout my generation). I’m just talkin’ ’bout my g-g-g-generation (talkin’ ’bout my generation). My generation, this is my generation, baby. So goes 1965 hit by the Who, My Generation. The song, written by Pete Townsend was the band’s highest charting single in England and was named the 11th greatest song by Rolling Stone Magazine. While Townsend was trying to tell the story of teenagers trying to find a place in society, the generation that seems to be having a serious problem is the young adult or Millennial population.
Sure, there has been a lot of stereotyping of Millennials, much of it negative. Personally, I find the man-buns and beards to be a bit odd, but then the tattoos on the Generation Xers were odd to me too. The issue with Millennials as it effects the economy; however, is both a stereotype, but also does show up in the statistics. They simply are not working to the same extent as earlier generation.
Much has been said about the decline in the labor force participation rate. This statistic is a simple calculation of the number of people employed or looking for employment divided by the civilian non-institutionalized population. These are persons 16 years of age and older who do not live in institutions (for example, correctional facilities, long-term care hospitals, and nursing homes) and who are not on active military duty. This ratio declined fairly steadily from the turn of the century until the end of 2016, falling from a high of about 67 percent of the population to just under 63 percent today. Considering that the civilian non-institutionalized population is about 257,500,000 persons, each percentage decline in the rate is equal to roughly 2.6 million persons. The labor force is about 161,540,000 so this means that the 4 percent drop equates to roughly 6.4 percent of the labor force.
Put this another way, 10.3 million fewer people are working today than would be had the participation rate stayed the same as in 2000. Many pundits have stated that this decrease is entirely due to the growth in the number of retired persons. However, many retired persons are actually working. They might run a home business, or work a couple of days a week at Wal-Mart. In fact, the labor force participation rate of older persons has been skyrocketing – up from jut 12.1 percent in 1996 to nearly 20 percent today.
On the other hand, the participation rate for younger people has plummeted, down from 65.5 percent in 1996 to only 55.2 percent now. And this encompasses two large generations, each accounting for roughly as many people as the Baby Boom generation.
What is going on with the Millennials (people roughly between 25 and 34) and post-millennials (those between about 16 and 24), and why are they not working?
Lest start with the younger folks first. There are roughly 76 million Americans that were born between 1998 and the early 2000s, roughly a quarter of the overall population. The vast majority of this generation is not yet in the workforce – they are simply too young, however, the oldest are just entering the workforce, along with the youngest millennials. If you don’t count protesting as work, these young people have simply disappeared from the labor force. In 1996 over half, 52.3 percent of non-institutionalized people between the ages of 16 and 19 were in the labor force. This has fallen to just 35.2 percent today, and represents 3.5 million people, or just over a third of the loss in the labor force. Why are teenages no longer working?
There are generally three reasons for the drastic decline in work by young people (including the all important Summer Job). First, and probably most important is that more 18 and 19 year-olds are in college. According to the Census Bureau 80.3 percent of these young people who are not in the labor force are in either high-school or college. Nearly 70 percent of high-school graduates enter college, up from 65 percent in 1996. So rather than going to work, many more millennial and post-millennial kids continue their education, and part of this includes summer school.
In addition, state labor policies have made it much more difficult to hire people with low-skills and little experience. Today 30 states have minimum wage floors that are higher than the Federal standard, and some of these are very high. Consider that at a $15 minimum wage, a teenage worker at a fast-food restaurant would have to generate over $45 per hour in sales just for the establishment to break even. So many businesses that would have hired young people simply don’t find it worth doing so.
The number of young people in school and the dearth of paid jobs has led many to take unpaid internships for college credits or as part of their educational experience. These jobs do not generally show up in the employment statistics, so there is a statistical reason why there are fewer younger people in the labor force as well.
With less opportunities to get experience when they are young, the millennial generation is entering the workforce with a handicap. This is a huge generation, about 79.4 million people which is even larger than the current number of baby boomers. The oldest millennials are about 35-37 today, and the youngest are about 20. Fewer of people in these age cohorts are in the labor force than were 10 years ago, but nowhere near as large of a drop-off as the younger people. The labor force participation rate for those between the ages of 20 and 24 dropped from 76 percent in 1996 to just 70.5 percent today. For older millennials (ages 25 to 34) the decline was smaller from 84.1 to 81.6.
The same reasons why the post-millennials are not getting jobs applies to the 20-24 age cohort as well. The labor force participation rate for folks in this age cohort that are not in school is a healthy 83.5 percent, so yet again, delaying work for school or internships is likely the reason behind this decline.
The more concerning thing, is the drop in participation for older millennials. While this is just a 2.5 percent drop, that is 2.5 percent of 44.38 million people or over 1.1 million individuals, representing 10.8 percent of the lost workers. Where did these folks go?
Here is where attitude may matter more than actual economics. According to the Census Bureau in 1975, about 45 percent of the people in this age cohort had achieved what the Bureau calls the four Common Milestones of Adulthood, which are: Getting married, having children, working and living independently. By 2016, only 24 percent of millennials had reached these goals. This is a big deal. The same data from the Census Bureau shows that of those millennials who live with the parents, just 43.6 percent worked full-time and year-round. This compares to 63.9 percent who live independently and 55.5 percent of those with roommates. Now there is a cart before the horse issue here. One needs to work to have enough money to move out of mom’s basement, so those living at home are obviously having more trouble finding a job, but a whopping 20.9 percent, or 1.7 million people are not in the labor force at all. Were these millennials working at the same rate as those who say lived with roommates, there would be another 453,000 people working. This is almost half of the missing millennials.
These are not stupid people. They have roughly the same educational attainment as those who live with roommates, they just don’t work. The Census Bureau really does not come up with a reason why. They point out that those living at home are slightly more likely to be disabled, or have a child, but this would likely be just as true in 1975 or in 2000. One thought might be that many of these people have outstanding student loans that are so high that they cannot pay them back in any reasonable way. If one is not working, they can get loan deferrals or payment plans based on income. Another thought is that this highly educated generation is more geared toward starting their own business rather than working 9 to 5. A poll by the Intelligence Group found that 72 percent of millennials want to be their own boss one day, so they may not be sitting on mom’s couch, but working in the garage inventing the next Facebook or Uber.
The bottom line is that the economy needs to find a better way to get young people into the workforce if there is any way to sustain economic growth after the actual retirement of the baby-boom generation. Generation X works hard but is tiny, and the huge pool of Millennials must get engaged to keep the economy on track.
This is a challenge for governments that need to make labor laws flexible enough to allow young people to work; for colleges that can’t burden students with unpayable debt; for employers that need to make workplaces more friendly for younger workers; for parents who have to get tough and get their kid off the couch; and finally for young people themselves who need to understand that life does not offer participation trophies and that work is not always fun. These challenges need to be met if this generation is not going to all f-f-fade away.