CONGRESS OF THE UNITED STATES

CONGRESSIONAL BUDGET OFFICE

What Is Happening to

Youth Employment Rates?

NOVEMBER 2004

The Congress of the United States O Congressional Budget Office

CBO

What Is Happening to

Youth Employment Rates?

November 2004

A

PAPER

Preface

As part of its projections of the federal budget and the economy, the Congressional 

Budget Office (CBO) projects the size of the labor force over a 10-year period. Such projections depend, in part, on the employment picture for youth. For male youth, the trend in the 

employment rate is downward, but for females, it is upward. 

This paper examines trends in the youth labor market from 1979 to 2000 and the changes 

during the labor market downturn between 2000 and 2003. It also considers factors that may 

account for the trends, such as an increase in school enrollment rates, and presents information on the percentage of youth who are neither enrolled in school nor employed. In keeping 

with CBO’s mandate to provide objective, impartial analysis, this paper makes no recommendations.

Nabeel Alsalam of CBO’s Health and Human Resources Division prepared this paper. 

Lawrence Katz of Harvard University read a draft of the paper and made valuable suggestions. 

Within CBO, David Brauer, Paul Cullinan, Arlene Holen, Elizabeth Robinson, Christi

Hawley Sadoti, Ralph Smith, and Bruce Vavrichek provided comments. Meena Fernandes 

and Peter Richmond provided research assistance. 

John Skeen edited the paper, and Loretta Lettner proofread it. Maureen Costantino designed 

the cover and formatted the paper for publication. Lenny Skutnik produced the printed copies, and Annette Kalicki produced the electronic versions for CBO’s Web site (www.cbo.gov).

Douglas Holtz-Eakin

Director

November 2004

Introduction and Summary 1

School Enrollment Rates 3

Trends in School Enrollment from 1979 to 2003 3

Some Reasons for the Increases in School

Enrollment Rates 3

Trends in the Employment of Out-of-School and

 In-School Youth, 1979 to 2000 5

Trends in Employment and Labor Force Participation 

Among Out-of-School Youth 5

Trends in the Work Behavior of Students 6

Changes in the Labor Markets Where Youth Work 6

Indicators of Shifting Job Opportunities: Unemployment and Wages 7

Trends in the Sectoral Distribution of Employment and 

Job Opportunities for Youth 8

Growth in the Competition for Youth in the Labor 

Market: Unskilled Immigrants 9

Youth Neither Enrolled in School Nor Working 9

The Cyclical Downturn in the Employment of Youth

from 2000 to 2003 11

CONTENTS
vi DISABILITY AND RETIREMENT: THE EARLY EXIT OF BABY BOOMERS FROM THE LABOR FORCE

Tables

1. School Enrollment Rates for Youth, by Age, Sex, and Education Level,

1979 to 2003 5

2. Mean Annual Earnings of Workers Age 18 or Older, by Sex and

Educational Attainment, 1979 to 2002 6

3. Employment Rates for Youth, by Age, Sex, and School Enrollment

Status, 1979 to 2003 8

4. Labor Force Participation Rates for Out-of-School Youth,

by Age and Sex, 1979 to 2003 9

5. School Enrollment and Employment Status of Youth,

by Age and Sex, 1979 to 2003 10

6. Youth Who Are Out of School and Not Working,

by Age and Sex, 1980 to 2000 11

Figures

1. Employment Rates for Youth, by Sex and Age, 1979 to 2003 1

2. Employment Rates for Teenagers, by Sex and Status of School

Enrollment, 1979 and 2000 2

3. Employment Rates for Young Adults, by Sex and Status of School

Enrollment, 1979 and 2000 2

4. School Enrollment Rates for Teenagers in October and July

of Each Year, 1979 to 2003 7

Box

1. The Transition from School to Work 4
What is Happening to Youth Employment Rates?

Introduction and Summary

Most people get their first job when they are a teenager. 

Although such jobs are likely to be low paying and to require little expertise, they provide important opportunities for young people to pick up practical job skills—

coming to work on time, taking responsibility for assigned tasks, and so forth. Because early work experience 

is an important part of the preparation for or the launch 

of a productive work life, it can affect not only young 

people’s future but also the larger economy. 

Over the past few decades, trends in the percentage of 

youth who are employed have been quite different depending on whether they are male or female and on how 

old they are (see Figure 1). For instance, between the peak 

labor market years of 1979 and 2000, the portion of 16- 

to 19-year-old males with jobs fell from 49 percent to 44 

percent, but the portion of females that age with jobs was 

unchanged, at 44 percent. For 20- to 24-year-old men, 

the employment rate fell from 79 percent to 77 percent, 

but for women that age, it rose from 62 percent to 69 

percent. 

What is behind the trends in youth employment? Increasing school enrollment, in particular, puts downward pressure on youth employment overall, because young people 

who are in school are much less likely to have jobs than 

are those who are not in school (37 percent versus 67 percent among teenage males in 2000, for example). School 

enrollment rates for both male and female youth increased over the 1979-2000 period. 

Half of the overall decline in the employment of teenage 

males between 1979 and 2000 is attributable to a fall 

from 76 percent to 67 percent in the employment rate for 

those who were out of school (see Figure 2). Because that 

fall occurred between two peak years in the labor market, 

it cannot be attributed to a cyclical downturn. 

Indications are that the drop resulted from both a reduction in male teens’ availability for work and a lessening

Figure 1.

Employment Rates for Youth, by Sex 

and Age, 1979 to 2003

(Percentage of the population)

Source: Congressional Budget Office based on the Census 

Bureau’s October Current Population Surveys.

Note: The figure covers the civilian noninstitutional population, 

which comprises people who are 16 years of age or older 

and who do not reside in institutions (for example, penal 

institutions and mental facilities) and who are not on active 

duty in the armed forces.

of the job opportunities for them. First, as the percentage 

of male teens with jobs went down over the period, the 

percentage actively looking for work did not go up. 

Meanwhile, the federal minimum wage adjusted for inflation fell over much of the period and was significantly 

lower in 2000 than it was in 1979—and thus posed less 

of a potential barrier to the creation of low-wage jobs. 

That no more teens were actively looking for work despite the easing of that potential barrier suggests that

1979 1989 2000 2003

0

30

40

50

60

70

80

90

Males, Ages 20 to 24

Females, Ages 20 to 24

Males, Ages 16 to 19

Females, Ages 16 to 19
2 WHAT IS HAPPENING TO YOUTH EMPLOYMENT RATES?

Figure 2.

Employment Rates for Teenagers, by 

Sex and Status of School Enrollment,

1979 and 2000

(Percentage of the population)

Source: Congressional Budget Office based on the Census 

Bureau’s October Current Population Surveys.

Note: The figure includes the civilian noninstitutional population, 

which is defined in a note accompanying Figure 1.

fewer teens were available for work or interested in the 

available jobs. Second, although job opportunities for 

male teens were hurt by shrinking employment at such 

establishments as gasoline stations and grocery stores, 

they were helped by growing employment at other establishments employing youth. Nevertheless, the hourly 

wages paid to male teens declined during the 1980s, indicating that employers were less interested in hiring them, 

probably because employers increasingly needed skilled 

workers more than unskilled ones. Furthermore, an influx of immigrants, predominantly males, who were unskilled but eager to work may have provided employers 

with an alternative to hiring male teens. 

Among female teens, the unchanged employment rate 

masks two offsetting trends. On the one hand, the employment rate both for those out of school and for those 

in school increased slightly over the period. On the other 

Figure 3.

Employment Rates for Young Adults, by 

Sex and Status of School

Enrollment, 1979 and 2000

(Percentage of the population)

Source: Congressional Budget Office based on the Census 

Bureau’s October Current Population Surveys.

Note: The figure includes the civilian noninstitutional population, 

which is defined in a note accompanying Figure 1.

hand, the increase in their school enrollment rate acted to 

bring their overall employment rate down.

The trends among young men and women were similar 

to those among teens. For example, among young men 

ages 20 to 24, the employment rates for those who were 

out of school also fell (see Figure 3). Among young 

women that age, the increase in the employment rates 

both for those still in school and for those out of school 

dominated the employment-reducing effect of a large rise 

in their school enrollment rate. 

In 2000, 4 million youth ages 16 to 24 (60 percent of 

them female) were neither in school nor working. About 

1.7 million youth in that status had not finished high 

school, and most were not even looking for work. Another half million, mostly male, were in prisons and juvenile and other institutions.

0

20

40

60

80

100

Out of School In School

Males Females

1979 2000 1979 2000

0

20

40

60

80

100

Out of School In School

Males Females

1979 2000 1979 2000
WHAT IS HAPPENING TO YOUTH EMPLOYMENT RATES? 3

The recent downturn in the labor market has reinforced 

the trends that occurred over the 1979-2000 period. Between 2000 and 2003, the employment rate of teens fell 

from 44 percent to 36 percent. Among young adults, the 

employment rate fell from 72 percent to 68 percent. The 

number of youth both out of school and not working 

rose from 4 million to 4.8 million. Altogether, the fall in 

employment among teens was larger than during past 

downturns, although judging from past business cycles, 

most of the loss will probably be recovered.

From a policy perspective, the trends in youth employment and school enrollment provide a decidedly mixed 

picture. The rising school enrollment rates for both males 

and females and the increasing employment rates for females are positive. However, the large secular decline in 

the employment rate for out-of-school teenage males is 

not, and the status of many youth who are neither in 

school nor working raises questions about what they are 

doing and what their prospects are for the future.

School Enrollment Rates

Youth who are enrolled in school are much less likely to 

have a job or to be looking for a job than are youth who 

are not in school. Furthermore, if in-school youth do 

have a job, it is rarely a full-time job—in 2003, only 14 

percent of teenage males who were employed and in 

school worked full time, compared with 62 percent of 

those who were employed and out of school. So any 

change in the percentage of youth who are in school can 

affect the overall percentage who are working and the 

percentage who are working full time. (See Box 1 for a 

discussion of the transition from school to work.) 

Trends in School Enrollment from 1979 to 2003

School enrollment rates for young people have increased 

substantially over the past 25 years. Between 1979 and 

2003, they increased more for teenage females (14 percentage points) than for teenage males (9 percentage 

points) (see Table 1). 

Predictably, school enrollment rates are lower for young 

adults than for teenagers, because many young adults 

have completed their education. However, over the 1979-

2003 period, enrollment rates for young adults increased 

substantially—by over one-quarter for young adult males 

and by three-quarters for young adult females.

Had employment rates among in-school and out-ofschool teenage males remained the same as those in 1979, 

the increases in their school enrollment rate between 

1979 and 2003 would have reduced their overall employment rate by 3.4 percentage points (see Table 1). For 

other groups of youth, the effect of increased school enrollment in reducing or limiting employment rates was 

similar—2.8 percentage points for teenage females, 2.5 

for young adult males, and 2.1 for young adult females.

School enrollment rates increased even more in the summer months than they did during the school year. From 

1985 to 2003, the enrollment rate of teens for the month 

of July more than tripled, increasing from 10 percent to 

33 percent (see Figure 4).1 It was 38 percent in July 2004. 

For young adults, the rate doubled, increasing from 9 

percent in 1985 to 19 percent in 2003 (17 percent 

among males and 22 percent among females). 

The teens enrolled during the summer months appear to 

be similar to those enrolled during the school year. In 

2003, the group was equally divided between males and 

females, and the distributions of their ages and family incomes were the same as those for teens enrolled during 

the regular school year. However, summer students were 

somewhat more likely to be enrolled in college than were 

students enrolled during the regular school year (34 percent versus 28 percent in 2003). 

Some Reasons for the Increases in School

Enrollment Rates

The most likely reason for the growth in school enrollment rates is the attraction of better job opportunities 

available to those who complete more education.2 One 

indication of those opportunities is the substantially 

higher earnings of college graduates compared with those 

of high school graduates of the same age. For example, in 

2002, male college graduates (without an advanced degree) earned 94 percent more than high school graduates 

($64,000 versus $33,000) (see Table 2). That earnings 

advantage grew from approximately 50 percent during 

1. Since 1985, the Census Bureau has been measuring school enrollment rates every month in the Current Population Survey. Before 

then, school enrollment rates were measured only in October.

2. Orley Ashenfelter, Colm Harmon, and Hessel Oosterbeek, “A 

Review of Estimates of the Schooling/Earnings Relationship, with 

Tests for Publication Bias,” Labour Economics, vol. 6, no. 4 

(November 1999), pp. 453-470.
4 WHAT IS HAPPENING TO YOUTH EMPLOYMENT RATES?

the late 1970s. In addition to higher earnings, workers 

with more education typically have jobs with better fringe 

benefits and are less likely to be unemployed.3

However, higher school enrollment rates for youth have 

not necessarily led to parallel increases in their educational attainment. Among recent cohorts of young males, 

no more are finishing high school, no more are getting 

some postsecondary education, and no more are obtaining a bachelor’s degree. Female youth, however, are completing more education. More are finishing high school, 

more are getting some postsecondary education, and 

more are obtaining a bachelor’s degree. 

A possible reason for higher school enrollment rates 

among males without a parallel increase in their educational attainment is that students are generally taking 

longer to finish their education. At the high school level, 

the longer time may reflect the stricter graduation standards that many states have adopted since the early 1980s 

in an effort to increase graduates’ academic qualifications. 

At the college level, students appear to be stretching out 

their time as undergraduates. For example, among bachelor’s degree recipients in 1992, 59 percent had completed 

3. Henry S. Farber and Helen Levy, “Recent Trends in EmployerSponsored Health Insurance Coverage: Are Bad Jobs Getting 

Worse?” Journal of Health Economics, vol. 19, no. 1 (2000), pp. 

93-119; and Janet Currie and Aaron Yelowitz, “Health Insurance 

and Less Skilled Workers,” in David Card and Rebecca M. Blank, 

eds., Finding Jobs: Work and Welfare Reform (New York: Russell 

Sage Foundation, 2000), pp. 233-261.

Box 1.

The Transition from School to Work

Between the ages of 16 and 24, young people generally make the transition from full-time education to 

full-time work. The vast majority of 16-year-olds are 

enrolled in high school. Then, some young people 

leave school, and the enrollment rates for young people in high school and in college fall. 

In 2003 (outside the summer months), the school 

enrollment rate ranged from 97 percent for 16-yearolds to 20 percent for 24-year-olds.1 However, very 

few 16 year-olds work, especially full time. As young 

people age, more and more take on jobs, and their 

employment rates rise. In 2003, 2 percent of 16-

year-olds were employed full time and 19 percent, 

part time. Among 24-year-old men, those employment rates were 69 percent and 11 percent, respectively, and among 24-year-old women, 55 percent 

and 15 percent. That shift to employment reflects 

not only leaving school to go to work but also students’ increasingly taking jobs while attending 

school. Among 16 year-olds, the percentage of students with jobs was 18 percent, whereas among 24-

year-old men and women, the percentages were 59 

and 62, respectively.

When young people leave school, those who have attained a higher level of education are more likely to 

be employed. For example, in 2003, among 19-yearolds who were out of school, 68 percent of those 

who graduated from high school had jobs, compared 

with 50 percent of those who had not graduated. 

Among out-of-school 21-year-olds, 77 percent of 

those with some college had jobs, compared with 70 

percent of those with a high school diploma but no 

time in college. Among out-of-school 24-year-olds, 

88 percent of those with at least an associate’s degree 

had jobs, compared with 81 percent with some time 

in college but no degree. Greater educational attainment leads to more job opportunities, and people 

with a greater interest in work also are more likely to 

invest in education.

1. All statistics apply to the civilian noninstitutional population. As a point of reference, there are about 36 million 16- 

to 24-year-olds in that population and roughly another million in prison or in the military.
WHAT IS HAPPENING TO YOUTH EMPLOYMENT RATES? 5

Table 1.

School Enrollment Rates for Youth, by Age, Sex, and Education Level,

1979 to 2003

(Percentage of the population)

Source: Congressional Budget Office based on the Census Bureau's October Current Population Surveys.

Notes: The table covers the civilian noninstitutional population, which is defined in a note accompanying Figure 1.

Data are rounded to the nearest percent or 10th of 1 percent. Changes are calculated from unrounded data and then rounded.

a. The difference in 1979 between the employment rates of those in school and those out of school (see Table 3) times the change between 

1979 and 2003 in their enrollment rate. For males ages 16 to 19, for example, this effect is (38-76) x (80-71) = -3.4 percentage points.

their degree within five years of starting, but by 2000, 

that figure had slid to 55 percent.4

Trends in the Employment of Out-ofSchool and In-School Youth, 1979 to 

2000

To distinguish longer-term trends in behavior from shortterm cyclical effects of downturns in the labor market, 

most of the analysis in this paper is based on changes between the peak labor market years of 1979 and 2000.5

The last section briefly examines the recent cyclical 

downturn in the employment rate for teenagers between 

2000 and 2003 and compares that with what happened 

during earlier downturns.

Trends in Employment and Labor Force Participation Among Out-of-School Youth

Fewer than a quarter of teens are not in school.6 Although some of those teens may later continue their education, most are probably beginning a career. Those early 

experiences in the labor market can have lasting consequences for their earnings. 

1979 71 53 18 67 47 21 25 3 23 22 3 19

1982 71 52 19 69 47 22 26 2 24 23 2 22

1989 74 53 21 73 48 25 27 1 26 27 1 27

1992 79 58 21 77 51 26 31 1 30 32 1 32

2000 76 55 20 78 51 27 31 1 30 34 1 33

2003 80 60 20 81 56 26 33 1 31 39 1 37

1979 to 2000 4.4 2.3 2.1 10.9 4.6 6.3 5.6 -1.5 7.0 12.1 -1.6 13.7

2000 to 2003 4.5 4.6 -0.2 3.2 4.4 -1.2 1.8 0.2 1.6 4.5 0.4 4.2

Memorandum:

1979 to 2003 

(Percentage points) -3.4 -2.8 -2.5 -2.1

Levels

High

Change in Enrollment Rate

Employment-Reducing Effect of the Change in the Enrollment Ratea

School College Levels School College Levels School College Levels School College

Females

Both High Both Both High Both High

Males Females

16- to 19-Year-Olds 20- to 24-Year-Olds

Males

4. U.S. Department of Education, National Center for Education 

Statistics, A Descriptive Summary of 1999-2000 Bachelor’s Degree 

Recipients 1 Year Later With an Analysis of Time to Degree, NCES 

2003-165, (Washington, D.C.: Government Printing Office, 

2003).

5. Measured using the annual average employment rate of teenagers. 

There are slight differences in the timing of peak and trough 

employment rates across demographic groups.

6. Among male teens, the figure was 24 percent in 2000, down from 

29 percent in 1979 (see Table 1).
6 WHAT IS HAPPENING TO YOUTH EMPLOYMENT RATES?

Table 2.

Mean Annual Earnings of Workers Age 18 or Older, by Sex and Educational

Attainment, 1979 to 2002

(As a percentage of the earnings of high school graduates)

Source: U.S. Department of Commerce, Bureau of the Census, Current Population Surveys (March).

Note: Based on people in the civilian noninstitutional population with some earnings during the calendar year. That population is defined in a 

note accompanying Figure 1.

Among out-of-school youth, between 1979 and 2000, 

the percentage of teenage males who were employed fell 

from 76 percent to 67 percent. For young adult males, 

the employment rate fell more modestly, from 87 percent 

to 85 percent (see Table 3). The decrease for teenage 

males is very large, considering that it is measured between two years with strong labor markets.7 As the percentage of out-of-school teenage males who were employed declined between 1979 and 2000, the percentage 

actively looking for work did not rise. Thus, the labor 

force participation rate (which is the sum of the percentage employed and the percentage actively looking for 

work) dropped as well—suggesting that, over time, more 

out-of-school teenage males were either not available for 

work, were not interested in taking the available jobs, or 

had become discouraged about their job prospects and 

stopped looking for work (see Table 4).

Among out-of-school teenage females, the percentage 

employed rose from 58 percent to 60 percent, and among 

young adult women, it rose from 65 percent to 72 percent (see Table 3). Although teenage females and young 

adult women who were out of school were less likely than 

their male counterparts to have jobs, that gap got smaller. 

Trends in the Work Behavior of Students

More than three-quarters of teenagers are students, and, 

in 2000, almost 40 percent of teenage students worked 

(averaging 20 hours a week), and more than 60 percent of 

young adult students worked (averaging 28 hours a 

week). Research has found no detrimental effects on educational achievement when high school students make a 

light to moderate commitment to working. Instead, 

when people reach their mid-20s, their earnings and 

fringe benefits are positively associated with the hours 

they worked as seniors in high school.8

The tendency for students to work has generally risen 

over past three decades. Among teenagers, most of that 

increase occurred during the 1970s, so their employment 

rate was about the same in 2000 as it was in 1979. 

Among young adults, it increased throughout the period 

(see Table 3).

Changes in the Labor Markets Where 

Youth Work

Several sources of evidence on the job opportunities for 

youth point both to a decline in teenage and young adult 

males’ availability for work and to a decline in the relative 

job opportunities for males.

Less Than High Some Bachelor's Advanced Less Than High Some Bachelor's Advanced 

High School School College Degree Degree High School School College Degree Degree

1979 74 100 103 150 184 72 100 107 141 189

1989 65 100 114 172 223 66 100 118 169 216

2000 67 100 119 199 280 66 100 119 184 258

2002 68 100 117 194 278 64 100 113 179 240

Men Women

7. The increasing enrollment rate for youth raises the question of 

whether those teens with the poorest skills in the labor market are 

becoming more concentrated in the shrinking out-of-school 

group. However, one measure of preparation for the labor market—the percentage who finished high school—did not fall 

among out-of-school teens over the 1979-2000 period.

8. See Christopher J. Ruhm, “Is High School Employment Consumption or Investment?” Journal of Labor Economics, vol. 15, no. 

4 (1997), pp. 735-776.
WHAT IS HAPPENING TO YOUTH EMPLOYMENT RATES? 7

Figure 4.

School Enrollment Rates for Teenagers 

in October and July of Each Year,

1979 to 2003

Source: Congressional Budget Office based on the Census 

Bureau’s monthly Current Population Surveys.

Notes: Before 1985, the Census Bureau measured school enrollment rates only in October.

The figure includes the civilian noninstitutional population, 

which is defined in a note to Figure 1.

As the percentage of male youth with jobs declined over 

the 1979-2000 period, the percentage actively looking for 

work did not go up. Meanwhile, the inflation-adjusted 

minimum wage dropped substantially, which could have 

led to the creation of more low-wage jobs. That no more 

male youth were actively looking for a job despite the easing of a potential barrier suggests that fewer were available for work or interested in the available jobs.

The shifts in employment among sectors of the economy 

are consistent with improving job opportunities for female youth along with stagnant or declining opportunities for their male counterparts. Also, the entry of many 

unskilled immigrants into the labor force, two-thirds of 

whom were male, probably reinforced the decline of job 

opportunities for male as compared to female youth. 

Overall, the declining hourly wages of youth suggest that 

employers were less interested in hiring them, at least 

during the 1980s, probably both because employers increasingly needed more skilled workers and because immigrants provided an alternative source of unskilled 

workers.

Indicators of Shifting Job Opportunities: Unemployment and Wages

Trends in the percentage of out-of-school male youth 

who do not have a job but are actively looking for one do

not suggest a pattern of declining job opportunities. For 

teenage males, the percentage actively looking for work 

was about the same in 2000 as it was in 1979. Among 

young adult males, it was just slightly lower. However, 

those facts do not rule out the possibility that job opportunities had declined and youth who wanted a job 

stopped looking because they became discouraged about 

their prospects for finding one. (Between 1979 and 2000, 

the percentage of teenage females and young adult females who were employed rose a few percentage points, 

and the percentage actively looking for work fell a few 

points, which is not a pattern that suggests declining job 

opportunities.)

The trends in wages generally suggest that teenagers may 

have lost job opportunities after 1979 but then regained 

some of them by 2000. Between 1979 and 1985, the average wages earned by youth (adjusted for inflation) fell 

dramatically, and they did not rebound by the next peak 

in the labor market, in 1989. Increases began in the later 

part of the recovery of the 1990s, so by the next peak, in 

2000, average wages for young workers had rebounded to 

some extent. For example, among male teens, the average 

hourly wage (in 2003 dollars) fell from about $8.90 in 

1979 to $7.10 in 1985 and 1989, but then it increased to 

about $7.50 in 2000.

Declining job opportunities for less skilled workers may 

have been a part of the reason for the decline in teens’ 

wages in the early 1980s.9

 Wages also fell for low-skilled 

adult males during that period as developments in many 

sectors of the economy led to an increase in the demand 

1979 1982 1985 1988 1991 1994 1997 2000 2003

0

10

20

30

40

50

60

70

80

90

October of Each Year

July of Each Year

9. Much economic research concludes that the so-called skilledbiased technical change is an important factor behind the increasing earnings of college graduates relative to high school graduates. 

Over time, firms have changed their methods for producing goods 

and services in ways that have increased their demand for moreeducated workers. See, for example, Lawrence Katz and Kevin 

Murphy, “Changes in Relative Wages, 1963-1987: Supply and 

Demand Factors,” Quarterly Journal of Economics, vol. 107, no. 1 

(1992), pp. 35-78.
8 WHAT IS HAPPENING TO YOUTH EMPLOYMENT RATES?

Table 3.

Employment Rates for Youth, by Age, Sex, and School Enrollment Status,

1979 to 2003

(Percentage of the population)

Source: Congressional Budget Office based on the Census Bureau's October Current Population Surveys.

Note: The table covers the civilian noninstitutional population, as defined in a note accompanying Figure 1.

for skilled relative to unskilled workers. Furthermore, the 

minimum wage (adjusted for inflation) was relatively 

high in the late 1970s and, despite increases during the 

early 1980s, was eroded by the high inflation rates of 

those years. Although the minimum wage (in 2003 dollars) stood at $7.13 per hour in 1979, it was $5.63 per 

hour in 1985, and, consequently, posed less of a potential 

barrier to the employment of teenagers.

Trends in the Sectoral Distribution of Employment 

and Job Opportunities for Youth

Over the past 25 years, youth have shifted where they 

work and what they do at work in response to changing 

opportunities in the labor market. However, the growth 

of some sectors of the U.S. economy and the contraction 

of other sectors may have contributed to the growth of 

employment rates for female youth and to the decline of 

employment rates for males.

Female youth may have benefited from the sectoral shifts 

in employment over the past 25 years. If their share of 

employment within each sector had stayed the same as it 

was in 1979, the shifting distribution of employment 

across sectors would have increased their overall employment rate in 2000 by 1.6 percentage points for teenage 

females and by 3.6 percentage points for young adult females. 

Job opportunities for male youth, however, may have 

weakened with sectoral shifts in employment. If their 

share of employment within each sector had stayed the 

same as it was in 1979, the shifting distribution across 

sectors would have decreased the employment rates in 

2000 by 0.1 percentage points for teenage males and by 

2.5 percentage points for young adult males.

Young people work in relatively few sectors of the economy, so the growth or contraction of those sectors can 

have significant effects on their job opportunities. For example, many young people work in eating and drinking 

establishments. Between 1979 and 2000, the share of all 

employment in those establishments grew 19 percent, 

which benefited youth. In 2000, a quarter of employed 

teenagers worked in those establishments. They also benefited from the growth of recreation and entertainment 

services, health services, and transportation services. 

However, other traditional places of employment for 

teenagers shrank over the period. For example, employment at gasoline stations, an important source of employment for teenage males in 1979, shrank substantially over 

the period. 

1979 49 38 76 44 38 58 79 53 87 62 53 65

1982 40 31 62 39 34 50 70 49 78 60 53 62

1989 47 38 71 45 42 54 77 55 85 66 60 68

1992 41 34 66 38 35 48 74 56 81 63 56 66

2000 44 37 67 44 40 60 77 59 85 69 64 72

2003 36 29 61 36 32 52 72 57 80 64 57 68

1979 to 2000 -4.8 -1.0 -9.7 0.0 2.2 1.9 -1.9 5.9 -2.7 6.9 11.1 7.0

2000 to 2003 -8.8 -7.9 -5.7 -8.2 -7.5 -7.9 -4.6 -1.8 -5.2 -5.6 -6.9 -4.1

Change (Percentage points)

In Out of 

16- to 19-Year-Olds 20- to 24-Year-Olds

All School All School All School School

In Out of 

All School School School School

Males Males Females

In Out of In

Females

Out of 
WHAT IS HAPPENING TO YOUTH EMPLOYMENT RATES? 9

Table 4.

Labor Force Participation Rates for Out-of-School Youth, by Age and Sex,

1979 to 2003

(Percentage of the population)

Source: Congressional Budget Office based on the Census Bureau's October Current Population Surveys.

Note: The labor force participation rate is the percentage of the civilian noninstitutional population (as defined in a note accompanying Figure 1) that either have a job or are actively looking for one.

Growth in the Competition for Youth in the Labor 

Market: Unskilled Immigrants

Immigrant labor has been the largest source of growth in 

the labor force, accounting for about half of that growth 

between 1990 and 2003.10 Increasingly, immigrants have 

little formal education, so the native workers whose earnings and employment are most likely to have been affected are unskilled and young workers, particularly those 

who have not finished high school.11 Hence, the influx of 

immigrants may have contributed to the fall in the employment of male youth, particularly the large decline for 

out-of-school male teens. 

The increase in the foreign-born population may have increased the competition for the jobs that out-of-school 

native-born males seek more than it has for the jobs that 

native-born females seek. Foreign-born men are more 

likely to be in the labor force than are native-born men 

(89 percent versus 85 percent for those ages 20 to 64). 

However, foreign-born women are significantly less likely 

to be in the labor force than are native-born women (74 

percent versus 63 percent).

Youth Neither Enrolled in School Nor 

Working

During the months of the school year in 2000, an average 

of 4 million youth ages 16 to 24 were neither in school 

nor working (60 percent of them were female).12 Nearly 

40 percent of those youth had not finished high school, 

and most were not even looking for work. That status 

raises the question of what they were doing and their 

prospects for the future.

Family background plays a role. Teens from low-income 

families are much more likely to be neither enrolled in 

school nor employed than are those from higher-income 

families. Teens whose parents did not finish high school 

1979 89 72 95 72

1982 86 69 94 73

1989 87 67 93 74

1992 81 62 92 74

2000 79 73 92 77

2003 78 67 90 77

1979 to 2000 -9.6 0.8 -3.3 5.0

2000 to 2003 -1.0 -6.2 -2.0 -0.7

Change (Percentage points)

Males Females Males Females

16- to 19-Year-Olds 20- to 24-Year-Olds

10. See Andrew Sum and others, “New Immigrants in the Labor 

Force and the Number of Employed New Immigrants in the U.S. 

from 2000 Through 2003: Continued Growth Amidst Declining 

Employment Among the Native Born Population,” Center for 

Labor Market Studies, Northeastern University (December 2003).

11. For a recent analysis, see George Borjas, “The Labor Demand 

Curve Is Downward-Sloping: Reexamining the Impact of Immigration on the Labor Market,” Quarterly Journal of Economics, vol. 

118, no. 4 (November 2003), pp. 1335-1374.

12. Excluding residents of institutions and members of the Armed 

Forces.
10 WHAT IS HAPPENING TO YOUTH EMPLOYMENT RATES?

Table 5.

School Enrollment and Employment Status of Youth, by Age and Sex,

1979 to 2003

(Percentage of the population)

Source: Congressional Budget Office based on the Census Bureau's March Current Population Surveys.

Note: The table covers the civilian noninstitutional population, as defined in a note to accompanying Figure 1.

are twice as likely to be in that status as those whose parents have at least some postsecondary education.

In 2000, more than a quarter of a million female youth 

were neither enrolled in school nor employed, had not 

finished high school, and had a young child but no 

spouse at home. In that situation, such youth are particularly likely to have little income and to rely on government programs such as Temporary Assistance for Needy 

Families and Food Stamps. The number was up from 

about 210,000 in 1989 despite the increases in school enrollment and employment rates and a decline in pregnancy rates among teens. However, in percentage terms, 

the portion of female teens who were both not in school 

and not employed dropped from 14 percent in 1979 to 9 

percent in 2000; the portion of young women in that situation dropped from 27 percent to 18 percent (see 

Table 5). 

In contrast, the percentage of male youth who were neither enrolled in school nor working was slightly higher in 

2000 than in 1979. However, those data do not take account of those who were residents of institutions and 

those who were in the armed forces. 

In 2000, almost 500,000 young men were in prisons and 

juvenile and mental institutions, up from about 270,000 

in 1980. After being released, youth who have been incarcerated have lower employment rates than other youth. 

In turn, low employment rates are associated with higher 

rates of recidivism.13

In 2000, the number of youth in the armed forces, at 

450,000, was down from its level in 1980, which was 

840,000. Taking account of the increasing number who 

were in institutions and the decreasing number who were 

in the armed forces raises the percentage of all male youth 

who were either out of school and not working or in institutions (see Table 6).

Not Not Not Not

Employed Employed Employed Employed Total Employed Employed Employed Employed Total

1979 27 44 22 7 100 25 42 19 14 100

1982 22 49 18 11 100 23 46 16 15 100

1989 28 46 18 7 100 30 42 15 12 100

1992 27 52 14 7 100 27 50 11 12 100

2000 28 47 16 8 100 31 47 13 9 100

2003 24 57 12 8 100 26 55 10 9 100

1979 13 12 65 9 100 12 10 51 27 100

1982 13 13 57 16 100 12 11 48 29 100

1989 15 12 62 11 100 16 11 49 24 100

1992 17 14 56 13 100 18 14 44 23 100

2000 18 13 59 11 100 22 12 48 18 100

2003 19 14 54 14 100 22 17 42 20 100

Enrolled in School Not Enrolled in School

16- to 19-Year-Old Males 16- to 19-Year-Old Females

20- to 24-Year-Old Males 20- to 24-Year-Old Females

Enrolled in School Not Enrolled in School

13. Harry J. Holzer, Steven Raphael, and Michael A. Stoll, “Employment Barriers Facing Ex-Offenders,” Urban Institute Discussion 

Paper No. 410885 (May 2003).
WHAT IS HAPPENING TO YOUTH EMPLOYMENT RATES? 11

Table 6.

Youth Who Are Out of School and Not Working, by Age and Sex, 1980 to 2000

Sources: U.S. Department of Commerce, Bureau of the Census, Decennial Census of the Population; and Congressional Budget Office based 

on the Census Bureau's October Current Population Surveys.

Note: Differences are calculated from unrounded percentages and then rounded to the nearest 10th of 1 percent.

a. For instance, people residing in penal and mental facilities.

b. Active-duty personnel.

c. The total population is the sum of the civilian noninstitutional population (as defined in a note accompanying Figure 1), active-duty personnel in the armed forces, and residents of institutions. 

The Cyclical Downturn in the

Employment of Youth from

2000 to 2003

During weak labor markets, the employment rate of teens 

generally falls more than it does for adults. Between 2000 

and 2003, the employment rate for teenagers fell dramatically, from 44 percent to 36 percent, its lowest level in 

the post-World War II period. Furthermore, that drop 

was greater than those that occurred during the cyclical 

downturns of 1979 to 1982 and 1989 to 1992 and was 

across the board in that it affected both males and females 

and both in-school and out-of-school teens. Among 

young adults, the employment rate fell about 5 percentage points. 

However, employment rates among youth can be expected to rebound when the labor market strengthens, as 

they have done in earlier upturns in the labor market 

from 1982 to 1989 and from 1992 to 2000, but perhaps 

not uniformly. For example, in contrast to earlier downturns, that of 2000 to 2003 saw the employment rate of 

male teens fall less for out-of-school youth than it did for 

students. Going forward, high school enrollment rates 

will continue to have an influence on employment rates.

1980 98 222 9 9

1990 129 128 8 9

2000 181 83 8 10

1980 28 27 14 14

1990 24 22 12 12

2000 25 19 9 9

1980 173 531 14 14

1990 220 452 11 12

2000 313 293 11 13

1980 28 58 27 27

1990 25 62 23 23

2000 26 54 18 18

Institutionsa

Members of the 

Armed Forcesb

Civilian Noninstitutional 

Population Out of School

and Not Working

Residents of and Not Working 

or in an Institution

Number (Thousands) Percentage of the

Total Populationc 

Either Out of School 

16- to 19-Year-Old Males

16- to 19-Year-Old Females

20- to 24-Year-Old Males

20- to 24-Year-Old Females