Why unemployment is such an important

It is widely recognized as a key indicator of labor market performance.

Why unemployment is such an important

But thanks to a working paper released this week by the National Bureau of Economic Research, perhaps it should be. The paperauthored by Alexander Gelber at Berkeley, Judd Kessler at Penn, and Adam Isen at the Treasury Department, found that youth who participate in summer employment programs are better off, at least by some key criteria.

But the benefits arrive in ways you might not expect. How to Teach Kids from Kindergarten to College About Money Consistent with past studies, the new study finds little evidence that summer job programs increase future employment or earnings among participants.

Indeed, for reasons that are not yet clear, their results suggest that participants may actually earn less than nonparticipants in the three years following summer employment. Youth who participate in summer work programs are less likely to end up in jail.

Summer jobs save lives. With unemployment at 5. But those top-level aggregates tell us nothing about how various subgroups are faring. If we parse the data by age group, we see that young people by far are the most likely to be unemployed.

If you graduate when unemployment is high, chances are your earnings will be less than they would have been, even decades later. The Best Paying Jobs for High School Graduates And the recent difficulties of young people in the labor market are not a new trend; young people have long had the greatest difficulty maintaining stable employment.

Education | Why is the unemployment rate so high, and does it fully capture labor market weakness?

The figure below, which comes from a recent report I authored for The Century Foundation, tracks the unemployment rates among various age groups from towith toyear-olds a dramatic outlier. Even today, the youth unemployment rate remains higher than that endured by any other cohort during the depths of the Great Recession.

To dispel a popular misconception: By definition, the unemployment rate measures only the fraction of people who are out of work and actively looking for a job. Or, more precisely, why is it up? Well, education does matter—not because school preempts work, but because, quite straightforwardly, many jobs demand levels of education young people have not yet attained.

The same goes for experience: Why assume the economy has a fixed number of jobs? That is, when one person is working, he or she has more to spend on the stuff others are selling. In fact, research by Jonathan Gruber yes, the now infamous architect of Obamacare and others has found that the labor market is precisely the opposite of boxed: It turns out the unemployment gap between youth and everyone else can be explained entirely by their propensity to leave jobs, or what is known as their separation rate.

Think of the labor market like an all-you-can-eat buffet. Even so, a youth unemployment rate of It is also not a given that the youth unemployment rate should be three times higher than the rate for prime-age workers — that's a huge gap. It's even higher for minorities and those from disadvantaged backgrounds.

Given how important early labor market experiences can be for career trajectories including future productivity growthwe ought to be concerned when youth struggle to find work.

Why unemployment is such an important

Which brings us back to summer jobs. The toyear-olds selected for the program work up to 25 hours a week, for six weeks, at the minimum wage, while also receiving workplace education.

Because the program has far more applicants than openings inonly 36 percent ofapplicants were acceptedslots are allocated via lottery, which creates exactly the sort of randomization researchers live for.

Why unemployment is such an important

After four years, employment rates and earnings in the two groups become indistinguishable. And alums are no more likely to enroll in college, either. To put it bluntly, when all is said and done, the summer youth employment program fails to deliver on what is ostensibly its chief objective: It has, at best, no impact on youth employment outcomes.

The researchers offer several hypotheses to explain this troubling result. For one thing, earnings losses are higher among older participants and those with previous work experience, which suggests that the program may actually interfere with preexisting career development paths.

As it turns out, though, it does offer three pretty important yet somewhat overlooked benefits. First, it is effective as an income transfer.

Although the program has no income requirement, applicants tend to come from poor families, and these funds can be a boost to household resources.

But the real payoff comes with the second and third benefits—reduced probabilities of incarceration and mortality.

While these effects are small in absolute terms fortunately, such outcomes are rare to begin withthe authors estimate that, as ofthe program prevented jailings and 86 deaths among youth who participated in the program from to Job Market Has Changed Dramatically in 15 Years Males, minorities and inexperienced youth also appear to reap the greatest gains in terms of simply staying alive.One possible explanation for why there is an increasing share of potential workers who are falling outside the most commonly used definition of unemployed is because the duration of unemployment spells is increasing (on average, it takes longer to find a job).

Some other forms of unemployment are, however, included in the calculation; such as frictional unemployment, voluntary unemployment, or structural unemployment. For example, large sections of the economy maintain a work force which is seasonal or cyclical, and . This is unemployment caused by the time people take to move between jobs, e.g. graduates or people changing jobs. There will always be some frictional unemployment in an economy because information isn’t perfect and it takes time to find work. This occurs when people choose to remain unemployed. The government’s report that the economy added only 74, jobs in December, while the unemployment rate dipped to %, has left many feeling dispirited and confused.

That adjustment is important because if it was known that job creation was weaker by , jobs during , additional job creation efforts could have been considered. The national unemployment rate is defined as the percentage of unemployed workers in the total labor force.

It is widely recognized as a key indicator of labor market performance. A closely. The higher unemployment causes consumer demand to drop even more, which is why it’s cyclical. It results in large-scale unemployment.

Why Does the Unemployment Rate Matter?

Examples include the financial crisis of and the Great Depression of Some other forms of unemployment are, however, included in the calculation; such as frictional unemployment, voluntary unemployment, or structural unemployment.

For example, large sections of the economy maintain a work force which is seasonal or cyclical, and . Oct 01,  · explain why this is an important issue. unemployment is used as an economic strenght indicator to begin with. In the case of recovery it tends to be a laging indicator meaning that it is one of the last indicators to barnweddingvt.com: Resolved.

Why Youth Unemployment Is Still a Huge Problem | The Fiscal Times