Interview: The Financial Impact Of Youth Unemployment

01.13.14
01.13.14

In a recent study, Young Invincibles quantified the cost of America’s current youth unemployment situation and calculated its effect on the economy. According to the national youth policy and advocacy organization’s press release, “On average, one unemployed 18-24 year old will  cost his or her federal and state government over $4,100 annually in forgone tax revenue paid and safety net benefits paid out.”

The study shows that when youth are unemployed, it doesn’t just hurt the young people, but also everyone that is paying taxes. In fact, it costs more money per year to support one unemployed young person, than it would to put him or her through  a four-year public university, according to the report.

Youth Radio’s Darelle Brown interviewed Tom Allison, Manager of Policy and Research at Young Invincibles. Check out what he had to say below.

Darelle Brown: What was the inspiration for pursuing this research?

Tom Allison: What we wanted to do with this report was to demonstrate and show with real numbers that the unemployment situation for young people affects every single American. The idea is that we wanted to put a price tag on young unemployment to show that look, it’s not just the people who are unemployed. When a young person is unemployed, they’re out of the workforce and not paying taxes, they’re not paying state taxes, FICA taxes, federal income taxes that they would be paying if they had a job… It’s not just drying up the economy because they’re not out there spending money, it’s actually costing each taxpayer more money on their tax bill every year.

DB: So if you could break it down for us: What are the three most surprising findings that stood out to you from this report?

1) But what we found was that the majority of the cost of youth unemployment, actually comes from deferred tax revenue.  For the 18-25 year-old group,  93% of the cost of unemployment comes from deferred tax revenue. If anyone said this cost is really high… and we need to cut social safety net expenditures, that’s not the case because the majority of the cost is coming from lost tax revenue.

2) The other surprising thing conclusion that came out of this report, was when you look at the cost per unemployed youth, so you’ve got one unemployed person that otherwise would be working, otherwise would be paying taxes, otherwise wouldn’t be receiving unemployment insurance or welfare, that cost for a 25-34 year old is about $9,000 a year. And the average cost for tuition for your average 4-year  public university in this country is more like $8,600. So it’s actually more expensive to keep young people unemployed, than it would be to send them to a four-year public college.

3) And a third thing is just the cost to the states. There’s a lot of dispersion throughout the states. The most unemployed young people are in CA. We estimated about 1.7 billion dollars annual cost to the people of California due to the unemployment problem. But then if you break that down per taxpayer… you end up between $60 and $70 per taxpayer.

DB: What do you hope to accomplish with this report?

TA: We hope that by putting a price tag on it, by bringing in every tax-paying American, we can raise awareness on this pretty serious problem… Young people always get hit by each recession and while the rest of the workforce recover, young people never quite make it back to where they were…  It’s emotionally difficult for youth to have to wait a little longer to get married, start a family and have kids, wait a little longer to buy a house.

DB: In your opinion, who should read this report?

TA: Members of congress. Because there are lots of opportunities to invest in programs that we know work — to address this problem. I would definitely call on every member of congress to read this report. Consider expanding programs like americorps. We have about 80 thousand slots for the Americorps program,  but we have over a half of million applications…. At the same time, I would encourage members of the media to look at it. Look at it with a critical eye, look at our methodology and see if it makes sense.

DB: What should states do to eliminate youth unemployment?

TA: We know that the unemployment rate is almost half that for people with a bachelor’s degree versus people without. I’d encourage states to look at higher education and think about how they’re funding it. I would look at ways to match up skills that are in demand with the workforce right now. Talk to your employers. Talk to the community organizers that work with young people. Figure out ways to make those connections. this generation is smart, is innovative, and certainly has displayed a lot of perseverance and I think those are good qualities in an employee. And figure out ways to incentivize businesses to hire young people too.

DB: How would the world (or at least the U.S.) look different if more youth were employed?

TA: For one, we might not have a budget deficit problem. If we cut youth unemployment rate by half, which means more young people working, their incomes are getting taxed, we’d be able to invest in some other programs and not deal with this budget austerity that has clearly had a negative effect on growth of GDP and the employment rate itself. I think you’d see health outcomes improve. If you’re in franchise with a job, one that provides insurance, you’d likely see health outcomes improve. You’d probably see crimes go down as well. And then you start thinking about the economic multipliers. A  young person with a job is more likely to spend money more, likely to buy or house or a car, and can contribute to the economy a little more. Plus, you can talk a little bit about the sense of pride that and accomplishment that you get from having a job. That’s a little harder to quantify and harder to put a price tag on… You don’t know where your place is in the world. And a lot of times you can get that satisfaction only a hard day’s work and a paycheck can provide.

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