Young People Under the Obama Administration

For the nearly 2 million young people who graduated college in 2013, the economic environment remains unfriendly.  College graduates continue to struggle finding work, let alone a job in a career that reflects their educational experience and skillset.  Youth unemployment remains above the national average.  And, while the number of college graduates continues to increase, the average salary among them is stagnant.  The higher cost of education is increasing the average young person’s student loan debt.  Barriers to the economic stability and well-being of our nation’s youth continue to persist, including a weak economic recovery incapable of providing high-quality jobs and the multiple burdens of Obamacare.

Jobs and the Economy

According to a 2013 Harvard Institute of Politics poll (aged 18 to 29), 45 percent of young people identified issues such as jobs and the economy as the most concerning.[1]  Yet, the President’s economic agenda has been ineffective to support this population or any working age American.  In the most recent jobs report, unemployment among those aged 16-19 was 21.4 percent and 11.9 percent among those aged 20-24, far above the national average of 6.7 percent.[2]  Even more concerning is labor force participation among youth, which has declined by 7.2 percent[3] among those aged 16-19, and 3.8 percent among those aged 20-24, since December, 2007.[4]

The economic impact of high unemployment for young people is far-reaching.  According to a 2012 study from the Corporation for National and Community Service, the approximately 6.7 million unemployed young people could cost taxpayers $1.6 trillion in lost tax receipts, an average of $215,580 per person.[5]  This impact, when taking into account long-term economic and social effects, could result in $4.7 trillion in lost economic output over a young person’s lifetime.[6]  Among the approximately 3.3 million youth who are under-attached to the labor force, the social burden currently tops $2 trillion.

Even among employed youth, economic stability remains a concern.  According to the most recent BLS report on the characteristics of minimum wage workers, individuals under 25 represented 19.8 percent of hourly paid workers.  The Administration’s change to full-time employees (from 40 hours to 30 hours) will disproportionately hurt young people.  According to testimony presented by the Hoover Institution, 2.6 million working-age Americans with a median income under $30,000 are at risk of losing jobs and hours. [7]  Startlingly, 60 percent of those who could be impacted are between the ages of 19 and 34 and the majority of them do not possess a college degree.[8]  In 2012, 75.3 million working-age Americans were paid at hourly rates, representing 59 percent of all wage and salary workers.[9]  Among them, one-fifth is under the age of 25 (half of whom are paid minimum wage or less), and 47 percent have a high school diploma or less.[10]  The employer mandate puts younger, less-educated people at risk of losing jobs and wages, and may result in an increase in the already 7.2 million Americans working part-time for economic reasons.[11]

Disposable income is necessary to promote economic growth and create jobs.  Yet, an increasing debt burden held by many Americans has the potential to crowd out consumer spending and limit economic freedom.  The debt-to-income ratio increased from 1:1 in 2001 to 1.5:1 in 2010, and does not seem to be slowing.[12]  The increased cost of education and stagnant wage growth has made growing debt especially burdensome on young people.  In fact, the slow recovery has forced many individuals to make the decision to live at home for financial reasons.  According to a Gallup poll conducted in February, 29 percent of adults under the age of 35 live at home, including 51 percent under age 23, and 14 percent aged 24 to 34.[13]  More troubling, however, is the fact that wage growth remains stagnant despite increasing student debt.  This year, average hourly earnings rose by 52 cents, a 2.2% increase from February, 2013.  This means that wage growth has not kept up with debt increases.[14]  Unfortunately, the President’s policies have done little to fix the poor economic climate for young people, instead pursuing an agenda that has done little to encourage hiring and promote economic growth.

Education

Another major issue for many young Americans is the cost of a college education and the growing burden of student loan debt. At the end of 2013, collective student loan debt topped $1.08 trillion.[15]  Moreover, the number of students with debt is significant.  According to a 2012 report by The Institute for College Access and Success (TICAS) Project on Student Debt, nearly two–thirds of college seniors in 2012 had loan debt, averaging $26,600 per borrower.[16] A study of the class of 2013 by Fidelity reported that 70 percent of students graduated with debt, averaging $35,200 per borrower.[17]  The growing cost of education has left students with a larger debt, yet the job market has done little to improve the ability of graduates to pay it off.  According to a recent poll, 41% of recent college graduates said that they were underemployed relative to their education.[18]

This debt in turn impacts borrowing patterns in other markets.  Students who borrow and accumulate debt are far less likely to take other financial risks such as purchasing homes and cars.  According to a recent report, for the first time in ten years, 30-year-olds[19] without a history of loans are more likely to have a mortgage than those with a history of student debt.[20]

Despite student loan debt, a college education is far more preferable in terms of economic opportunity.  Among millenials aged 25-32, college graduates earn about $17,500 more than their non-graduate counterparts, and are significantly less likely to be unemployed (3.8 percent to 12.2 percent).  Millenials need polices that not only improve job growth, but tackle issues such as the growing burden of student loan debt.

Healthcare

Finally, significant changes to America’s healthcare system will have a significant impact on young Americans.  Despite the President’s promise that Obamacare would help young Americans remain insured through dependent coverage up to age 26 – the reality is – this is not happening.  Some employers have responded to Obamacare’s regulatory scheme by dropping spousal coverage, leaving spouses and young people without insurance.  Moreover, young adults whose parents are among the unemployed will also not have access to coverage, forcing them to purchase more expensive individual plans.

The President promised that premiums would go down.  Yet, Obamacare will disproportionately increase premiums for young adults.  Due to age-rating restrictions, some reports estimate that premiums for young males with single coverage could increase by 180 percent if they are ineligible for premium assistance.[21]  When new requirements on age ratings and required benefits are taken into account, new entrants in the individual market could see a premium increase of as much as 413 percent, and an average 96 percent nationally.  80 percent of young people living above the poverty line will see an increase in their healthcare costs.[22]

The President has failed to address how young Americans are going to pay for these higher costs.  Not only will young Americans struggle to pay their premiums, but the financial burden of Obamacare on young adults will negatively affect already-shrinking disposable incomes nationally.  Real Per Capita disposable incomes for young people have increased by only 2.3% since June 2009, compared to an 11.3% recovery average.[23]  Obamacare only further strains the amount of disposable income available to young people, which will reduce consumer purchases, limit economic growth, and hamper job creation.  Americans need policies to increase economic growth, promote job creation, rein in education spending, and lower healthcare costs.

 


[5] Clive R. Belfield, Henry M. Levin and Rachel Rosen, The Economic Value of Opportunity Youth, W.K. Kellogg Foundation for the Corporation for National and Community Service (Jan. 2012), p. 24.

[8] Id.

[9] Bureau of Labor Statistics, Characteristics of Minimum Wage Workers: 2012 (Feb. 26, 2013), p. 2.

[10] Id. at 8.

[11] http://www.bls.gov/news.release/empsit.t08.htm; see also: BLS Historicals, Employment Level – Part-Time for Economic Reasons, All Industries (Series ID: LNS12032194) 

[19] 30 is the median age for first-time homebuyers.

[23] Source: Data derived from Join Economic Committee Staff Calculations