Executive Summary

Young adults in the United States have experienced higher rates of unemployment and lower rates of labor force participation than the general population for at least two decades.¹ The Great Recession exacerbated this phenomenon.² Despite a substantial labor market recovery from 2009 through 2014, vulnerable populations--including the nation's young adults--continue to experience higher rates of unemployment.³

Meanwhile, changes in labor market conditions, including globalization and automation, have reduced the availability of well-paid, secure jobs for less-educated persons, particularly those jobs that provide opportunity for advancement. Furthermore, data suggest that young workers entering the labor market are affected by a long-running increase in the use of "contingent" work arrangements, characterized by contracted, part-time, temporary, and seasonal work.⁴

In light of these trends, in 2013, the Federal Reserve Board's Division of Consumer and Community Affairs began exploring the experiences and expectations of young Americans entering the labor market. Staff reviewed existing research and engaged external research and policy experts to identify the potential economic implications of these labor market trends on young workers.

This initial exploration raised several questions about the experiences of young workers that were not fully explained by existing data. In response, the Federal Reserve conducted a survey, the Survey of Young Workers, in December 2013 to develop a deeper understanding of the forces at play. The online survey was intended to be exploratory--ultimately confirming some insights and highlighting areas worthy of additional study. The Survey of Young Workers was administered by GfK (formerly Knowledge Networks), using its Internet panel.⁵ The 2,097 survey respondents ranged in age from 18 to 30. Details about the survey, its methodology, and limitations can be found in the body of the report and in a methodological appendix (Appendix A: Methodology).

This report is intended to serve two principal purposes. First, it summarizes insights from the Survey of Young Workers and related research in the field. Second, it frames policy and research issues for future consideration by the Federal Reserve Board and others interested in young workers.

Key Findings

This report presents findings from the December 2013 survey. Key findings include the following:

Connecting Education and the Labor Market

Educational programs and goals should align with labor market demands in order to prepare students to join the workforce

• Students need information on potential job outcomes from a variety of educational options to guide their career-planning decisions. In fact, respondents noted that uncertainty about job outcomes is a barrier to enrollment in postsecondary education.
• The current gap in alignment between education and the labor market may contribute to the number of young workers who have not found paid work in their chosen field of study. Only 42 percent of working respondents in the survey have a job that is closely related to their field of study.
• Many high school students are not receiving adequate information about job planning. In the survey, 63 percent of respondents reported that they received information about jobs and careers during high school, while 24 percent of respondents reported that they received none.
• This situation is similar for college students. Among respondents who attended any college, 66 percent received information about jobs during these years, while 22 percent reported that they received none.
• According to survey respondents, school counselors and teachers are the primary source of job information in both high school and college. Hence, educational institutions have an opportunity to provide students with more information about the labor market.

Young workers are responding to the labor market's increasing demand for postsecondary credentials and degrees

• Thirty-seven percent of the respondents reported that they have the level of education and training needed for the type of job that they would like to hold in the next five years. As expected, the respondents' confidence in their education increases with each level of attainment.
• In response to the need for more education, nearly one-third of the total respondents are currently enrolled in an education or training program.

The labor market rewards education and work experience with career paths and higher earnings

• Respondents with higher levels of education are more likely to be employed, to be working in a field related to their education and training, and to characterize themselves as being in a "career" rather than "just a job."
• Respondents with higher levels of education and work experience are more likely to have higher earnings and to be able to cover their monthly household expenses.
• Respondents with early work experience, such as a high school job, are more likely to be currently working and more likely to have a full-time job than those who did not work during high school.
• Workers with a postsecondary degree have the most opportunity for upward mobility, with 39 percent describing their job as a "career" and 23 percent reporting they have "just a job."⁶

The ability to pay for postsecondary education affects a young adult's decision to enroll

• Nonstudents who are interested in additional education named financial considerations--including not being able to afford school or not wanting to take out loans--as their top barriers to enrollment.
• Twenty-three percent of respondents reported that the financial benefits of their education do not outweigh the cost of their education.⁷ These respondents are more likely to have student loans associated with their education.
• Meanwhile, respondents who reported a high financial value for the cost of their education are more likely to have received a scholarship, cash for their education, or financial assistance from an employer for their education. One possible explanation for this finding is that because these respondents are less likely to have student debt, their perceived return on investment is typically higher than their counterparts with student loans.

Job Fit

Job satisfaction is driven by compensation and schedule

• According to the survey, 66 percent of respondents are somewhat satisfied or very satisfied with their job arrangements over the past five years. The satisfaction of these respondents is attributed to their compensation and their schedule.
• Likewise, lack of job satisfaction is driven by compensation and schedule.

Despite the importance of education and work experience, intangibles still play a role in the labor market

• According to the survey, landing a job is still heavily based on personal connections. Respondents identified personal networks as a primary source in their job search process.
• Demographics also play an important role in labor market outcomes. For example, non-Hispanic white respondents are more likely than other racial and ethnic groups to have early job information and experience. This subgroup was more likely to receive this information from their parents, friends and family, and their place of work. This group is also more likely to have held a job while in high school and college.

Upward Mobility

"Traditional jobs" (defined as permanent, full-time jobs) are associated with "careers" and upward mobility, while the opportunities associated with contingent work are less clear

• Respondents with traditional jobs are more likely to have higher salaries and wages than those with temporary or part-time employment.
• Full-time workers are more likely to have received a promotion in the past year and to perceive opportunities for advancement in their job than part-time workers.

The lack of labor market opportunities may have pushed workers to accept jobs for which they are overqualified

• Twenty-eight percent of working respondents reported that they are overqualified for their current job. Respondents with an associate's or bachelor's degree are most likely to report they are overqualified for their job.
• Less than one-third of those who described themselves as overqualified for their current job are working in a field related to their education or training.
• The data suggest that in some cases less-educated workers have been pushed out of previously available, well-paid, secure jobs that are filled by overqualified workers. And, as a result, 83 percent of those seeking a job have not completed a postsecondary degree.

Young Workers' Unemployment

Close to half of respondents who do not have a paid job are seeking paid employment

• Most of the unemployed respondents have low levels of educational attainment, including 83 percent who have not completed a postsecondary degree.
• Only 20 percent of the job seekers had a job interview in the four weeks prior to completing the Survey of Young Workers.

Young Workers' Outlook

Young workers value job stability

• When given the choice, young workers generally prefer steady employment (67 percent) to higher pay (30 percent).
• Going forward, young workers expect greater job stability than they have experienced to date. Young workers generally have not experienced much job stability, as 29 percent have held a single, full-time job for one year, and another 14 percent have held a single, full-time job for five years. However, they expect greater job stability in the future, with 43 percent expecting to have a single, full-time job for the next five years.

Education, work experience, and job opportunities are the main drivers of a young worker's outlook about their job future

• In the survey, 45 percent of respondents reported that they are optimistic about their job future. Respondents with higher levels of education, work experience, and job opportunities are more likely to be optimistic about their job future than respondents who lack such skills and experiences.
• Likewise, the 21 percent of respondents who reported that they are pessimistic about their job future are more likely to lack economic opportunity, job experience, and education.
• In the survey, 34 percent of respondents are not sure about their job future.

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Policy and Research Implications

The survey demonstrates the association between postsecondary education and positive labor market outcomes, ranging from optimism about one's job future to higher earnings. Hence, it is critical that young workers receive appropriate information that enables them to select an educational program that maximizes their job opportunities. Young adults considering postsecondary education must choose from a range of public, nonprofit, and for-profit institutions offering an assortment of degrees and training programs. However, limited information is available to young workers regarding the likelihood of landing a job or the expected salary from these alternative options. The decision is further complicated for the majority of potential students who do not have the personal resources to pay for their education upfront or lack the ability to earn a full scholarship.

Because education plays such an important role in a young person's career opportunities, additional research on the outcomes from various educational paths is essential. School teachers, counselors, and other providers of career information also need these valuable resources to properly advise individuals as they develop a career path.

The Survey of Young Workers is intended to provide a general overview of individuals at the onset of their workforce experience. The report highlights some notable differences based on respondent characteristics such as race and ethnicity, gender, and geographic location. These preliminary findings and the policy solutions that seek to address them merit additional analysis. While the survey adds to the body of knowledge provided by previous surveys and research on this topic, much remains to be explored. The Federal Reserve intends for this report to help shape future inquiry among workforce researchers, policymakers, and practitioners. To this end, the Federal Reserve will make the survey's data available to the public. In addition, the Federal Reserve will encourage additional use of these data for research both within the Federal Reserve System and among external parties.

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References

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