The Decline of Summer Employment

Decline in the labor force participation is an often-discussed topic of the recent Great Recession and its recovery. Numerous demographic factors have played a role in the decline, including the growing number of older Americans and their decreasing labor force participation rates. However, there has been a real effect from the decline of youth employment – primarily youth seeking summer work.¹ This article discusses youth summer employment in North Carolina, and its changes over the past two decades.² Some key findings include:

• Summer youth labor force participation has steadily declined since the early 1990’s, but has been particularly exaggerated since 2004.
• Summer youth unemployment is much higher than unemployment among the working age population for the same period.
• Summer youth employment is highly concentrated in Retail, and the share of employment in this industry has increased recently.

Over the past two and a half decades, young North Carolinians have chosen less frequently to participate in the labor force during their typical summer breaks. In contrast, the labor force participation rate for the working age population has hovered around the mid-70s apart from a slight peak in the early 1990s.

In particular, the Great Recession seems to have had an outsized impact on the younger population’s labor force participation, which fell from around 68% in 2005 to a low of 52% in 2011. This began to rebound slightly during the economic recovery, but has declined yet again. Some theories that have been offered as to why youth labor force participation has been declining include: crowding out of younger individuals by older ones seeking work, the rise of volunteer or unpaid internships (which do not show up as work), and other extracurricular activities to improve their college applications.³

During recessions, unemployment rates began to rise, but youth unemployment appeared to have a more exaggerated swing during those periods. One reason may be that companies, which may normally hire younger individuals during the summer months, have the option to hire older, more experienced, workers for lower wages as they seek out any available employment. Therefore, the unemployment effects are in a way passed on from one labor group to another.

As expected, the youth workforce tends to be heavily concentrated in the Retail industry during the summer months. Last June, July, and August, about 48% of the youth employed population in North Carolina found themselves working for a retail oriented industry. The Retail industry typically allows more flexibility in work schedule, requires little to no training, education, or experience, and pays lower wages, which make it attractive to the youth population.⁴  During the same period, only between 10% and 15% of the working age population were employed in this industry.

In 2016 roughly 18% of total industry employment during the summer months was in Retail compared to under 15% in 1980.

The declining youth labor force participation could result in a strain on retail businesses seeking to hire workers for the summer months since the industry has a higher concentration of youth employment. Businesses may be forced to hire more employees from the working age group whom typically command higher wages. These greater costs will inevitably be passed on to consumers in the form of higher prices for services and products.