Obama plan to boost teen employment could be an uphill battle

The national unemployment rate has fallen to 8.6 percent, but the level of teen joblessness has remained high. So, on Thursday, President Obama encouraged the private sector to step up their hiring of young people.

By , Staff writer

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    A woman reacts as U.S. President Barack Obama shakes hands after speaking about jobs and the economy at Shaker Heights High School during a trip to Cleveland, Ohio Thursday.
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Uncle Sam used to reach into his deep pockets to pay for programs to keep teens off the streets in the summer and instead get some work experience.

But, with federal budget cutting the norm, those days are over.

So, on Thursday, the White House kicked off its efforts to encourage the private sector to step up their hiring of young people.

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Called the “Summer Jobs +” initiative, the White House urged corporations, nonprofits, and government to hire at least 250,000 teens this summer. So far the Obama administration says it has received commitments from such companies as AT&T, Bank of America, and CVS/Caremark to hire 180,000 youthful workers this summer. Included in that effort is hiring promised by such federal agencies at the Department of Agriculture, Department of Interior, and Department of Health and Human Services.

Even with those commitments, people involved in youth employment say jobs are likely to be tough to get this summer. States and cities continue to face budget challenges. Although companies are hiring, they are still skittish about the direction of the economy. And there is only so much federal agencies can do with Congress talking about the need for austerity.

“This summer is going to be a real challenge for young people who want a decent job or any job,” says Aaron Smith, executive director of Young Invincibles, a nonpartisan nonprofit that tries to represent the views of people 18 to 34 years of age. “I am glad we have some employers stepping up, but we will have millions of teens applying for these jobs and not enough positions.”

Even as the national unemployment rate has fallen to 8.6 percent, the level of teen joblessness has remained high. In November, teenage unemployment was 21.4 percent compared to 20.8 percent November, 2010. In August of 2009, according to the Bureau of Labor Statistics, the unemployment rate for teens peaked at 24.9 percent.

Pent-up demand last summer was 3 million teens, estimates Andrew Sum, director of the Center for Labor Market Studies at Northeastern University in Boston. And counting people in their early twenties, he says, increases the shortage to 5.5 million jobs.

“Every little bit helps but the magnitude of the problem is far greater,” says Mr. Sum who thinks getting private employers involved is a good idea since kids tend to get more training than if they work in the public sector. “Quite frankly, the private sector is more demanding.”

Sum also says if a teen can get a foot in the door in the private sector, they have a greater likelihood of being kept on in the fall and winter.

For teens, finding work in the summer has never been easy. They lack experience and may not have much of a work history. In recent years, the task has gotten even harder as people over 55 years of age have returned to the workforce, taking many of the service sector jobs that used to go to teenagers.

“Employment has shifted dramatically to people over 55 years of age in the major areas that teenagers used to work – food preparation, the service sector, and retail,” says Anne Thompson, a policy analyst at the National Employment Law Project (NELP) in Washington. “Older people just can’t afford to retire – they need to make ends meet.”

Some groups think the rising minimum wage has also cut into companies' willingness to hire young people. This year, eight states raised their minimum wage to account for the higher cost of living. After a lengthy battle, Congress increased the federal minimum from $5.15 an hour to $5.85 an hour in 2007, $6.55 in 2008 and $7.25 in 2009.

“I heard a restaurant owner in San Francisco, where the minimum wage is over $10 an hour, say there was no way he was going to hire a teenager at that rate,” says Michael Saltsman, a fellow at the Employment Policies Institute in Washington.  “I know some states have talked about a youth training wage,” he says. “The point is, you try to make it as easy as possible to employ someone.”

In addition, people who have exhausted their unemployment benefits are also competing for entry-level jobs. “We have seen people who have lost good middle class jobs back in the labor market in entry-level jobs,” says Ms. Thompson. “The majority of the jobs lost in the recession were mid-to-high wage jobs and the majority of the jobs created are low-wage jobs.”

She says a NELP study has found that wages for low-income workers have declined 2.3 percent since the recession began.

Another part of the problem for teens is a structural shift. For example, many teens used to get jobs working at financial companies, says Mr. Sum at Northeastern. But, many of those companies have merged or moved back-office operations out of the country. “Relative to the last ten years, 85 percent of those jobs are gone,” he says. “Finance just quit hiring kids.”

Many cities and states used to hire teens but have to cut their programs as their own budgets have been pared. For example, last summer New York City created 23,000 summer jobs compared to 52,000 in 2009.

In 2009, when the Democrats still controlled Congress, President Obama’s American Recovery and Reinvestment Act (ARRA) included $1.2 billion for summer jobs for youth. It resulted in 320,000 temporary jobs.

In 2010, Sen. Chuck Schumer (D) of New York, introduced the Youth Jobs Act which would have provided 500,000 jobs at a cost of $1.5 billion. However, it failed to pass Congress.

This year, federal budget analysts say any attempt to get money from Congress will be tough as well. “The only way it would happen is if included offsetting spending cuts and then you would only increase the odds to 50-50,” says Stan Collender, managing director at Qorvis Communications and an expert on the budget.

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