Warren Buffet, Tom Cruise, Kathy Ireland, Martin Luther King, Walt Disney and Wayne Gretzky all had paper routes when they were kids. Unfortunately, those days are gone, along with many of the other jobs traditionally performed by teenagers.
Why does this matter? As explained in episode #852 of NPR’s Planet Money, it matters a lot, both to the future of generation Z teenagers and our overall economy. Btw – if you’re an entrepreneur and you haven’t checked out Planet Money yet, I highly recommend it.
Kathy Ireland (Photo by Gabriel Olsen/Getty Images)
What Happened To Summer Jobs?
In 2018, the peak percentage of working teenagers, ages sixteen to nineteen, was thirty-seven percent (the high point usually occurs during July). In contrast, the peak teenage employment percentage during the 1970’s and 1980’s routinely approached sixty percent.
This disparity becomes even more significant when you consider that during 2018, we neared record low unemployment levels. It’s likely teenage employment would have been even higher during past decades, if unemployment rates had been comparable to those in 2018.
So what changed? According to Dr. Paul Harrington, Professor of Labor Markets & Policy at Drexel University, several factors account for the suppressed teenage labor market. Note: quotes below are from Mr. Harrington’s appearance on Planet Money and have been lightly edited for readability.
Older Workers – “… employers clearly prefer them, because employers see older workers as having the basic behavioral traits that they need and they think that kids increasingly don’t have those traits – dependability, reliability and self-control.”
College Admissions – “The higher education system now… punishes high school kids for working, because the rewards in high school for college admissions are not working related, they are community service… (and) extracurricular activities.
Other factors suppressing teenage employment, not cited by Professor Harrington, include:
Litigation – Jury settlements are particularly generous when a young person is injured at work, irrespective of the culpability of their employer. Given the lower level of good judgement of the average teenager, potential litigation is another reason employers prefer older workers.
Working Parents – Middle-to-lower earning families require two working parents to make ends meet. This reality makes it difficult for disadvantaged teenagers to hold down a job, due to the need to care for siblings and a lack of reliable transportation.
Entitlement – On the other end of the socioeconomic spectrum, many affluent parents freely share their financial success with their children, in the form of ample allowances, debit cards, etc. A teenager with no financial needs is much less likely to seek employment.
Long-term Societal Impact
According to Professor Harrington, “Kids who work while they are in high school, are more likely to work as an adult. They have higher employment rates, as adults, than kids who don’t work while they’re in high school. As adults, ten years later, they make somewhere between ten to twenty percent more, holding other factors constant, than kids who didn’t work.”
To put this in perspective, according to the Bureau of Labor Statistics latest reporting, the average annual salary of a U.S. worker, between 25 and 34 years old, is about $43,500. Using fifteen percent as the midpoint of Professor Harrington’s increased salary range, working during high school could put $65,250 of additional pay in your kids’ pockets, during the decade of their thirties ($43,500 x 10 years x 15%). This incremental pay is a conservative estimate, as it assumes the benefits of working in high school end when a person turns forty, which is unlikely.
The impact on the U.S. economy is staggering, when one considers that about 43.7 million people were in their thirties, as of July, 2018. If only ten percent of these workers who were not employed during high school had worked as teenagers, their increased wages would theoretically total approximately $28 billion. This is a drop in the bucket when compared to the U.S.’s overall GDP, but real money for a generation of thirty somethings. This analysis obviously assumes an adequate number of jobs to employ this incremental workforce, which is a challenge in an economy approaching full employment.
It’s Not Just About Making More Money
According to Professor Harrington, working during high school is, “… a way to develop proficiency. This is the first time that you’re asked to act as an adult, in an adult setting, where there are adult repercussions for your decisions.”
Some of the hands-on behaviors and skills teenagers cultivate through working include:
Punctuality – Most employers require their employees to arrive on the job site on time, irrespective of the weather, the time of day or what the employee did the night before. Even remote workers have to learn punctuality, as they must attend online meetings and virtually convene with customers in a timely manner.
Customer Service – Many teenage jobs are in the service industry, which provides young people an opportunity to interact with adults in a professional setting. Irrational and irate customers are no fun, but learning to appropriately deal with them is an important life skill.
Communications – Entry level jobs often have a sales component, whether it’s an upsell suggestion at a fast food restaurant or promoting a complimentary item at a retail store. Such opportunities allow young people to exercise their interpersonal skills and develop a persuasion style that compliments their personality.
Thus, if you want your child to build a foundation of future success, encourage them to work while in their teens. The skills they develop will pay dividends for decades to come.
Note: this article was inspired by a conversation with Nick Cronin, CFO at HG Insights. He assures me that though his children aren’t yet in elementary school, each of them will be hard working teenagers.