According to a recent St. Louis Fed report, over one-third of individuals aged 18 to 24 reported no earnings from wages or salaries in 2022, a significant increase from about 22% in 1990. This trend highlights a concerning shift as a new generation of workers appears to be disengaging from the workforce at an early stage, despite favorable job market conditions. Additionally, mental health challenges are prevalent among this demographic, further complicating their employment prospects.
Many young adults find that their academic qualifications do not directly correlate with the practical skills required in the job market. The Burning Glass report from February indicates that nearly 50% of individuals with a bachelor’s degree are underemployed, working in positions that do not utilize their academic training, within a year of graduation. Lisa Severy, a career counselor at the University of Phoenix, notes that such employment circumstances, including non-traditional hours and work environments, can make employees feel undervalued.
The youth mental health crisis is also identified as a significant barrier to economic progress, influencing their ability to secure and retain employment. Although Gen Z has faced an exceptionally tight labor market, the conditions stemming from the COVID-19 pandemic up to the present have exacerbated feelings of financial insecurity among this age group, as per a 2022 McKinsey survey.
From an employer's perspective, there is a growing emphasis on skills-based recruitment rather than academic credentials, according to Josh Millet, CEO of Criteria. This shift suggests that employers are prioritizing practical skills and abilities over formal education and related experience.
Despite the robust labor market of 2022, described as the strongest on record, the employment-to-population ratio for 20 to 24-year-olds has shown improvement compared to the previous decade, based on data from the Bureau of Labor Statistics. However, the economic gains for this cohort have not been substantial, with real incomes remaining largely stagnant and a growing segment of this demographic not earning wages, as highlighted by the St. Louis Fed. The unemployment statistics do not account for young adults who are neither employed nor in education, as they are not actively seeking work.