Losing Now, Losing More Later?: Tapping the Long-Term Economic Potential of Opportunity Youth

Most people understand that high rates of youth unemployment and underemployment are an immediate loss to the nation. Most people also appreciate the value of completing high school and obtaining some vocational skills or post-secondary qualification. But policy decisions tend to be overly focused on the here and nowimproving labor market opportunities and making college more affordable.

To truly help young people disconnected from jobs and education, there should be a greater focus on policy decisions that require a longer-term perspective.

In our calculations of the immediate economic costs of youth unemployment and inadequate education, we estimated a taxpayer burden of approximately $14,000. We also found a social burden all the costs, not just those to taxpayers, of $37,000 annually.

But these are just the short-term expenses.

To develop a longer-term perspective, we took a look at the repercussions in adulthood of having less work experience, fewer skills, and less education. What we found was alarmingthese costs are more than ten times as high as the immediate costs. That۪s why a broad swath of research evidence is now focused away from immediate costs of disconnected youth and instead emphasizes an understanding of development over the life cycle of these individuals. 

What this research has found is growing evidence on what could be called “scarring.” This includes those youth with limited experience who can۪t get jobs so they can۪t build successful careers. It also includes youth who tend to stay on welfare, in part because they understand the eligibility criteria, and in part because the stigma effect attenuates over time.

Scarring is especially significant in the realm of youth criminality. Once involved in the criminal justice system, youth face stiffer penalties and, after prison, their economic options are so diminished that a return to crime is highly likely. 

Finally, adults who were previously disconnected youth experience chronic illnesses at higher rates than the general population, largely due to the fact that they had less access to health education.

The evidence on scarring is complemented by substantial research on skills formation. As argued in extensive writings by the Nobel Laureate Professor James Heckman, “skills beget skills.” Youth with some skills find it easier to pick up new skillsand this facility is greatest at younger ages. Much of this evidence comes from studies of early education, but increasing attention is being paid to skill formation in youth. Existing studies find it is very hard to move the needle۪ on building skills and human capital in high school.

A third body of inquiry looks at community disadvantage and how it is perpetuated. Migration studies focus on how ex-offenders return to their local communities, reinforcing the clustering of criminal activity. Analysis using data on over five million persons in the American Community Survey shows that the level of youth disadvantage in a community is strongly correlated with the extent of adult disadvantage in a community. The obstacles to economic independence faced by youth are a reflection of the community they grow up in.

Research on lifecycle scarring and skill formation makes investment in youth imperative. But the need for investment is even more compelling for the youth of the Great Recession. Labor market opportunities for low-skill and low-experience youth have almost collapsed in the years since 2007. At the same time, a large fraction of the population is heading for retirement, and each new worker must now support a greater amount of public funding for retirees. To further add to this problem, the long-term trend in public support for postsecondary education is waning. Current cohorts of youth will be paying a greater fraction of the cost of college themselves.

This investment should begin with efforts to ensure these youth do not become disconnected from the educational system in the first place, and that means reducing the number of high school dropouts. In recent work with colleagues at Teachers College, Columbia University, we have found that the most cost-effective way to increase the high school graduation rate is to focus on students who have not yet dropped out of high school. A federal program such as Talent Search, which helps increase the high school graduation rate by motivating and preparing students for college, is relatively inexpensive and effective.

By comparison, programs that help students complete a high school diploma after they have already dropped out of school are much more expensive. These programs, such as Job Corps and National Guard Youth ChalleNGe, cost between $14,000-$22,000 per student.

Public policy for youth should be understood as an investment, weighing the immediate costs with the benefits in the future. The challenge is to build a better appreciation of how decisions we make now could jeopardize our well being in the future. It۪s time to look beyond the horizon if we want to make a difference.

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Clive Belfield is an associate professor of economics at Queens College, City University of New York, and co-director of the Center for Benefit-Cost Studies in Education at Teachers College, Columbia University.

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