Changing Youth Employment Outcomes:

Tying Skills Training and Education to Careers

Haile Dagne

Kellen Grode

Tracey Livingston

Kency Nittler

School of Public Affairs

American University

March 21, 2014

Acknowledgements: We would like to thank Dr. Daniel Puskin, Dr. Sonja Walti, Dr.

Bradley Hardy, Dr. Gabriel Mathy, Kelsey Kerle-O’Brien, Kevin Nesline, Dr. Karen

Baehler, Dr. Robin Lumsdaine, Virginia Knechtel, Dr. Jillian Berk, Dr. Alexandra

Resch, Jennifer Kowalski, Lynn Johnson, Dr. Laura Sullivan, and Dr. Seth Gershenson,

and Dr. Robert Lerman for their help and guidance throughout this competition.

1

Executive Summary

Youth unemployment and underemployment has lasting negative social and economic

consequences including billions in lost earnings for affected groups and negative impacts on

health, life expectancy, reading skills, and more. These adverse outcomes represent a strong

justification for government intervention. The policy analysis presented here identifies specific

structural and cyclical causes of youth unemployment and underemployment, and examines four

policy alternatives with potential to address these causes and improve outcomes: (1) Hiring

Credits, (2) Career Academies, (3) Apprenticeships, and (4) College Co-op Programs. These

alternatives are assessed relative to current policy using seven criteria, including improvement in

earnings, employment effect, ability to address sources of the problem, cost-effectiveness,

political feasibility, target population, and timeline of effectiveness.

All four alternatives were projected to have positive employment outcomes. Hiring

credits were most effective at creating jobs in the short term, but had no long-term effects. In

contrast, the other three alternatives had significant increases in earnings in the long-term, but

mixed findings on reducing the level of unemployment. Each of these alternatives focuses on

different segments of the population and therefore this paper recommends a holistic approach

that implements all four alternatives at the national level to address short and long term issues for

each segment of the population.

Problem Definition

Youth in the US are unemployed and underemployed at historically high rates that

threaten to have lasting social and economic consequences for the nation. Youth are unable to

find jobs primarily for three reasons: (1) jobs are not available, (2) they are not qualified for

available jobs, or (3) they cannot signal to employers that they are qualified for available jobs. In

2013 more than 1 in 6 youth were unemployed, compared to 1 in 13 for the general population.1

Millions more young people are suffering from underemployment, with 1 in 4 being

underemployed compared with 1 in 6 in the general population.2 Over the last 20 years there

have been three separate recessions, but the most recent recession has resulted in higher annual

youth unemployment rates in the

past 5 years than in any of the

previous 15.3 Although the rate

continues to trend downward, the

annual unemployment rate is still

2.8% higher than the average of the

last 20 years.4 The Great Recession

ended over five years ago, yet its

effects are still being felt; the

recovery that has followed is far

slower than the average recovery

following a recession (see Figure

1).5 The effects of the Great

Recession highlight a problem that

has existed for some time, as youth unemployment has only dropped below 10% twice in the last

40 years.6

Justification for Intervention

The effects of elevated youth unemployment and underemployment have lasting

economic and social impacts. Despite making up 15.9% of the total workforce, youth comprise

Figure 1. Source: BLS Date, Authors' Calculations

2

27.6% of the unemployed population.7 Its estimated that nearly 1 million youth who have

experienced long-term unemployment as a result of the recession will lose more than $20 billion

in earnings over the next 10 years, or more than $22,000 per person.8 These effects are expected

to persist for 10 years beyond that, although to a lesser extent. Lost earnings have spillover

effects as they result in lost tax revenue for the government and the failure of the economy to

reach its full potential. CBO estimates that excess unemployment in the US has caused an output

gap whereby GDP growth is about 4% below its full potential.9 These problems are compounded

by increased demand for government welfare services both now and into the future.i

Within the youth demographic the consequences are not felt uniformly. CBO found that

the three most negatively impacted groups are men, people without a high school diploma, and

people under the age of 25.10

Among those with no college education, 1 in 3 are

underemployed.11

Among African American youth, 2 out of 5 are underemployed.12

The stigma

attached to these groups, combined with the erosion of their skills, can create lasting problems

for such individuals as well as their future employers and the economy as a whole.

The consequences of youth unemployment increase in severity the longer it is allowed to

endure. In addition to the economic costs of unemployment, there are a host of social problems

that result. Unemployment shortens lives13

, worsens psychological and physical well-being14

,

damages familial and social relationships15

, harms basic skills like reading16

, and even results in

worse future employment outcomes for children of the unemployed.17

Higher rates of

unemployment are connected to higher crime rates.18

Underemployment also causes long-term

negative impacts on income, self-esteem, job turnover, and productivity.19

Therefore, it is

necessary to devise an intervention to solve these problems or risk permanently damaging the

prospects of an entire generation.

Causes of Poor Employment Outcomes for Youth

The two primary goals of policy in this arena are to reduce youth unemployment and

underemployment in order to improve long term earnings and ensure youth live up to their

economic potential. To get to the root of the problems that block achievement of these goals, one

should ask: why do youth not get hired? Why do youth continually find themselves

underemployed?

The answers to these questions can be generalized into three primary causes, as illustrated

in Figure 2. First, there may not be enough jobs (weak labor demand). Second, youth may not be

qualified due to lack of education or skills (skills mismatch). Finally, youth may be qualified, but

may not be able to signal to employers that they are (a form of hysteresis).

The Business Cycle and Lack of Demand: Why are 1 in 6 youths still unemployed?20

One of

the primary explanations is that job growth following the Great Recession has been slower

compared to recessions in the recent past.21

Cyclical forces continue to matter for youth

employment outcomes. Low aggregate demand for goods and services, resulting from the recent

downturn, depresses demand for labor. CBO estimates that overall unemployment is about 1

percentage point higher due to continuing weakness in demand for goods and services.22

Even if

new job growth were to increase at a rate equal to that of the best year of the 2000’s, which saw a

monthly average of 208,000 new jobs, it would take until September 2018 to completely close

the jobs gap.23

At present, the monthly average job growth was about 7% lower than that rate.24

i Not to mention the impact on private savings for housing, children’s education, and retirement.

3

Concerns about the long

term unemployed—Skills Mismatch: Structural

changes to the economy

have led to the

polarization of the job

market into low-skilled

and high-skilled jobs. ii

Consequentially, this job

polarization has led to the

decline in of middle-skill

jobs, creating a hollowing

out effectiii

.25

From 1979

to 2010, middle-skill jobs decreased as a share of the labor market from 58.9% to 44.5%.26

In

addition, over the last several business cycles, job polarization has become particularly

pronounced coming out of recessions with the composition of the workforce permanently

changed and leading to jobless recoveries.27

The recovery from each recession of the past 20

years has experienced a decline in demand for middle-skill jobs that never recovered to pre-

recession levels, while the demand for high and low skills jobs saw stagnant or increased demand

during recoveries resulting in overall jobless recoveries.28

Moreover, the rising disparities in earnings amongst workers are not just occurring

between skills levels but also within. For example, recent college graduates that obtained a

degree in high reward majorsiv

saw a 33% increase in earnings over their counterparts due to the

demand shift in the labor market.29

The high youth unemployment rate indicates that primary,

secondary, and postsecondary educational institutions are not producing enough individuals with

the skills necessary for a career. Specifically, employers seek individuals with non-cognitive,

industry-specific, or higher-order cognitive skills.

Non-Cognitive Skills: Today’s workforce, for jobs at all skill levels but particularly for low-skill

jobs, is increasingly looking for bright individuals who have strong non-cognitive skills. These

skills include the ability to communicate effectively, a sound emotional temperament, and other

positive personality traits such as discipline, motivation, and persistence. 30,31

The level of

accountability, self-control, and diligence in young potential employees is an effective predictor

of career success. 32,33

Due to the increasing complexity of high-wage positions that value

ii Low-skills jobs require at most a high school education (e.g., service, agricultural) and high-skill jobs require

college education (e.g., professional or managerial positions) iii

Middle-skills jobs are defined as jobs that require some education beyond high school but no college education is

necessary (e.g., manufacturing, carpenters, electricians, auto mechanic, industrial machinery) iv

High reward majors include chemical engineering, finance, chemistry, computer programming, etc.

Figure 2. Causal Map and Intervention Points

4

Figure 3. Source: JOLTS and BLS data, (Ghayad 2013)

communication with colleagues, managers,

and clients, young workers are asked to

demonstrate shared understanding, gain

trust, and to negotiate an outcome suitable

to all parties.34

Young workers therefore

may find it difficult to signal to employers

their non-cognitive skills because it often

requires that they have past work experience

and/or individuals to advocate on their

behalf.

Industry-Specific Skills: In addition to

non-cognitive skills, a sizable proportion of

middle skills jobs require industry specific

skills. 35

Despite projections that 30% of

jobs in 2020 will require a technical,

associate’s, or college degree, only 28% of

employees currently have the necessary

skills to fill these positions – an expected 3

million worker shortage.36

In a 2012 survey

of businesses, 84% reported a skills gap of

high-and middle-level skills within their

organization.37

The skills gap can be

attributed to the baby boomers retiring, the

Great Recession, and a weak system to train

and educate individuals into middle-skill

jobs.38

The lack of an effective transitional

system for youth from high school to

industry-specific careers has increased the

skills mismatch for these jobs.

Higher Order Cognitive Skills: For high-skill jobs, non-cognitive, industry-specific, and

higher-order cognitive skills are necessary. Over the last 30 years there has been a decrease of

approximately 25% in the share of jobs that are predominately middle skill and an increase in

high skill jobs and low skilled, manual jobs.3940

Educational attainment has been critical to

advancing technological innovations over the past twenty years.41

The employee’s ability to

productively utilize technology to increase outputs has become a necessary skill requirement for

being offered a job.42

Individuals must be able to analyze a myriad of computer-provided data

and develop a solution. The capacity to recognize patterns and determine if a solution will be

inadequate facilitates employees in developing problem solving and critical thinking skills.43

Hysteresis: Hysteresis occurs when persistent levels of long-term unemployment are so

damaging to the labor market that it causes unemployment to persist. Hysteresis can be caused

by the real erosion of skills due to unemployment or employer’s perceptions that long term

unemployed are risky or lower quality employees.44

CBO estimates that 1 in 200 adult laborers is

without a job due to the stigma of employer perceptions or the erosion of skills resulting from

long-term unemployment.45

These problems especially concern youth, who make up a larger portion of the long-term

unemployed (18.7%) than they do of the overall labor force (15.9%).46

To identify and analyze

5

hysteresis, economists use the Beveridge Curve to capture the negative relationship between the

vacancy rate and unemployment rate. If hysteresis is occurring, the Beveridge Curve will display

an outward shift; in other words, there will be more people unemployed for any given vacancy

rate. Recent analysis of the years 2002-2013 finds that hysteresis is present due to this outward

shift in the curve (see Figure 3). These findings show how the Great Recession has impacted

total unemployment and subsequently youth unemployment to a greater degree than 20 years

ago.

Methodology and Criteria Both the alternatives and the criteria used to assess them are motivated by the

relationships in Figure 2. This problem requires alternatives to address multiple causes of the

problem for different parts of the youth population. The Xs in Figure 2 represent the different

points of intervention for each alternative.

Each policy alternative will be analyzed based on the causal factor it addresses (the

business cycle, skills mismatch, hysteresis). Given the wide range of education levels in the

youth population, the various segments of the population are considered. Policies must be

effective and efficient, represented by an estimate of the cost-effectiveness of each policy. The

youth unemployment problem is both an immediate and a long-term concern, which makes the

timeline it takes for a policy alternative to create an impact an important factor of consideration.

Finally, policy alternatives will need to be politically feasible in order to be viable. Political

feasibility is considered on both a state and national level, when applicable, and will be impacted

by interest groups and current trends in popular opinion regarding youth, education, and career

readiness.

Current Policy

Current policies that support youth employment depend on a wide variety of stakeholders

at the federal, state, and local levels, as well as nonprofit and for-profit businesses. There are

twelve federal agencies that fund youth initiatives ranging from the Corporation for National and

Community Service to the US Department of Transportation.47

Federal programs for youth

include job and skills training programs, direct employment, and various funding mechanisms

including tax credits.

Policy Alternatives

This paper examines four potential alternatives that address the problem of poor youth

employment outcomes: Hiring Credits, Career Academies, Apprenticeships, and the College Co-

Operative Program (CCOP). Hiring credits provide immediate relief to currently unemployed

youth. Career Academies are a long term, preventative solution that focuses on skills gained

during high school. Apprenticeships address skills mismatch for youth no longer in school. The

CCOP provides increased incentives for students in post-secondary education to gain skills in

high-demand fields through substantive internships with employers. The evaluation of each

solution is summarized in an outcomes matrix (see Table 1) and the following sections detail

each solution based on the criteria.

Policy Alternative: Expand the WOTC Hiring Credit to Youth Description: Hiring credits

v provide subsidies to employers who create jobs by offering tax

credits to employers who have net hiring gains. Some target specific populations or industries,

v Hiring credits are often compared with wage subsidies (such as EITC). Evidence suggests that the hiring credit

policies are more effective at increasing employment when wages are unable to adjust to in response to weakened

aggregate demand (such as the case with the current situation), while wage subsidies are more effective at increasing

employment when the labor market is in equilibrium.

6

like the Work Opportunity Tax Credit (WOTC), while others are non-categorical, like the New

Jobs Tax Credit (NJTC) of the mid-1970’s.48

In the context of youth employment outcomes, this

alternative would expand the WOTC to include youth. The WOTC and NJTC are two notable

examples of the use of hiring credits at a national level, although many states have implemented

various types of hiring credits. Hiring credits for youth create additional youth jobs by

incentivizing employers to either create jobs that currently are not there or ignore negative

signaling and stigma attached to youth workers. While credits do not directly improve skills,

being employed prevents deterioration of existing skills.49

Cyclical unemployment tends to self-

correct in the long term.50

As a result, hiring credits are more effective in the short term.

Projected Outcomes: Hiring credits targeting specific industries are ineffective, but those

targeting the unemployed or allowing for recapture of payments for unmet goals have a positive

impact.51

Research on the impact of the WOTC on TANF recipients’ employment outcomes

found that subsidizing 40% of a worker’s 1st $6000 of income resulted in a 10% increase in the

employment rate (1.85 percentage points) of TANF recipients and a $35 monthly increase in

wages in the short term.52,53

Based on these rates, the analysis projects that expanding the WOTC

to youth would create an additional 333,000 jobs for youth ages 16-24. It is likely that the effect

of expanding the WOTC to youth would have a larger impact, however. For example, the

estimate is much smaller than it could have been because only about 10% of businesses eligible

to receive the credit participated in the program.54

It is believed that this is a result of the

difficulty of knowing and proving a new employee qualifies for the credit.55,56

These barriers are

much smaller when it comes to verifying ones’ age. Additionally, estimates of the elasticity of

demand for youth labor find that a 1% increase in wages increases unemployment by about

0.1%, which in context of WOTC suggests that a 40% reduction in hiring costs for youth would

decrease unemployment by 4% creating approximately 720,000 youth jobs.57

These two

estimates provide an upper and lower bound for the range of possible effects of this expansion of

the WOTC, with the actual effect likely falling somewhere in between.

Estimates of the impact of a hiring credit modeled on the NJTC are also promising. The

primary reason for NJTC’s effectiveness is higher participation rates (~50%), which are

attributable to the ease of compliance resulting from the lack of targeting.58,59

One meta-analysis

of the NJTC founds that the median estimate of the cost per job created is 6.9 times more

effective than stimulus spending, indicating that a $50 billion dollar hiring credit program would

yield 1.2 million new jobs.60,61

An important difference here is that these jobs would not all be

youth jobs, but if these jobs go to youth at the same rate as the existing jobs it will equate to

about 145,000 youth jobs.62

Despite the cost efficiency of these gains, political feasibility of

hiring credits is moderate at the national level where budgetary constraints and the lack of long

term benefits detract from their viability. Because the WOTC can specifically target youth,

however, it is more appropriate for addressing this problem than the NJTC.

Policy Alternative: Increase Funding for Career Academies General Description: Both state and national level governments could implement policies that

encourage the creation and expansion of Career Academies by providing specific funding to

local education agencies for their development. Career Academies are small learning

communities within existing high schools that integrate college-prep academic classes with

vocational instruction and maintain partnerships with employers and postsecondary education

institutions. In 2010, there were an estimated 7,000 career academies throughout the US serving

7

Improvement in

Earnings per

Invidual

(Timeframe)

Employment

Effect

Addresses

Problem SourcesCost-effectiveness

Political

Feasibility: Are

political barriers

surmontable?

Target

PopulationTimeline

Expand the

WOTC to Youth

$420 per year (1

year): 9% increase

in earnings for

target group

Reduces

unemployment

between 0.59% and

4% by creating

125,000 to

851,000 jobs

Business cycle:

Yes Skills

mismatch: No

Hysteresis: Yes

Applying to youth will

generate 125,000-

851,000 jobs and cost

between $300 million

and $2 billion

Yes: While many

republicans are

averse to larger

deficits, they also

tend to support tax

cuts.

All youth

Impact starts

immediately and

lasts 6 to 12

months

Increase Funding

for Career

Academies

$2,088 per year (at

least 8 years):

$16,704 over 8

years

Academy students

worked 4% more

than non-Academy

students in the first

four years after

graduation, which is

an verage increase

of 1.4 months of

employment

Business cycle:

No Skills

mismatch: Yes

Hysteresis: Yes

(preventative)

Within 4 years the

program pays for itself;

8 years after

completion the net

wage benefit is

$9,513.15

Yes: There is

already an

educational policy

movement towards

career and

technology based

education at both

the state and federal

level.

10th-12th

Graders;

program is

especially

good for men

Impact begins in

3 to 5 years

after implementat

ion and continues

for at least eight

years

$1000 Tax Credit

for Hiring

Apprentices

$5839 per year

(lifetime):

$240,037 per

apprentice over a

work-life

8.6% increase in

employment versus

non-participants 6

years after

enrollment

Business cycle:

Yes Skills

mismatch: Yes

Hysteresis: Yes

Net social benefits 9

years after enrollment

is $58,888

Yes: Backlash

against standards-

based reforms have

increased support

for apprenticeships.

4.6 million

youth not in

colleges

and/or labor

force

Impact begins  in

2 to 3 years after

implementation

and continues

long term

Pilot a College

Co-Op Program*

$6,302 per year;

10% increase in

salary compared to

non-co-op students

Not enough

available data to

reliably estimate

Business Cycle:

No Skills

mismatch: Yes

Hysteresis: Yes

(preventative)

The cost of current co-

op programs is not

released by

participating instutions

Yes: This

alternative parallels

recent programs

that are currently

being funded

through DOL

Youth in four-

year degree

programs

Impact begins in

4 to 5 years after

implementation

and continues

long term

*Due to the fact that this is a pilot program, estimates are

based on limted data and have low external validity

Table 1: Outcomes Matrix

8

about 1 million students (or about 10% of the national high school population), primarily in

grades 10 through 12.63

Career Academies change the focus of compulsory education to include career specific

skills and provide education outside of a traditional classroom in order to increase both non-

cognitive and industry specific skills, while continuing to develop higher order skills through

academic classes. Within three to five years after career academy programs start, youth will be

more competitive in the job market due to being more qualified for industry specific jobs and

having better signals that they are qualified. In theory, Career Academies can prevent hysteresis

and skills mismatch by strengthening youths’ skills (industry specific and non-cognitive) and

improving the signaling of ability of youth before the end of their high school experiences.

Projection of Outcomes: In 2008, a long-term study with random assignment by MDRC found

that Academy students had sustained earning gains, averaging roughly $2,088 more per year than

non-Academy students, with gains persisting through eight years after graduation.vi64

If these

gains were to persist over twenty years this would equate to an average increase in wages of over

$41,000. While some studies of Career Academies find no significant increase in employment

rates for Career Academy youth, several find increases in hours worked and months of

employment. 65,66

Career Academies also create other social and academic benefits. Students that

participated in Career Academies are more likely to say that high school prepared them well for

further education and work.67

Career Academies are associated with an increase in the

percentage of youth living independently and the percentage of young men who are custodial

parents.68

Career Academies have also been found to decrease drop-out rates, increase school

attendance, and increase grades.69,70, 71,72,73,74,75

One criticism of career-focused education is that

it tracks particular groups of students away from college; however, evidence suggests that

Academy students attend post-secondary school at the same rates76,77

or higher than non-

Academy students.78,79,80,81

Many of these benefits may stem from the increase in non-cognitive

skills.

Using the wage findings from the MDRC study and the average cost per student of

Career Academy programs in California82

, the authors calculate that the wage benefits alone of

Career Academies outweigh the costs after four years, with a net wage benefit of $9,513.15 per

student eight years after they complete the program.vii

These cost-effectiveness calculations only

include the average increase in wage per student as a benefit, but there are additional benefits to

wage increases and other Career Academy outcomes including increased tax revenue, increased

spending and saving, the potential increase in youth employment, and the positive externalities to

the community associated with increased independent living and men being custodial parents.

The political feasibility of expanding Career Academies is strong at both a state and

national level. At the federal level, the Department of Labor recently introduced a new grant for

career focused learning in addition to career and technical education being a focus of the Obama

vi These gains were even more striking for men, with real earnings in the Academy group $3,731 higher per year on

average compared to non-Academy males vii

Authors’ calculations: MDRC found an average wage increase of $2,088 per student per year which over eight

years is a total of $16,704, the total benefit. Total cost was calculated using the average cost per student in a Career

Academy in California, $2,396.95, multiplied by three since students usually spend three years in the program. Total

benefits minus total costs, $16,704 minus $7,190.85, equals $9,513.15. It is also worth noting that a sensitivity

analysis varying the cost and average wage increase shows that there is still a net benefit per student after eight years

even when costs are increased by $3,000 or the average wage increase is cut down to $1,000.

9

administration.83, 84

At a state level, these programs already exist and many states are pushing

away from standards-based education and towards career education.85

Policy Alternative: $1000 Tax Credit for Hiring Apprentices Description: In partnerships with local businesses and community colleges, apprenticeship

programs would provide training on industry-specific skills through a combination of on-the-job

training and in-classroom sessions.86

The apprenticeship program would consist of a national

$1,000 per apprentice per year tax credit to incentivize employers to collaborate with local

community colleges. The program would model the Apprenticeship Carolina program that

incentivized apprenticeship creation through a $1,000 tax credit to employers in 2007.87

The

target population for the apprenticeship program will be the 4.6 million unemployed youth who

are not currently enrolled in post-secondary education.88

Individuals who complete the

apprenticeship program would receive an industry-recognized certificate issued through the

community college. By expanding on existing federal incentive programs, apprenticeship

programs can better mitigate cyclical unemployment in industry-specific sectors and reduce

hysteresis by providing immediate skills training in high-demand sectors and getting more

qualified individuals into vacancies.89

Apprenticeship programs are effective in both the short

and long term, as they allow youth to acquire and signal skills (including industry-specific and

non-cognitive) necessary to improve employment outcomes.90,91

Projected Outcomes: Apprenticeships yield excellent rates of return. Apprenticeship programs

have effectively reduced the number of youth unemployed and contributed to the leftward shift

of the Beveridge curve in Germany during the Great Recession.92

In the US, apprenticeship

programs have demonstrated an 8.6% increase in employment rate versus non-participants after

6 years of enrollment.93

Apprentices have been found to earn $5,839 more than non-apprentices

within nine years of enrollment and $240,037 more in career earnings than comparable

populations.94

After 9-years of enrollment the net social benefitviii

is $58,888 and over a career

(36-years) the net social benefit is $124,057.95

A study conducted in Washington state calculated

net social benefits for apprenticeships at $50,000 per apprentice within the first 2.5 years and

$269,000 per apprentice over lifetime earnings.96,97

The effectiveness of such programs adds to

the political feasibility which appears to be high as both political parties include apprenticeships

in their job creation strategies.98,99

Policy Alternative: Create a Pilot College Co-Op Program (CCOP) Description: The College Co-Operative Program (CCOP) would be a new federal pilot grant

program to increase the number of co-op programs at the bachelor’s degree level. Co-ops are

integrated college-employer programs where students receive substantive employment

experience that directly relates to their degree program. At present, the percentage of institutions

with co-op programs is estimated to be between 4-16%.100

CCOP would offer matching grants to

four-year public colleges and universities to develop new co-op programs across a wide variety

of disciplines.ix

Based on self-reported institutional data on co-ops that have been successful, the

purpose of the pilot is to provide more information about the impact of co-ops on youth

employment and earnings outcomes. CCOP will finance co-ops at a scale large enough to ensure

sound statistical evaluation in order to properly analyze the effectiveness of the programs across

a variety of metrics. Data, implementation, and program evaluation for each of the grant

viii

Benefits measured as additional earnings, side benefits, increased tax receipts and reduced social welfare costs.

The costs of apprenticeships include state/federal and community college administration costs. ix

The grant structure will be similar to the Race to the Top in that awardees will be developing plans for

implementing coherent, compelling, and comprehensive co-op models.

10

awardees will be required.

CCOP would address hysteresis by moving youth into co-op employment positions in the

short-term, with the full benefits emerging upon graduation. As youth obtain career and technical

skills, research finds that they cultivate non-cognitive skills required for the new workforce.101

Additionally, students do not have to claim wages earned through the co-ops on their financial

aid forms, which in turn may increase college retention rates as students will have access to

higher incomes without losing financial aid.x

Projected Outcomes: There is evidence that co-ops reduce skills mismatch by matching students

with jobs that relate to their major and overall career plans. Within 6 months of graduating, 98%

of IT students from the University of Cincinnati are employed in jobs within their field102

, 95%

of co-op students at SUNY find jobs immediately upon graduation103

, and a survey of co-op

employers found that 55.1% of co-op students converted to full-time employment in contrast to

20.1% of students employed in summer jobs.104

On average, only 27% of all college graduates

have jobs related to their major.105

While salary figures cannot be fully generalized, Purdue co-

op grads see a 10% higher salary106

and a large-scale study by Mississippi State University

(MSU) found that co-op students had a salary $6,302 higher than non-co-op peers.107

Taking the

average earnings of a 25-34 year old with a bachelor’s degree at $45,000, a 10% wage increase

would bring them to $49,500.108

This increase in wages would translate into more individual

earnings and tax revenue over a lifetime, stimulate the economy through private purchasing, and

increase the ability to save for retirement. These benefits help to offset the costs of the pilot.

CCOP has a moderate level of political feasibility: similar employment and training programs

have recently been funded109

, but the downward trend of federal spending will be a hindrance.110

Recommendations for a Politically Feasible and Cost Effective Solution

This analysis recommends a holistic approach using all four alternatives because they

each lead to cost effective improvements on employment outcomes for youth, and adequately

address each of the reasons why youth are unable to get jobs. Hiring credits have the most

immediate effect on job creation by targeting short-term cyclical weakness. Career academies,

apprenticeships, and co-ops are more cost effective in the mid to long-term in providing

appropriate skills to different youth populations and enabling them to signal their skills to

employers. No one alternative on its own addresses every segment of the population in the short

and long term. This analysis projects that this approach will result in significant improvements in

youth unemployment and earnings outcomes, and, although variations in availability of data for

each solution create uncertainty in the estimates, the combination of theory and evidence

supports implementation of this approach. In addition to support from evidence and theory, these

alternatives each have support from members of each political party. They are also flexible

enough to implement at either state or national level, although all except career academies will

likely lose efficiency if implemented on the state level. These alternatives work to create

partnerships between government, businesses, and schools ensuring that each has incentive to

buy in. This, along with garnering buy in from unions and teachers, which is likely given their

desires to create a more well educated and prepared youth population, will also improve the

political feasibility and effectiveness of this solution.

x Co-Op earnings do not count toward the “estimated family contribution” within the Free Application for Student

Aid (FAFSA). This results in eligibility for more financial aid, grants, and scholarships than students who get paid

for summer jobs. Co-op earnings help to offset the cost of living, tuition, and personal expenses.

11

Endnotes

1 Bureau of Labor Statistics (BLS). (2014a). Current Population Survey. Washington, D.C.: Department

of Labor. 2 Ruetschlin, C., & Draut, T. Stuck: Young America's Persistant Jobs Crisis. demos.org. April 2013.

Retrieved from http://www.demos.org/sites/default/files/publications/Stuck-YoungAdultEmployment-

Demos_1.pdf (accessed February 15, 2014). 3 BLS. (2014a).

4 Ibid.

5 Congressional Budget Office (CBO). (2014).The Slow Recovery of the Labor Market. Washington,

D.C.: Congressional Budget Office 6 BLS. (2014a). 7 Bureau of Labor and Statistics (BLS). (2013). Employment and Unemployment Among Youth Summary.

Washington, D.C.: Department of Labor, Bureau of Labor and Statistics. 8 Ayers, S. (2013). The High Cost of Youth Unemployment. Washington, D.C.: Center for American

Progress. 9 CBO. (2014).

10 Ibid.

11 Ruetschlin & Draut. (2013).

12 Ibid.

13 Sullivan, D., & Von Wachter, T. (2009). Job displacement and mortality: An analysis using

administrative data. The Quarterly Journal of Economics, 124(3), 1265-1306. 14

Mckee-Ryan, F., Song, Z., Wanberg, C.R., & Kinicki, A.J.. (2005). Psychological and Physical Well-

Being During Unemployment: A Meta-Analytic Study. Journal of Applied Psychology, 90(1), 53-76. 15

Pew Social Trends. (2010). Hard Times Have Hit Nearly Everyone — And Hammered the Long-term

Unemployed. Washington, D.C.: Pew Research Center. 16

Edin, P., & Gustavsson, M.. (2008). Time Out of Work and Skill Depreciation. Industrial and Labor

Relations Review, 61(2), 161-180. 17

Oreopoulos, P., Page, M. & Stevens, A. H.. (2008). The Intergenerational Effects of Worker

Displacement. Journal of Labor Economics, 26 (3), 455-483. 18

Raphael, S. & Winter‐ Ebmer, R. (2001). Identifying the Effect of Unemployment on Crime.

Journal of Law and Economics , 44 (1), 259-283 19

Burris, B.H. (1983). The Human Effects of Underemployment. Social Problems , 31 (1), 96-110. 20

BLS. (2013). 21

CBO. (2014). 22

Ibid. 23

The Hamilton Project at the Brookings Institution. (2014). UpFront. The Hamilton Project at the

Brookings Institution. Retrieved from http://www.brookings.edu/blogs/up-front/posts/2014/02/07-

updated-jobs-gap-number-hamilton-

project?utm_source=Twitter&utm_medium=Social&utm_campaign=BrookingsInst02091&utm_content=

BrookingsInst02091 24

Bureau of Labor and Statistics. (2014b). Employment Situation Summary. Department of Labor, Bureau

of Labor and Statistics, Washington, D.C.: Bureau of Labor and Statistics, 2014. 25

Jaimovich, N., &Siu, H.E. (2012). The Trend is the Cycle: Job Polarization and Jobless Recoveries

(Working Paper No. 18334). Retrieved from the National Bureau of Economic Research:

http://www.nber.org/papers/w18334 26

Acemoglu, D. & Autor, D. (2012) What Does Human Capital Do? A Review of Goldin and Katz’s The

Race between Education and Technology. Journal of Economic Literature, 50 (2), 426-463.

12

27

Jaimovich & Siu, Page 11-14. 28 Ibid. Page 11. 29 Altonji, J. G., Kahn, L. B., & Speer, J. D. (2013). Cashier or Consultant? Entry Labor Market

Conditions, Field of Study, and Career Success1. 30

Greene, J. P. (2013). Brilliant New Measure of Non-Cognitive Skills. Education Next. 31

Heckman, J. & Kautz, T.D.. (2012). Hard Evidence on Soft Skills (Working Paper No. 18121).

Retrieved from the National Bureau of Economic Research: http://www.nber.org/papers/w18121 32

Ibid. Page 5. 33

Ibid. Page 5. 34

Levy, F., & Murnane, R. J. (2012). The new division of labor: How computers are creating the next job

market. Princeton University Press. 35

Holzer, H. & Lerman,R. (2007). America’s Forgetten Middle-Skill Jobs: Education and Training

Requirements in the Next Decade and Beyond. Skills2Compete Campaign. 36

Olinsky, B., & Ayres, S. (2013). Training for Success: A Policy to Expand Apprenticeships in the

United States. Center for American Progress Report. 37

American Society for Training and Development (ATSD). (2012). Bridging the Skills Gap: Help

Wanted, Skills Lacking: Why the Mismatch in Today’s Economy? ASTD Career Development

Community. 38

Ibid. 39

Jaimovich & Siu. (2012). Page 9. 40

Acemoglu &Autor. (2012). 41

Ibid. Page 432. 42

Ibid. Page 432-433. 43

Levy, F., & Murnane, R. J. (2012). 44

Blanchard, O. J., & Summers, L.H.. (1986). Hysteresis and the European Unemployment Problem.

NBER Macroeconomics Annual, 15-90. 45

CBO. (2014). 46

BLS. (2013). 47

Federal Youth Funding Agencies. Retrieved from http://www.findyouthinfo.gov/funding-information-

center/federal-youth-funding-agencies. 48

Neumark, D. (2012). Direct Job Creation Policies in the Aftermath of the Great Recession and Beyond.

Retrieved from http://www.employmentpolicy.org/sites/www.employmentpolicy.org/files/field-content-

file/pdf/David%20Neumark/Neumark%20Job%20Creation%20EPRN.pdf. 49

CBO. (2014). 50

Ibid. 51

Neumark, D., & Grijalva,D. (2013). The Employment Effects of State Hiring Credits During and After

the Great Recession (Working Paper 18928). Retrieved from the National Bureau of Economic Research: http://www.nber.org/papers/w18928 52

Hamersma, S. (2008). The Effects of an Employer Subsidy on Employment Outcomes: A Study of

Work Opportunity and Welfare to Work Tax Credits. Journal of Policy Analysis and Management, 27(3),

498-520. 53

Neumark & Grijalva. (2013). 54

Hamersma. (2008). 55

Ibid. 56

Neumark. (2012). 57

Hamermesh, D. S. (1985). Substitution between different categories of labour, relative wages and youth

unemployment. OECD. 58

Ibid.

13

59

Bartik, T. J. (2001). Jobs For the Poor: Can Labor Demand Policies Help? New York: Russell Sage

Foundation. 60

(Neumark 2012) 61

Bartik, T.J., & Bishop, J.H. (2009). The Job Creation Tax Credit: Dismal Projections for Employment

Call for a Quick, Efficient, and Effective Response (Policy Briefing No. 248). Washington, D.C.:

Economic Policy Institute. 62

BLS. (2014b). 63

Stern, D., Dayton, C., & Raby, M. (2010). Career Academies: A Proven Strategy to Prepare High

School Students for College and Careers. Career Academy Support Network. Retrieved from

http://casn.berkeley.edu/resource_files/Proven_Strategy_2-25-1010-03-12-04-27-01.pdf 64

Kemple, J. J., & Willner, C. J. (2008). Career academies: Long-term impacts on labor market outcomes,

educational attainment, and transitions to adulthood. Retrieved from

http://www.mdrc.org/sites/default/files/full_50.pdf 65

Stern, D., Raby, M., and Dayton, C. (1992). Career Academies: Partnerships for Reconstructing

American High Schools San Francisco: Jossey-Bass. 66

Stern et al. (2010). 67

Maxwell, N.L. & Rubin, V. (2000): High School Career Academies: A Pathway to Educational Reform

in Urban Schools? Kalamazoo, MI: W.E. Upjohn Institute for Employment Research. 68

Kemple & Willner. (2008). 69

Stern et al. (2010). 70

Maxwell & Rubin. (2000). 71

McPartland, J., Balfanz, R., Jordan, W., & Legters, N. (1998). Improving climate and achievement in a

troubled urban high school through the Talent Development Model. Journal of Education for Students

Placed at Risk, 3(4), 337-361. 72

Stern et al. (2010). 73

Stem, D., Dayton, C., Paik, I. W., & Weisberg, A. (1989). Benefits and costs of dropout prevention in a

high school program combining academic and vocational education: Third-year results from replications

of the California peninsula academies. Educational Evaluation and Policy Analysis, 11(4), 405-416. 74

Kemple, J.J., & Snipes, J.C. (2000). Career Academies: Impacts on Students' Engagement and

Performance in High School. New York: Manpower Demonstration Research Corporation. 75

Stern et al. (2010). 76

Kemple, J.J. (2004). Career Academies: Impacts on Labor Market Outcomes and Educational

Attainment. New York: Manpower Demonstration Research Corporation. 77

Stern et al. (1992). 78

Reller, D.J. (1987). A longitudinal study of the graduates of the Peninsula Academies, final report. Palo

Alto, CA: American Institutes for Research in the Behavioral Sciences. 79

Stern et al. (2010). 80

Maxwell & Rubin. (2000). 81

Maxwell, N.L. (2001). Step to College: Moving from the High School Career Academy Through the

Four-Year University. Evaluation Review, 25(6), 619-654. 82

California Department of Education. (2011). Profile of the California Partnership Academies 2009-

2010. Retrieved from http://www.cde.ca.gov/ci/gs/hs/documents/cpareport2010.pdf 83

Department of Labor. (2013). Youth Career Connect. Retrieved from

http://www.doleta.gov/ycc/eta_default.cfm. 84

The White House, Office of the Press Secretary. (2013). Fact Sheet: Youth CareerConnect Grants

[Press release]. Retrieved from http://www.whitehouse.gov/the-press-office/2013/11/19/fact-sheet-youth-careerconnect-grants

14

85

Simon, S. (2014). The school standards rebellion. Politico. Retrieved from

http://www.politico.com/story/2014/02/education-standards-reform-high-school-college-103510.html 86

Stieritz, A.M. (2009). Apprenticeship Carolina: Building A 21st Century Workforce Through Statewide

Collaboration. Community College Journal of Research and Practice, 33, 980-982. 87

The New Evolution of Apprenticeship. Retrieved from

http://www.apprenticeshipcarolina.com/default.html 88

Department of Labor, Bureau of Labor Statsitics. (2013). College Enrollment and Work Activity of

2012 High School Graduates [Press release]. Retrieved from

http://www.bls.gov/news.release/hsgec.nr0.htm 89

Gonzalez, J. (2010) Apprenticeship Programs Expand With Help of Community Colleges. Chronicle of

Higher Education, Vol. 57, Issue 5. 90

Lerman, R. (2009). Training Tomorrow’s Workforce: Community Colleges and Apprenticeships as

Collaborative Routes to Rewarding Careers. Center for American Progress Report. 91

Ibid. Page 39. 92

Aivazova, N. (2013). Role of Apprenticeships in Combating Youth Unemployment in Europe and the

United States (Policy brief No. 13-20). Peterson Institute for International Economics. 93

Reed, D., Liu, A. Y. H., Kleinman, R., Mastri, A., Reed, D., Sattar, S., & Ziegler, J. (2012). An

effectiveness assessment and cost-benefit analysis of registered apprenticeship in 10 states (No. 7625).

Mathematica Policy Research. 94

Ibid. 95

Ibid. Page 42. 96

Lerman. (2009). Page 13. 97

Hollenbeck, K. (2008). State Use of Workforce System Net Impact Estimates and Rates of Return.

Presented at the Association for Public Policy Analysis and Management (APPAM) Conference, Los

Angeles, CA. 98

Lerman. (2009). Page 7. 99

Simon, S. (2014). 100

Supiano, B. (2008). For Co-op Students, College Pays (Unless They Get Laid Off). The Chronicle of

Higher Education. Retrieved from http://chronicle.com/article/For-Co-op-Students-

College/9626/?key=HGolLVtrMi5May96bCdZbyhWYmBrdUQibiodbEMRZlE%3D. 101

Bailey, M., Hamann, J., Pendleton, L.K., Raelin, J.A., Raelin, J.D., Reisberg, R., Whitman, D. (2011).

The Effect of Cooperative Education on the Self-Efficacy Among Undergraduate Students: Introducing

Work Self- Efficacy. Retrieved by http://www.northeastern.edu/poe/Work%20Self-

Efficacy%20in%20JCE&I.pdf. 102

University of Cincinnati. (2014). Co-Op Education. Retrieved from http://cech.uc.edu/it/future-

students/coop-education.html 103

State University of New York. (2014). SUNY Works. Retrieved by

http://www.suny.edu/educationpipeline/sunyworks/ 104

Hoffart, N., Diani, J.A., Connors, M., & Paula, M. (2006). Outcomes of Cooperative Education in a

Baccalaureate Program in Nursing. 105

Abel, J.A., & Deitz, R. (2013). Do Big Cities Help College Graduates Find Better Jobs? Federal

Reserve Bank of New York. Retrieved from http://libertystreeteconomics.newyorkfed.org/2013/05/do-

big-cities-help-college-graduates-find-better-jobs.html 106

Venere, E. (2012). Purdue Co-Op Program Gives Students Employment Edge. Retrieved from

http://www.purdue.edu/newsroom/academics/2012/120131GrollCoop.html 107

Ibid. 108

Department of Education, National Center for Education Statistics. (2011). Income of Young Adults.

Retrieved from http://nces.ed.gov/fastfacts/display.asp?id=77

15

109

Department of Labor. (2013). Notice of Availability of Funds and Solicitation for Grant Applications

for Trade Adjustment Assistance Community College and Career Training Grants Program. Retrieved by

http://www.doleta.gov/grants/pdf/taaccct_sga_dfa_py_12_10.pdf 110

US House of Representatives, Committee on Appropriations. (2013). Rogers: Omnibus Targets

Funding to Important Programs Continues Downward Trend in Federal Spending. Retrieved from

http://appropriations.house.gov/news/documentsingle.aspx?DocumentID=366721