Improving Employment Outcomes for U.S. Young Adults

In 2022, more than 1 in 3 U.S. young adults (defined as those ages 18 to 24) reported having no wage or salary income, up from 1 in 5 young adults in 1990. Reducing this share of young adults who aren’t working could potentially result in greater economic growth—an effect with broad benefits.

So, what might be effective at increasing young adults’ participation in the workforce, allowing this group to contribute more to and get more from the economy?

Exploring that question was the theme of a presentation and panel discussion hosted in May by the Federal Reserve Bank of St. Louis. The presentation, given by Data Scientist Lowell R. Ricketts to both an in-person and online audience, focused on recent economic analysis from the St. Louis Fed’s Institute for Economic Equity that examined the economic outlook for young adults through three lenses: their labor force participation, their mental health outcomes and their financial outcomes.

During the panel discussion, speakers discussed their experiences in working with young adults and implementing programs and initiatives to improve employment outcomes. Sharing their thoughts on this topic with St. Louis Fed Regional Outreach Manager Neelu Panth, who moderated the conversation, were panelists Mary Anne Medlock, a business services liaison at the West Kentucky Workforce Board; Sean Joe, a professor of social development at the Brown School of Washington University in St. Louis; and Michael Woods, the president and CEO of Dream Builders 4 Equity, a St. Louis-based nonprofit that employs young adults in rehabilitating housing in communities that have experienced disinvestment.

“All three of [our panelists] are working at a systems-change level to create a better environment, a more thriving environment for our young adults,” said Panth, whose role at the St. Louis Fed includes working with organizations around the flow of community and economic development capital for improving economic mobility within the St. Louis region.

Working toward Better Young Adult Employment Outcomes

Drawing on Institute for Economic Equity research based on selected years of data in the monthly Current Population Survey from the U.S. Bureau of Labor Statistics, Ricketts showed that after adjusting for inflation, wages for young adults have been roughly stagnant since 1969. And while young adults did post some real wage growth in 2019 and 2022, those gains largely disappeared when factoring in young adults who don’t work full time and year-round. Ricketts noted that interventions to reduce skills gaps are one important way to help improve labor force attachment among young adults.

Such training and skills development are integral to the mission of the Paducah Innovation Hub (or simply “the Hub”) in Kentucky, a workforce development initiative launched in 2019 on the campus of Paducah Tilghman High School. The 100,000-square-foot facility cost about $25 million to open and offers programs in the traditional trades, health care and technology. As Panth observed, some graduates of the Hub’s welding program are leaving high school with high-salary job offers.

“We have made a huge shift in the way career and technical education is seen. It is intentional,” said Medlock, of the West Kentucky Workforce Board, noting that the Hub had captured funding from a $100 million bond created by the Kentucky General Assembly to strengthen the state’s workforce.

As conversations in the community about creating the Hub evolved, Medlock said, the project became a shared vision not just for educators, but for employers, community leaders, parents and students. The Hub’s programming was designed to solve for employers’ skilled labor needs a decade in the future, she said, thus helping to retain talent and strengthen the community’s economy.

Kentucky’s level of funding for workforce development initiatives, such as the Hub and other workplace readiness programs, appears to have helped it attract economic development projects, according to Medlock, who gave the BlueOval SK electric vehicle battery plants in Glendale, Ky., as an example. The plants are expected to begin production next year and create 5,000 jobs.

“When you invest at the right scale—as we would say, commensurate with the right level—you can start to do innovative things and get to the real heart of innovation that can really engage,” said Washington University’s Joe, who is also the founder and principal director of HomeGrown StL, which works with Black youth in St. Louis.

“You have to be structured for this,” said Joe, noting the benefits of partnering with community organizations, local government and other stakeholders to coordinate regional, data-driven approaches to economic equity. “If your community is not structured for this … you’re not going to achieve the same level of result at scale.”

The St. Louis Fed’s Neelu Panth (left) discusses young adult employment opportunities with (from left) Washington University in St. Louis professor Sean Joe, Michael Woods of Dream Builders 4 Equity, and Mary Anne Medlock of the West Kentucky Workforce Board during the May 23, 2024, Dialogue with the Fed event.

Addressing Young Adult Racial Wealth Gaps

Older adults had 17 times the wealth that young adults did in recent years, which isn’t abnormal given the life cycle over which wealth normally accumulates, Ricketts said. But the data also show that wealth disparities by race and ethnicity are already present among U.S. young adults.

The figure below shows that from 2016 through 2022 the median, or typical, incomes for Black young adults, Hispanic young adults and white young adults were $27,400, $33,100 and $32,900, respectively. However, the median net worth for Black young adults and Hispanic young adults ($3,300 and $3,600, respectively) was less than one-third of white young adults’ median net worth ($11,600).

Less wealth can translate to less financial stability and lower economic mobility. Using data from the Fed’s most recent Survey of Household Economics and Decisionmaking, Ricketts pointed out that 33% of Black young adults and 27% of Hispanic young adults would be completely unable to cover a $400 emergency expense, compared with 15% of white young adults.

To help young adults—specifically Black young adults in North St. Louis City—begin accumulating wealth, Dream Builders 4 Equity hires young people and pairs them with minority contractors to complete vacant house rehabs. Students in the program make between $15 and $20 an hour, and they get an equity stake in each house and a portion of the proceeds from sales, said Woods, whose program connects young adults with resources to develop professionally and financially.

Dream Builders 4 Equity is investing about $10 million into the area, according to Woods. “That’s 25 rehabs to be sold to first-time homebuyers, and then 25 free home renovations for seniors,” he said.

Forging Connections

The panelists noted that one way for workforce development practitioners to increase young adults’ engagement with the workforce is to get employers into the classroom—with projects for students to work on and as instructors or speakers, for example. Other approaches the panelists discussed include initiatives like programs that combine classroom instruction with paid, on-the-job experience and partnerships with companies that involve training opportunities meant to lead to job opportunities and career advancement. Signing days—events celebrating recent graduates’ hiring, with festivities, swag and public recognition—are another.

Medlock noted that young adults in career development and technical programs—those who are choosing a noncollege path and entering the workforce directly—need to feel like they’re important in their communities and to the companies employing them. Some ways to demonstrate this might be through job shadowing, a field trip or a signing day, she said.

Disconnected youth—those who are neither working nor enrolled in school—represented 14% of all U.S. young adults in 2020. Ricketts said that in St. Louis, 13% of young adults fall into this category. Nearly two-thirds of these are young men, and more than one-third are Black young men.

Making sure that the value of young adults’ work is adequately reflected in their paychecks is another important part of the equation, according to Woods.

“I think we get an extreme amount of buy-in from our young people because we’re not looking at them as participants. We are making sure that they feel like they are empowered to make decisions, that they are also bosses,” he said. “And I think that’s what the magic is. Our young people are coming in and they’re excited about being there.”

However, coaching and mentoring at the necessary level can take significant investment, Joe noted. He defined coaching as using one’s expertise in a particular area to discuss with young adults new to the workforce the key skills they need to learn, how to approach that learning, on-the-job strategies and advancing beyond an entry position.

“The economic investment in your local capital, human capital, can lead to economic investment for the region. So this is not a young Black male question. This is a St. Louis question. This was a Paducah question. So I don’t want to lose sight of that,” Joe said.