[Joint House and Senate Hearing, 111 Congress]
[From the U.S. Government Publishing Office]
S. Hrg. 111-591
AVOIDING A LOST GENERATION: HOW TO
MINIMIZE THE IMPACT OF THE GREAT RECESSION ON YOUNG WORKERS
=======================================================================
HEARING
before the
JOINT ECONOMIC COMMITTEE
CONGRESS OF THE UNITED STATES
ONE HUNDRED ELEVENTH CONGRESS
SECOND SESSION
__________
MAY 26, 2010
__________
Printed for the use of the Joint Economic Committee
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JOINT ECONOMIC COMMITTEE
[Created pursuant to Sec. 5(a) of Public Law 304, 79th Congress]
HOUSE OF REPRESENTATIVES SENATE
Carolyn B. Maloney, New York, Chair Charles E. Schumer, New York, Vice
Maurice D. Hinchey, New York Chairman
Baron P. Hill, Indiana Jeff Bingaman, New Mexico
Loretta Sanchez, California Amy Klobuchar, Minnesota
Elijah E. Cummings, Maryland Robert P. Casey, Jr., Pennsylvania
Vic Snyder, Arkansas Jim Webb, Virginia
Kevin Brady, Texas Mark R. Warner, Virginia
Ron Paul, Texas Sam Brownback, Kansas, Ranking
Michael C. Burgess, M.D., Texas Minority
John Campbell, California Jim DeMint, South Carolina
James E. Risch, Idaho
Robert F. Bennett, Utah
Andrea Camp, Executive Director
Jeff Schlagenhauf, Minority Staff Director
C O N T E N T S
----------
Members
Hon. Carolyn B. Maloney, Chair, a U.S. Representative from New
York........................................................... 1
Hon. Kevin Brady, a U.S. Representative from Texas............... 2
Witnesses
Statement of Dr. Till M. von Wachter, Associate Professor of
Economics, Department of Economics, Columbia University........ 4
Statement of Dr. Harry Holzer, Professor, Georgetown Public
Policy Institute, Georgetown University........................ 7
Statement of Mr. David Jones, President and Chief Executive
Officer, Community Service Society............................. 9
Statement of Mr. Stephen M. Wing, Director, Workforce
Initiatives, CVS Caremark Corporation.......................... 11
Statement of Mr. James Sherk, Senior Policy Analyst in Labor
Economics, The Heritage Foundation............................. 13
Submissions for the Record
Prepared statement of Representative Carolyn B. Maloney, Chair... 36
Prepared statement of Representative Kevin Brady................. 36
Prepared statement of Dr. Till M. von Wachter.................... 38
Prepared statement of Dr. Harry Holzer........................... 45
Prepared statement of Mr. David Jones............................ 50
Prepared statement of Mr. Stephen M. Wing........................ 61
Chart titled ``Young Workers Face High Levels of Unemployment''.. 77
Prepared statement of Mr. James Sherk............................ 78
AVOIDING A LOST GENERATION: HOW TO MINIMIZE THE IMPACT OF THE GREAT
RECESSION ON YOUNG WORKERS
----------
WEDNESDAY, MAY 26, 2010
Congress of the United States,
Joint Economic Committee,
Washington, DC.
The committee met, pursuant to call, at 10:00 a.m., in Room
210, Cannon House Office Building, The Honorable Carolyn B.
Maloney (Chair) presiding.
Representatives present: Maloney, Sanchez, Snyder,
Cummings, Brady, and Burgess.
Senators present: Klobuchar.
Staff present: Andrea Camp, Gail Cohen, Colleen Healy,
Jessica Knowles, Justin Ungson, Lydia Mashburn, Jeff
Schlagenhauf, and Robert O'Quinn.
OPENING STATEMENT OF THE HONORABLE CAROLYN B. MALONEY, CHAIR, A
U.S. REPRESENTATIVE FROM NEW YORK
Chair Maloney. Good morning. The meeting will come to
order, and I will recognize myself for an opening statement and
will be followed by the other members of the Committee with
their opening statements. I welcome our panelists today. Thank
you for coming.
Just over 1 year ago, the current Administration took
office while the country was suffering from the worst economic
crisis since the Great Depression. In fact, Council of Economic
Advisers Chair, Christina Romer, testified to the Committee
that the shocks we endured in the Great Recession were actually
worse than those in the Great Depression. But today, it is
clear that America is on a path toward economic recovery.
The most recent employment report showed that the economy
has gained jobs for 4 straight months. In April, 290,000 jobs
were created, bringing the total of jobs created since the
start of 2010 to 573,000. After 4 straight quarters of negative
growth, the economy has grown for 3 quarters. These
improvements in our economy are proof that actions taken by
this Congress and the Administration have put our economy back
on track.
While we are making progress, the road to recovery will not
be without bumps. Although we saw significant job creation in
the past 2 months, we need stronger job creation to reduce
unemployment. Some groups are suffering more than others.
Today's hearing focuses on younger workers who are facing
extremely high rates of unemployment.
The JEC released a report today showing that one in five
workers between the ages of 16 and 24 is unemployed, the
highest rate of unemployment ever recorded for this age group.
While 16- to 24-year-olds comprise 13 percent of the labor
force, they make up 26 percent of the unemployed. The youngest
workers, those aged from 16 to 17, experience the highest rates
of unemployment. The unemployment rate for 16- to 17-year-olds
was 29 percent in April 2010.
While education reduces the likelihood of being unemployed,
the benefits of a college degree are not uniform among 16- to
24-year-olds. The unemployment rate for young black college
graduates was 15.8 percent of April in 2010, nearly double the
8 percent unemployment rate for all young college graduates.
These numbers will take on a stark reality as millions of new
college graduates start knocking on doors looking for a job.
And for teens looking for their first job, it will be even
worse.
The scarring effect of unemployment among younger workers
has lasting consequences for their attachment to the labor
force, their productivity, and their future earnings. Dr. von
Wachter testified before this Committee last month that these
younger workers face reduced earnings even 10 to 15 years
later. The cost to the economy in terms of lost output of these
workers is great, which will have an impact on our debt and our
deficit.
Today, the House began debate on H.R. 4213, the American
Jobs and Closing Tax Loopholes Act, a bill to create jobs,
support those without jobs, and lay the groundwork for new
employment opportunities in the future. H.R. 4213 makes many
key investments in our people and in our future. In addition to
extending unemployment benefits and COBRA premium support
through the end of the year, the bill finds summer jobs for
more than 300,000 of our young people.
Job creation is critical, of course, but so are job
training skills. We need to identify training and placement
programs that are getting strong results and figure out how to
scale them so that they reach more workers across the country.
I look forward to hearing more creative solutions from today's
panel on how to solve the unemployment problem for America's
younger workers. And I thank everyone for coming, and recognize
Mr. Brady.
[The prepared statement of Representative Maloney appears
in the Submissions for the Record on page 36.]
OPENING STATEMENT OF THE HONORABLE KEVIN BRADY, A U.S.
REPRESENTATIVE FROM TEXAS
Representative Brady. Madam Chairman, I am pleased to join
in welcoming today's witnesses before the committee. I would
like to thank you for holding the hearing this morning on this
important topic.
The success in one's working life is largely path
dependent; therefore, getting off to a good start is important
to young people. That is one reason why a high level of youth
unemployment is so troubling.
In January of last year, top Obama Administration
economists Christina Romer and Jared Bernstein assured the
country that if Congress just passed the President's stimulus
bill, the unemployment rate would remain below 8 percent, and
payroll employment would increase to $137.6 million by the
fourth quarter of this year.
Congress enacted President Obama's $1 trillion stimulus
plan in February of 2009, but the results have been
disappointing at best. Since then, the unemployment rate for
all workers has never been below 8 percent. Today, it is 9.9
percent. So far, the Obama Administration is 7.4 million
payroll jobs short of its fourth quarter promises. However,
young American workers age 16 to 24 have fared even worse than
their older counterparts. Since the stimulus passed, the number
of unemployed workers ages 16 to 24 has increased by 707,000 to
a total of 4.2 million in April of this year.
Moreover, the youth unemployment rates soared from 15.8
percent when the stimulus passed to 19.6 percent in April of
this year, an all-time high for this data series. For many of
our young people, hope from the stimulus has turned to despair.
Given the severity of this problem, I am very interested in
what today's witnesses have to say about the high level of
unemployment among young American workers. Like one of today's
witnesses, Dr. Holzer, I want to find out what government job-
related programs and private-sector initiatives actually help
young Americans find and keep that important first job and what
programs are wasteful and ineffective.
The cost of paying for inefficient and misdirected
government programs through deficit spending will remain a debt
burden on our children and grandchildren. For example, one of
today's witnesses, James Sherk, observes the 2008 and 2009
bailout and stimulus packages will cost the average 22-year-old
$145,900 during their working life, $280 a month. He goes on to
say: That is the equivalent of requiring college graduates to
buy and throw out a high-end I-pod each and every month of
their life.
In conclusion, today's panelists offer different solutions
to the problem of youth unemployment. Some advocate more
government spending, while others emphasize the private sector
where most jobs are created. Like Presidents Kennedy and
Reagan, I believe that a rising tide lifts all boats. Instead
of more wasteful government spending on ineffective job-related
programs, we should promote entrepreneurship and business
investment to increase job creation and reduce youth
unemployment.
Madam Chair, I yield back.
[The prepared statement of Representative Brady appears in
the Submissions for the Record on page 36.]
Chair Maloney. Thank you very much. Mr. Snyder, would you
like an opening statement?
Representative Snyder. I will defer to the witnesses.
Chair Maloney. I then would like to introduce our
witnesses, and we have a very distinguished panel.
First, we would like to welcome back Dr. Till M. von
Wachter, who is a professor of economics at Columbia
University, as well as a faculty research fellow of the Aging
and Labor Groups at the National Bureau of Economic Research.
His research focuses on the long-term impact of job loss on
earnings, health, and retirement. He has also studied the
effect of business cycles on career outcomes of younger and
older workers.
I would also like to welcome back Dr. Harry Holzer, who is
a professor of public policy at Georgetown University and a
founding director of the new Georgetown Center on Poverty and
Equality and Public Policy. He is currently a senior fellow at
the Urban Institute and a senior affiliate of the National
Poverty Center at the University of Michigan, among his many
other affiliations. Prior to coming to Georgetown, Professor
Holzer served as Chief Economist for the U.S. Department of
Labor in 1999.
David Jones is from the District that I am very honored to
represent, and we have had a long career of working together on
programs that are important to the nation's youth. David Jones
is the president and CEO of the Community Service Society of
New York, or CSS, a nonpartisan, nonprofit organization that
promotes economic advancement and full civic participation for
low income New Yorkers. Mr. Jones was also a special adviser to
Mayor Koch with responsibilities in race relations, urban
development, immigration reform, and education.
Mr. Stephen Wing is director of workforce initiatives for
CVS Caremark, the largest provider of prescriptions and related
health care services in our Nation. In his position at CVS, Mr.
Wing partners with government agencies, nontraditional
employment organizations, and corporate colleagues, among
others, to provide opportunities for employment and training.
Since 1996, CVS Caremark has hired over 80,000 former welfare
recipients. Congratulations. Mr. Wing has helped CVS Caremark
develop cutting-edge programs that have earned the company many
outstanding awards.
Finally, I would like to welcome Mr. James Sherk, whose
previous appearance before this Committee was snowed out in
February; so we are very pleased you were able to make it this
time. He is a senior policy analyst in labor economics at the
Heritage Foundation. He was previously the Bradley Fellow in
labor policy at The Heritage Foundation. Mr. Sherk has written
on the dynamics of rising unemployment and the recession, the
economic consequences of extending unemployment benefits, card-
check, and other labor policy issues.
I would like to welcome all of you, and begin with Dr. von
Wachter and then go down the line. Thank you.
STATEMENT OF DR. TILL M. von WACHTER, ASSOCIATE PROFESSOR OF
ECONOMICS, DEPARTMENT OF ECONOMICS, COLUMBIA UNIVERSITY
Dr. von Wachter. Thank you, Chairwoman Maloney. Chairwoman
Maloney, and members of the committee, it is an honor to be
with you today.
The labor market of the United States is recovering from
the most severe recession since World War II. In my testimony,
I will summarize the available evidence on the short- and long-
term effects of entering the labor market in a recession on
young workers' employment and earnings. I will also indicate
which labor market entrants are most affected by such initial
bad luck, and will summarize potential explanations of these
effects. Finally, I would briefly offer some suggestions for
policies from these findings.
The available evidence suggests that the consequences from
entering the labor market in a recession are severe in both the
short and the long run. In the short run, labor market entrants
and young workers suffer from larger increases in unemployment
and layoffs than the average worker. Yet, even in the long run,
young workers who enter with no prior employment history and
are presumably the most flexible workers in the economy, can
suffer from initial bad luck for a long period of time.
For example, entering the labor market in a recession such
as the current one can lead to reduced earnings up to 10 to 15
years. During this period, younger workers are also exposed to
higher incidents of nonemployment and job and earnings
instability. The evidence suggests that these adverse effects
are driven by labor market conditions in years immediately
following entry into the labor market. As a result, a quick
improvement in labor market conditions can speed up the
recovery process, but it cannot eliminate significant long-term
effects from entering the labor market in a recession.
Existing evidence suggests that part of the decline in
earnings arises because young workers entering the labor market
in a recess take jobs with worse employers than they otherwise
would have had. This process is often termed cyclical
downgrading. For the average labor market entrant, this initial
fades over time, partly as workers search for better jobs,
partly as they manage to move up the career ladder of this
existing employer.
However, our findings suggest that the recovery process can
take a long time, and that it involves mobility in occupations,
industries, regions. As a result, some workers never recover
from the initial shock as they settle down, buy a house, and
start a family life. Not everybody can keep moving across the
labor force for 10 to 15 years.
These effects differ by education groups. In the short run,
lower educated workers experience larger increases in
unemployment than more educated labor market entrants. However,
in the long run, less educated individuals tend to recover
faster. In fact, these workers in the middle of the education
distribution who can suffer close to permanent earnings
consequences from entering the labor market in a recession; on
the other hand, those individuals at the bottom and at the very
top of the education distribution recover more quickly from a
bad initial start. Thus, more education, per se, does not yield
full insulation against shocks occurring in the aggregate labor
market. Yet, of course, more education is certainly beneficial
as it raises the overall mean earnings and employment
stability.
Entering the labor market in a recession also has impact on
an individual's beliefs. The evidence suggests unlucky cohorts
of labor market entrants tend to believe in a higher degree of
income redistribution; at the same time, such unlucky
generations tend to distrust public institutions. Similarly,
available evidence suggests prolonged unemployment affects the
age of marriage and family formation. Thus, a bad start can
have significant and lasting effects on many aspects of both
career prospects and lifetime outlook of affected individuals.
Some government policies may help to prevent long-term
earnings losses from entry into the labor market in a recession
and help unlucky young workers recover. Generally, the evidence
suggests that a faster macro-economic recovery will help
improve the speed of the recovery from a bad initial start.
However, the adjustment of individual workers lasts well into
and beyond the recovery of the overall labor market.
So, a rising tide lifts some boats but definitely not all
boats. Thus, it is worth considering cost-effective policies
that directly aid recovery from starting to work in a
recession. For example, to recover from beginning to work in a
recession, younger workers have to reorient their career goals.
The message here is: Something has got to give. As the economy
improves, changes in occupation, industry, or region will speed
the recovery of earnings. So raising awareness that the
recovery process can take a long time and may involve continued
mobility is important. This could be done with existing
infrastructure providing job search help for the unemployed.
In addition, there, young workers could be given
information that is routinely provided by the Bureau of Labor
Statistics or the Census Bureau and that indicates which of the
growing industries, occupations, or regions that will be
providing more jobs.
To aid the reorientation of careers, retraining can also
help to provide new skills appropriate for a changed labor
market situation. Support for such retraining could take
several forms. Subsidies for programs furthering on-the-job
training could help these programs for provide work experience
and direct contact with employers. Subsidies could also be
given for enrollment in community college courses.
Alternatively, vouchers could be provided that allow workers to
choose ways themselves to upgrade their skills in the private
market. In general spirit, not unlike personal reemployment
accounts.
Finally, an important concern is that many young workers
quit education in progress because they lack funds to continue
to finance their training. Either their parents are laid off,
or they themselves cannot find a job to support themselves
during their studies. Such a recession-induced decline in
completion of education could substantially raise the cost of
recessions for young labor market entrants and the economy as a
whole. As a result, providing subsidies or facilitate borrowing
to allowing young individuals to continue their education would
be worth considering.
An advantage of these policies or some of these policies is
that they can be implemented or built on the existing
infrastructure of existing programs. And this has the benefit
that some of them have already been evaluated and shown to be
cost effective. Moreover, they could be implemented relatively
quickly.
Finally, the evidence that I have discussed reveals that
there is a high degree of persistence of the effect of shocks
in the U.S. labor market, and this persistence is likely to
arise from the intrinsic working of the U.S. labor market.
Thus, it is likely to be quite difficult to help unlucky labor
market entrants after the fact. The best help might be
prevention. This includes efforts to prevent shocks that can
cost such large recessions. It also includes policies that help
to prevent concentrated layoffs or continuing layoffs in the
future, such as job sharing.
To conclude, our best evidence suggests that a strong
recession, such as the current one, can lead to persistent
scars for young labor market entrants. And the available
research shows that entering the labor market in a recession
lowers earnings, raises career instability, affects
individuals' beliefs and their family formation. And these
scars, as I said, persist for over 10 years and are only
partially mitigated by recovery of the aggregate labor market.
The available evidence suggests that the recovery process
involves increased mobility among employers, industry, or
region, and thus any program directly aiding this long
adjustment process is likely to lessen the effects of
recessions for unlucky generations of younger workers. Thank
you.
[The prepared statement of Dr. Till M. von Wachter appears
in the Submissions for the Record on page 38.]
Chair Maloney. Thank you.
Dr. Holzer.
STATEMENT OF DR. HARRY HOLZER, PROFESSOR, GEORGETOWN PUBLIC
POLICY INSTITUTE, GEORGETOWN UNIVERSITY
Dr. Holzer. Thank you. Good morning, Chairman Maloney, Mr.
Brady, and other committee members. I would like to make four
points today about the status of young people in the labor
market, both in the Great Recession and beyond that.
My first point is that, even in the best of times,
disadvantaged young people suffer from low levels of education,
low rates of employment and earnings, and many disconnect
altogether from the school and the labor markets. American
youth drop out of high school at very high rates, on average 25
percent for the whole population. Many fail to get any
postsecondary education. Of those who attend college, whether
it is a 2-year or 4-year, a majority fail to obtain any
credential, even an occupational certificate, within 6 years.
And outcomes for some groups, like young African American
men, are worst of all. Their high school dropout rates remain
well over 30 percent. When they do drop out, their employment
and earnings rates are very low, unwed fatherhood is very high,
and most become incarcerated before the age of 30. And this is
all in the best of times.
My second point. Employment outcomes for youth have
substantially worsened in this recession and will likely remain
very weak for another 3 to 5 years. As previously indicated,
employment and unemployment among teens in 2009 and 2010 are
among the worst ever recorded by the Bureau of Labor
Statistics.
For instance, right now teenagers overall only participate
in the labor market at a rate of about 35 percent in any given
month; and out of those participating, we have unemployment
rates of 25 percent for those people. If we look at black
teenagers, the numbers are much worse. Only 25 percent
participate in the labor market at any time, and in that group
the unemployment rate is about 40 percent. And these
unemployment rates will likely remain elevated for some time as
economists project high unemployment for several years to come.
Long-term unemployment of 6 months or longer is already very
high. Nearly half of the unemployed have been out of work for 6
months or longer, and that percentage will likely rise as well.
My third point. The high unemployment of youth over the
next several years will cause not only short-term losses of
income, but also some long-term scarring. And Professor von
Wachter has just addressed this issue. We know, for instance,
that among unemployed workers, long-term unemployment tends to
erode their skills, especially if their old jobs have been
permanently lost and they need to transition to new sectors of
the economy.
But we also know, for young people transitioning out of
school and into the labor market, there is evidence of scarring
as well. We have very strong evidence for young people
graduating from college in the early 1980s recession that they
suffered long-term declines. And there is evidence of other
groups of noncollege youth as well that we have just heard
about.
Now, some young people take advantage of a recession and
actually increase their school enrollment rates. And we
certainly see this in evidence of graduate school applications
and enrollments. But primarily, that is not where our
disadvantaged young people end up, and we really have very
little evidence that a downturn like this one will raise high
school graduation rates or postsecondary enrollments among
disadvantaged youth.
And then we have the issues of crime and poverty. So far,
we have seen no evidence of rising crime in this downturn. In
fact, the FBI released numbers yesterday suggesting that crime
fell a bit in the year 2009. But there is some tendency for
crime to rise during downturns. And if that occurs, both crime
and incarceration will have scarring effects, major scarring
effects both on the victims of crime and on the young people
who will become even more incarcerated. Poverty rates are
certain to keep rising over the next several years, and
neighborhoods of concentrated poverty will become increasingly
difficult places for young people trying to transition to
adulthood.
My fourth point concerns policy. I think policy efforts
should focus on some short-term job creation, but also on
enhancing education and training efforts with some work
experience components to improve the labor market status of
young people over the long term.
I strongly support enhanced efforts to spur job creation
right now both in the private sector and in the public sector,
with the public sector jobs heavily targeted to low-income
youth. I support extending summer youth employment programs,
but actually, I much prefer year-round programs linked to
schooling or other skill-building activities. High quality
education and training options for young people also need to be
enhanced at a range of levels. These options should be designed
to address long-term problems, but they should be ramped up
right now while unemployment for young people is so high. And,
wherever possible, these efforts should include opportunities
for them to gain some paid work experience, if necessary,
subsidized by government.
A few examples. For young people in high school, we should
be working not only on dropout prevention efforts, but on
bolstering high quality career and technical education and
subsidized internships and apprenticeships. For young people in
college, a range of curriculum improvements, and support
services could improve completion rates in certificate as well
as degree programs. And, in general, the States need to better
integrate their education and their workforce development
systems to generate a whole range of career pathways beyond
what young people see today.
Special efforts need to be made for out-of-school youth who
have already dropped out of high school or those who are
floundering since graduation. Efforts here include service
employment, sectoral training efforts like Gear Up and other
programs that have been recently evaluated, high school dropout
recovery and reconnection programs like the National Guard
Challenge program and the Gateways Opportunity program, and
efforts to build local youth employment systems like the Youth
Opportunities program.
And I am happy to discuss the available evidence on their
cost effectiveness during the Q and A period.
Now, all of these efforts will cost some Federal and State
funds over time, but we know that the social and economic costs
of not investing in our young people are very severe, and those
will be much greater than the costs of making effective
investments. Given the state of the economy right now and for
the next several years, I think these efforts are quite
urgently needed. Thank you.
[The prepared statement of Dr. Harry Holzer appears in the
Submissions for the Record on page 45.]
Chair Maloney. Thank you. Mr. Jones.
STATEMENT OF MR. DAVID JONES, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, COMMUNITY SERVICE SOCIETY
Mr. Jones. Good morning, Madam Chair. My name is David
Jones. I am president of the Community Service Society. We have
focused on poverty in the city of New York for 160 years,
founded the Columbia School of Social Work and the Hospital of
Special Surgery. We have been at this a long time, focused on
some of the unique problems of poverty in the City of New York.
I welcome this opportunity to talk to the panel.
We started work in this area focused on New York City
almost 5 years ago. We looked at the problem of young people
who were not in school or at work. We produced a report in
2005, Out of School, Out of Work, that showed that New York at
that time was facing an unprecedented number of 16- to 24-year-
olds who were neither enrolled in school nor working. The
numbers then were approximately 200,000, almost a whole city of
young people in this condition.
This represented nearly 20 percent of the New York City
youth and young adult population. And although our rates were
high compared to other areas, this wasn't unique to New York
City. I welcome testifying here, because what we see New York
as, regretfully, is sort of a canary in a mine. We see all
across the Nation similar problems of disconnect. When we were
looking then, there were nearly 5 million young people in this
condition of all races across the country who were facing this
thing.
Five years later in New York City, there is a little good
news. More young people are returning to school in New York
City than ever before. This is clearly a step forward. School
reform efforts have kept young people from leaving school as
well as created a new series of school environments to keep
young people at risk of dropping out.
The bad news is, of course, the labor participation has
gotten much worse for young people. We first reported on this
trend as far back as 2006, when one of our regular labor market
reports noted that the booming economy was helping everyone
except young people who were of working age. So even though New
York City and the country was adding jobs, young people were
just not rising with those boats.
Our recent recession has exacerbated this whole dynamic.
Since 2007, young adults have attained the highest unemployment
rates on record, as has been mentioned before, 19 percent. The
situation is much worse for young men, at nearly 23 percent,
and for African Americans, 33 percent, and Latinos, 24 percent.
We think jobs are critical for young people. I think, as
Dr. von Wachter mentioned, it has an enormous impact if young
people do not participate in work and particularly going
forward if they haven't had regular work by the time they are
25. We think this has enormous impacts on the likelihood of
these young people ever participating actively in the economy.
I come out of Crown Heights in Bedford Stuyvesant, one of
the poorest neighborhoods in New York, and the notion of large
numbers of young people concentrated in very poor neighborhoods
who never have association with work is going to cut right
through the fabric of these communities and endanger everyone
there, both in terms of their earning power and their ability
to really construct stable communities. We think this is a real
danger that we have to recognize.
This is not going to be cost free. This is not something
that has happened before, at least in my lifetime. When I was
growing up in the 1950s and 1960s in Bedford Stuyvesant,
virtually everyone was employed. The jobs weren't good; we were
facing racial discrimination, but it was very rare not to find
somebody who was working. The Bowery of New York really had
very few African Americans or Latinos; it was all people who
were having substance abuse problems, and it basically was not
coming from these communities.
Now I can walk through blocks of my old neighborhood and
see literally dozens, if not hundreds, of young people who are
just not connected to the job market, and it is going to
endanger my relatives, my young people, and my elderly, as well
as being damaging to the entire city of New York.
I think it has been talked about. The remedy issue is, I
think, the most critical one that we have to talk about. I
think we have talked about summer jobs as a vital effort I need
to stabilize, while we find longer-term solutions. We issued a
report a couple of months ago showing that the passage rate for
young people getting high school diplomas was appalling. We
have about 1.3 million people in the City of New York of
working age with no high school degree, and we have the worst
GED, which is high school equivalency, passage rate in the
Nation, worse than any other locality. We have issues here that
are going to make it very difficult to get young people back on
track.
We think reauthorization and increased funding for WIA is
obviously another thing that is necessary.
We at CSS have been working on three other initiatives.
One, a new tax credit for private business to incentivize them
to essentially hire young people who fall into this category of
being out of work and out of school for more than 6 months. The
other is a focus on the bill with Congressman Nadler, looking
at the new infrastructure transportation bill to add to it a
specific focused WPA-like program that could actually have
teams of young people working on infrastructure projects as at
least a pilot in areas of high impact and high need.
The final thing is work with Congresswomen Nydia Velazquez
and Maxine Waters and others to look at something called
section 3, something I had no knowledge of before I started
getting desperate for jobs for young people. But in the 1968
Act for public housing and other subsidized housing, there was
a provision that best efforts be made to hire young people and
others within housing authorities and in other subsidized
developments. It was never enforced through Democrat and
Republican administrations, so there is no ideological center
here.
Now, we are seeing such high concentrations in public
housing of young people without jobs and without skills that I
am looking for strict enforcement of section 3. We spent $1.3
billion last year in capital and maintenance efforts in public
housing in the city of New York. Virtually none of that went to
hire people from those neighborhoods, far less young people
from that neighborhood.
I am looking at recognizing the strict restrictions you are
under in terms of money to start focusing resources that are
already there and coming up with programs that can get people
to work immediately. I have a crisis that is ballooning much
faster than I think anyone recognized, certainly 3 or 4 years
ago, for the young in the city of New York and, I think, the
young across the Nation. Thank you very much.
[The prepared statement of Mr. David Jones appears in the
Submissions for the Record on page 50.]
Chair Maloney. Thank you very much.
Mr. Wing.
STATEMENT OF MR. STEPHEN M. WING, DIRECTOR, WORKFORCE
INITIATIVES, CVS CAREMARK CORPORATION
Mr. Wing. Good morning, Congresswoman Maloney, and the
members of the Joint Economic Committee. Thank you for inviting
me to speak to you today about CVS Caremarks' experiences
developing programs to train disadvantaged youth for careers at
our company.
But first, I would like to tell you about CVS Caremark. We
are the leading pharmacy health care company in the United
States and have more than 7,000 CVS/pharmacy stores and 211,000
employees across 44 States, the District of Columbia, and
Puerto Rico.
CVS Caremark has built a track record not only as a great
place to work, but as a company that has developed true
specialties in the area of job creation and workforce
development.
Partnering with Federal, State, and local officials, with
local nonprofit groups focused on job training and with the
deans of pharmacy schools, we have developed programs that are
recognized nationally as models for recruiting and training
colleagues from all walks of life.
CVS Caremark is facing high demand for supervisory and
management staff and pharmacists. But within our current
national workforce an absence of key basic academic and
workforce skills make it difficult for many entry-level
employees to advance into a management position. With the
training for advancement, we are creating ``on ramps'' to
employment and helping employees develop essential workforce
skills they need for promotion within the organization.
Through our Pathways to Pharmacy program, founded in
partnership with the America's Promise Alliance of community
groups and schools in 2000, Pathways to Pharmacy has surpassed
its goal of introducing 1 million children to pharmacy as a
potential career. We have also reached our goal of generating
$4 million in summer internship wages for high school students.
Our summer internship serves more than 1,800 teenagers in
more than 40 cities each year. The summer programs run 6 to 8
weeks, where high school students spend the first weeks
learning about customer service and the field of pharmacy in
classroom settings at colleges of pharmacy, and then the last
weeks gaining hands-on experience while interning at CVS/
pharmacy stores.
One example is 20-year-old Veronica Vergara, who
participated in our Chicago Pathways to Pharmacy program 4
years ago. She fell in love with the profession and is
currently a junior at the University of Illinois, Chicago, with
definitive plans to enroll in a four-year pharmacy school after
she graduates. She also continues to work at the same CVS/
pharmacy since her internship. She started out as a pharmacy
sales associate, and then studied to become a certified
pharmacy technician. She now works 20 hours a week in between
classes.
CVS Caremark has also recently piloted a Pathways to Retail
Careers program in Boston and Detroit, focusing on high school
dropouts, working with several partners including WorkSource
Partners as well as our own CVS Regional Learning Centers. We
provide 6 weeks of intensive training in classroom settings.
The training was designed so that it incorporates critical
workplace skills as well as CVS specific training. In addition,
the young people have a mentor and social support to help
ensure their success. Following the classroom training period,
the young people apprentice at a CVS/pharmacy store.
In the second phase of the pilot, once the young person is
an employee, we have designed a set of tools that can help them
to continue their skill development with online training and
on-the-job training. In Boston, the retention rate far exceeds
the company's average. We developed this pilot with the support
from the Kellogg Foundation's New Options Initiative. CVS
Caremark plans to replicate this program nationally.
When scaling up our various workforce programs to other
markets, CVS Caremark has found that the most difficult task is
identifying key players. Given that they are not the same in
each market, we have learned that it is critical to develop
partnerships with a range of local government agencies, faith-
based groups, community colleges, and other interested parties,
and it is important to develop a detailed corporate plan first
and then share the plan with the potential partners so that
they fully understand the program's details, what is expected
and how the program may further their own objectives.
Lastly, I am on the board of directors of Corporate Voices
for Working Families. Corporate Voices is a key player in
working with businesses, and they have dedicated themselves to
youth employment opportunities. They have compiled a case study
on CVS's role in helping out-of-school-youth through our
Pathways to Retail Careers pilot, and have also worked with us
in Year Up, as Dr. Holzer talked about, to develop a pharmacy
tech model. I would be happy to share this case study and the
other Year Up work with anyone who is interested.
Thank you, Madam Chairman and the committee, for allowing
me to testify today on our CVS story.
[The prepared statement of Mr. Stephen M. Wing appears in
the Submissions for the Record on page 61.]
Chair Maloney. Thank you.
Mr. Sherk.
STATEMENT OF MR. JAMES SHERK, SENIOR POLICY ANALYST IN LABOR
ECONOMICS, THE HERITAGE FOUNDATION
Mr. Sherk. Chairwoman Maloney, Congressman Brady, and
members of the Joint Economic Committee, thank you for inviting
me to testify this morning. My name is James Sherk. I am a
Senior Policy analyst in Labor Economics at The Heritage
Foundation. The views I express in this testimony are my own
and they should not be construed as representing an official
position at the Heritage Foundation.
As the other panelists have mentioned, today's youth face
serious challenges. Congress should ensure that it addresses
these challenges effectively. To do so, Congress should keep in
mind several lessons from recent history about what does and
does not work.
The first lesson that Congress should keep in mind is that
most youth employment programs have been shown not to work.
Congress has created several youth job training and work
experience programs: the National Supported Work Demonstration,
Youth Programs in the Job Training and Partnership Act,
JOBSTART, and, of course, Job Corps. These programs were and
are well intentioned. Unfortunately, evaluations show that they
have accomplished little. Youth who have used these programs
are not statistically more likely to have a job or to have
higher earnings later in life.
To quote Nobel laureate James Heckman, the man who
literally wrote the book on how to evaluate these programs,
``Neither the experimental nor the nonexperimental literatures
provide much evidence that employment and training programs
improve U.S. youths' labor market prospects.''
European nations have created far more extensive youth job
programs than America has because they have much higher youth
unemployment. Evaluations of these programs come to similar
conclusions: Public training, wage subsidies, and direct
government job creation have generally not worked.
The Swedish experience of the 1990s should provide a
particularly important warning. The Swedish government
responded to a large rise in youth unemployment by creating
large-scale youth job training and employment subsidies.
Hundreds of thousands of Swedish youth went through these
programs.
Swedish youth who used these programs had no higher
earnings and were no more likely to hold a job two years later
than those who did not. Swedish taxpayers' large investment did
little good for the Swedish youth.
Congress should carefully evaluate proposed expansions of
youth job programs to ensure that the same does not happen to
either American youth or American taxpayers.
The second lesson that Congress should remember is that a
stronger overall labor market is the best way to help young and
low-skilled workers. Employment among younger workers is
procyclical. As you can see from the chart against the wall
there, in recessions youth unemployment increases more, but
also in good times it falls more, than unemployment among older
and more skilled workers does. During the economic boom of the
late 1990s, the employment prospects of low-skilled workers,
including the young, improved substantially.
[The chart titled ``Young Workers Face High Levels of
Unemployment'' appears in the Submissions for the Record on
page 77.]
Now, Congress has no silver bullet policies to get us back
to the strong job markets of the late 1990s. However, Congress
can take steps in that direction by removing barriers to
entrepreneurship, investment, and wealth creation. This will
spur employers to hire as they take advantage of these new
opportunities, increasing the demand for labor, including the
labor of young workers.
Concrete measures towards this goal include eliminating
regulations that do more economic harm than good, removing
barriers to domestic energy production, and suspending the
Davis-Bacon Act.
If Congress wants to take measures that would particularly
target hiring of young workers, Congress could suspend the
recent increase in the minimum wage. Half of minimum wage
workers are between the ages of 16 and 24, and economic studies
show that a 10 percent increase in the minimum wage decreases
teenage unemployment by roughly 2 percent.
This suggests that the increase in the minimum wage from
$5.15 an hour to $7.25 an hour has cost roughly 480,000
teenagers their jobs, with additional job losses among 20- to
24-year-olds. As the other panelists have discussed, these job
losses mean lasting pain for these teens because the main value
of a minimum wage job is not the rather low wage it pays today,
but the training and the experience it provides for the future.
Congress could put these youth back to work by returning the
minimum wage to $5.15 an hour until youth unemployment falls
back to pre-recession levels. This would create hundreds of
thousands of youth jobs and provide them with valuable
experience without costing taxpayers a dime.
The third lesson that Congress should keep in mind is that
of the Greek crisis. Unsustainable government spending
eventually means severe economic hardship. Today's youth face a
far more serious challenge than even this painful recession.
They face the burden of paying for the baby boomers' retirement
and the debts being accumulated today.
By 2050, Social Security, Medicare, and Medicaid will
collectively consume one-sixth of the American economy, and
paying for these entitlements will place a very heavy burden on
America's workers--today's youth. To balance the budget without
cutting spending, Federal taxes would have to nearly double.
Today's bailouts and stimulus packages are adding to this
burden. Dr. Edward Stringham of Trinity College estimates that
the 2008-2009 bailouts and stimulus packages will cost the
average 22-year-old graduating from college today $145,900
during his working life. That is the equivalent of making him
buy a high-end iPod and throw it in the trash every month for
the rest of his working life.
Today's youth are set to become a debt-paying generation,
working to pay off the debts of their parents and their
grandparents, and this threatens their future far more than
this painful recession. Congress should hesitate before adding
to this burden. Thank you. I appreciate the opportunity to talk
with you about how to avoid ineffective policies and pursue
successful policies to help America's youth.
[The prepared statement of Mr. James Sherk appears in the
Submissions for the Record on page 78.]
Chair Maloney. I want to thank all of the panelists for
their insight and their testimony.
Dr. Holzer and Mr. Jones and Dr. von Wachter, you all
mentioned the scarring effect that our young people experience
when they are not able to get a job when they graduate from
college or high school. And Dr. von Wachter, I found your
testimony and research particularly riveting when you pointed
out that the scarring effect lasts for 15 years in reduced
earnings. I would like to point to this very troubling report
that we just did that has the unemployment for our young people
going through the roof, particularly the 16- through 24-year-
old age group. Certainly with the seniors and mid-age
employment, it is far less. And I would like to ask all of the
panelists, what action can policymakers take to mitigate this
effect of so-called ``scarring'' that affects not only the
individual but their ability to contribute to the overall
society and economy? Are there any initiatives or anything that
we can take to mitigate this scarring effect? Dr. von Wachter,
and then just go down the line if you have comments on it.
Dr. von Wachter. I am going to pick up one of the
suggestions made in my testimony. It is important to raise
awareness of what young workers can do to recover from a bad
initial start. For example, in high school or in community
college or in college, it is important to explain that the
recovery process can take a long time; that it will involve
hard choices; it will involve compromises; it is likely to
involve continued investment and continued mobility. I think
many young graduates don't realize that they have to
fundamentally change their career plans. I think it is also
important to point out where such information can be gotten,
where information on jobs and growth in the occupation industry
can be obtained. Such counseling and information, in addition
with potentially a voucher for retraining or career building
could be of significant help.
Chair Maloney. Where do you find the information on the
sectors or areas that would be employing young people? Is there
some central place that young people can go to see where jobs
are for their age group?
Dr. von Wachter. Currently a lot of this information can be
found on the Web site of the Bureau of Labor Statistics or the
Census Bureau, but it is scattered and it could be much more
effective if perhaps concentrated in one place. But in addition
to this information, it is also important to teach young
workers on how to use this information and to keep using it for
a longer period of time. So this information could be provided
in one-stop shopping centers that are used to help job search
for unemployment workers. But then the awareness has to be
raised that that is where the information is. Or it could be
that a central Web site is provided that gives the various
links to the various pieces of information. So the teaching
aspect is important, because not everybody knows from the start
how to read government statistics on unemployment trends. But
they can be very useful.
Chair Maloney. Dr. Holzer and Mr. Jones, would you comment
on the scarring effect and what we can do to alleviate it? And
is the scarring effect on young workers more or less the same
than on older workers? Or is it more severe with younger
workers?
Dr. Holzer. Well, I think we know that the scarring effect
is more severe because this is a more critical time for young
workers when they pick up really key labor market experience
that affects their long-term earnings. So when we talk about
policies to remediate this, I think it important that anything
we undertake and anything we spend public resources on target
this group and have some track record for cost effectiveness.
Now, as I mentioned earlier, I think we could engage in
well targeted job creation efforts, either through tax cuts for
new hires and tax credits for hiring and on-the-job training
much more robust than the recent payroll tax cut that Congress
passed. And also, some public service employment that would be
heavily targeted towards disadvantaged adults and especially
disadvantaged youth. And I think we have evidence on those, and
we know that those can be done in ways that are well targeted
and relatively cost effective, and you can get quite
substantial job creation, good bang for the buck.
But I also think another way to offset whatever scarring
occurs is to have more robust education and training that is
closely linked to labor market opportunities. And in different
areas we know how to do that and we have evidence. We have
evidence for young people still in high school on the power of
a high quality career education, like career academies and tech
prep that again combine strong academics with good workforce
experience.
We have some evidence at community colleges on what works
to not only improve completion rates, but make sure that what
people learn is tied to labor market opportunities. And even
for young people who have dropped out of high school--and I
think this is the most challenging group--we do have evidence
from programs that not only create employment but tie that
employment creation to skill-building efforts, training
targeted at key sectors of the economy. And there are several
efforts there that we could discuss. But all of these offer
opportunities I think not only to create more jobs, but also to
improve education and training.
Chair Maloney. My time has expired. Mr. Brady.
Representative Brady. Thank you, Madam Chair. We have had a
lot of thoughtful testimony today. Thank you all for being
here. How many separate Federal jobs training programs does the
Federal Government have? Does anyone on the panel know? The
reason I asked, I had served on job training programs at the
local level for many years, 20 years ago, and it was a
staggering number then. As you were talking, I just Googled
that question myself, and in one city, Washington, D.C., if you
go to the simply hired Site, it says here you can access at one
point all 241 separate youth programs in Washington, D.C. They
have training employment, youth experience training, youth
exchange training, teen bridge, homeless youth jobs program,
Latino jobs youth program, disadvantaged youth program, Job
Corp, JOBSTART.
How do we know what works when we don't even know what the
Federal Government offers? And, is anyone really examining the
effectiveness of decades of programs layered on top of decades
of youth programs? And how do we find out what has the best
bang for the buck?
That is not your fault. My point is, I am not sure we know
what is working because we don't know everything that we are
pouring billions of dollars into. And I still am convinced that
that first job a young person gets is a key turning point in
their life. And getting them into that first job, whether it is
through internships, that first minimum wage job makes a huge
difference in creating a stronger economy and making it easier
for small businesses to hire young people, as I think is
probably the key, whether you are in New York City or Texas or
rural America.
So my question is, how we make it easier for small
businesses to bring on young people for that first training
job, where they don't have experience but it puts them on the
right path?
So Mr. Sherk, you sort of addressed this. And I will start
with you. You talked about reducing the minimum wage for youth
to, again, make it easier for small business to hire. In real
life, increasing from $5.15 to more than $7, what that meant is
small business has to come up with an extra $5,000 a year to
bring that young person on the job.
What kind of impact has that had? You talked about it, but
addressing that issue to bring on more youth, removing other
barriers, how do we start making it easier for small businesses
to hire?
Mr. Sherk. I think that reducing the minimum wage back to
its previous level would be one of the most effective measures
that we could take. Studies done in better economic times when
businesses didn't have to be as conscious suggest that this
increase in the minimum wage costs about half a million
teenagers their jobs, and probably closer to 900,000 youth when
you include young adults.
Now that we are in a recession, businesses and consumers
have become extremely cost conscious. They are trying to save
pennies. Businesses have very little room to pass those costs
on to consumers. So the minimum wage has an even greater
employment effect than those studies indicate.
Representative Brady. No one ever wants to lower wages for
people. It is just counterintuitive for the country. But what I
see are small businesses that normally see that as on-the-job-
training, you know, plus the ability to assess the skills and
the work ethic of that person, often with the opportunity to
move them off it. The goal isn't to increase the minimum wage.
It is to move people off of it. It is to get them trained and
move them on to a path that is much more economically stronger
for them.
So if you lower the minimum wage, does it set people back,
or does it give more people an opportunity to move forward?
Mr. Sherk. Well, most people on the minimum wage are part-
time workers, 64 percent. And it is exactly as you suggested,
it is a training wage. It is a training job. Two-thirds of all
workers who earn the minimum wage are earning more than the
minimum wage a year later.
Representative Brady. Run that by me again.
Mr. Sherk. Two-thirds of workers who today earn a minimum
wage, come back and look at them a year later; and if they are
still working, they are earning above the minimum wage. They
have earned a raise. What it does is allows workers who have
very few skills to come in, get trained in very practical
things like the discipline of showing up on time for work every
day, skills that make you more productive and earn you a raise.
It is not a lifetime job for very many workers at all.
Representative Brady. You talked about the domestic energy
supply. Energy in America employs 2.2 million people directly.
Many of them are high school graduates who earn, I know, from
Texas, looking at some of our energy jobs, $60,000 to $80,000,
many of them minority, many Hispanic, to be honest, and an
opportunity to make--to raise a family to have that job.
You know, if we make it harder to produce, explore, energy
in the United States, does that cut off or reduce the
opportunity for well-paying jobs for people without necessarily
a college degree?
Mr. Sherk. Absolutely. And it does it in two ways: First,
we at Heritage have estimated that expanding domestic
production of oil by 2 million barrels a day would create
270,000 new jobs. You have got the direct jobs in the energy
sector itself, but then you have second, the overall effect on
the economy. What happens when we have more oil being produced?
Well, energy is less expensive. You gas up your car, and it is
that much cheaper, which means you have that much more money to
spend somewhere else in the economy.
So even if you do not have a job that has anything to do
with energy, it means more money in your pocket, and it is
better for the economy when energy is less expensive.
Representative Brady. Madam Chairman, at some point, too--
Mr. Sherk, you talked about it. At some point, I would love to
hear more about what other barriers there are for small
businesses to hire young people.
Chair Maloney. The gentleman's time has expired. Senator
Klobuchar.
Senator Klobuchar. Thank you very much. I appreciate it
that the other members are letting me go ahead here, because I
have got something to get back to in the Senate. Thank you very
much.
And I really, listening to you this morning, it made me
realize that the statistics support what I have been hearing at
home. When I get back, I hear from so many young people who are
having trouble getting work, either some summer jobs, but a lot
of them are college graduates or high school graduates who, in
other better times, would be able to get a job.
So this isn't my life growing up in the suburbs in the
1970s when it was simple to get the car hop job at the A&W or
the Baker's Square Pie Shop, where I would tell you, Madam
Chair, my career came to an abrupt end when I spilled 12 iced
teas on one customer. That is when I decided to go to law
school.
So my questions are, first of all, about how we get those
that are in college right now, and even in high school to focus
on some of these skills that were just being discussed in the
energy area, or perhaps in the science in the area of health
care, which I think there will still be more needs as our
population ages. How should we target that skill development
toward sectors of our economy that will generate demand in the
coming years? Anyone can take it.
Mr. Wing. Thank you, Senator, for the question. I think one
of the things that we are doing at CVS Caremark is in our
Pathways to Pharmacy program, we go back into elementary
schools and we start to talk to kids about pharmacy. Our
pharmacists volunteer to go to career days and talk to kids
about pharmacy and what a pharmacist does.
And then in middle school they actually, they come and
shadow us at the store. They spend time with the pharmacist and
the manager just to see if this is really something that they
want to do. And then in high school, then they do an internship
and then they really see. And just like I was talking about,
Veronica, I mean there are hundreds or thousands of kids that
we have around the country that are participating in that
program. And they get excited about the opportunities and then
they start to take the right courses that are going to get them
into pharmacy so that they are getting prepared at an early
age.
Really in middle school is where I think they, where we are
seeing where it is really important that they start to take the
right courses to get themselves prepared.
Senator Klobuchar. That is pretty early, having a 14-year-
old myself. Dr. Holzer.
Dr. Holzer. Senator, I think there are--we have strong
evidence of areas and programmatic efforts both for in school
use and out of school that can successfully target growing
sectors of the economy. I think this general statement that Mr.
Sherk made before that nothing works for this population is
simply incorrect when you read this evidence closely. There are
a lot of programs that haven't worked. We have developed a
better sense over several decades of research what does work,
what gets people not only secondary and post secondary degrees,
but targets towards growing sectors of the economy that good
jobs.
For instance, the career academy's program for high school
students has been rigorously evaluated and shown as much as 8
years later to have strong effects on earnings, especially for
at-risk young men for whom other programs have more trouble
working. Also programs like tech prep that build pathways from
high schools into community colleges.
Senator Klobuchar. And are these, like, one class that the
kids take?
Dr. Holzer. No. For instance, the career academy is a high
school within a broader high school that targets a sector of
the economy. So there is a health services career academy or a
financial services or an IT career academy, and people take a
combination of academic courses to keep open their post
secondary options as well as career oriented and occupational
training.
And I think at the community college level, which is so
important right now, we have strong evidence that getting
certificates, even for a young person who didn't do that well
in high school, if they get certificates in some of these key
areas, health technology and some other areas, it has quite
dramatic effects on their earnings.
Senator Klobuchar. Do you think there should be a bigger
emphasis on trying to have targeted community colleges or even
regular colleges having two-year degrees in certain areas?
Dr. Holzer. Two year degrees, certificate programs, I think
the whole range, the labor market rewards the whole range. I
think what we need is better coordination. It is not just
necessarily throwing money at these sectors, but it is better
coordination between our educational institutions and our
workforce development efforts. I think the Workforce Investment
Act needs to be advised in a way that improves this tie to the
education system, and you can do things also through Perkins,
through ESEA, I think to improve the coordination of those two
sets of institutions and make them more responsive to the labor
market.
Mr. Jones. One thing, Senator, you have to recognize, we
have an extraordinarily low graduation rate out of our
community colleges. I think it is 2.3 percent in 2 years in New
York. And when you look at that and deconstruct it, it is
basically about money. There is no money. We do surveys and
find that most poor households have less than $100 in total
reserves. When someone reaches that age of going to community
college with no supports, it is very difficult to make it. It
has nothing to do with intellectual capacity. It is the
question of how can you survive. You have to be working two
jobs and trying to do college level work at the same time.
So I think we have to look at subsidies if we want to have
young people be able to succeed in community college technical
programs.
Senator Klobuchar. Thank you. I note that The New York
Times recent article, Plan B: Skip College, also talked about
even with the bachelor's, only 50 percent of students get their
degree within 6 years, so thank you very much.
Chair Maloney. Thank you. Mr. Cummings.
Representative Cummings. Thank you very much, Madam Chair.
Mr. Jones, I was just listening to your testimony, and towards
the end of your testimony you seemed to get very passionate,
and I think it is because you had just gone through and talked
about what you saw as a youngster and what you see now. And the
point you just made is so significant. I sit on the board of a
historically black college, Morgan State University, and sadly,
we have to let a lot of our kids go. Why? Because they don't
have any money. It is not that they are not bright. They don't
have the money.
I have another school where the graduation rate is 18
percent. Again, money. Then when I hear comments from people
like Mr. Sherk, sometimes I wonder whether or not there is a
disconnect with reality. Because when one of these young people
can get $1,000, I mean in a job working, that $1,000 may very
well be the link between them staying in school and leaving
school. And what we have seen is that if they leave school the
likelihood is they will never return. And so I don't know what
you say to kids. And these kids want to work. A lot of times
they cannot find the jobs. And so I was just wondering what you
have to say. I will go to you Mr. Sherk in a minute, but what
are your comments on that, Mr. Jones?
Mr. Jones. I want to echo the problem of dropping out and
then trying to reconnect. We did a report on GED, which is your
second chance if you drop out basically, across the country set
up just after World War II for returning veterans who didn't
have a high school diploma to come back into the system. Really
a building block much to my shock for virtually any career now.
You can't get into pre-apprenticeship programs in plumbing,
electricians, carpenter, any more in the city of New York
unless you have a high school diploma.
So this is almost a necessary requirement. The difficulty
is once you drop out, the GED is considered sort of a second
rate degree. We presented some of the GED math problems to the
regions of the State of New York and 50 percent of the regions
couldn't do the math problems because it has been too long. As
the time goes on after you are in the rigor of school, trying
to reconnect, it has nothing to do with your intellectual
capacity, you lose those skills.
And that is why it is so important to hold young people in
as best you can, because that is the best shot to get their
high school diploma. But it is becoming money. When you turn 15
or 16 in the middle of the South Bronx or Brownsville, or I
assume across America, and there is no money in the household,
how can you sit around if there is no indication that there is
going to be a job out there for you even if you get through the
high school diploma and get into a community college with the
family struggling with no resources?
I think we are sort of having this image of a middle class
America and we are imposing that on working poor people across
the country, and it is not fair. And I guess I do get emotional
about this because I see deterioration from the time I was
coming through. It was supposed to be progress forward, not
backwards. And now when I visit my community it is backwards.
Representative Cummings. Mr. Sherk, I am going to get to
you in a minute, but I am running out of time, and I wanted to
ask Dr. von Wachter a question. You know, there was a recent
article talking about the importance of childcare subsidies for
the unemployed and lower income workers. Can you discuss the
issue whereby it seems that younger workers are more reliant on
these programs and exactly how do they affect the employment
rates of these young people?
Dr. von Wachter. Just a question for clarification. These
are subsidies for getting a job?
Representative Cummings. Yeah. If you can't answer it, can
anyone else on the panel? Subsidies for childcare, very
significant, because we have a lot of young women in particular
who don't have childcare and they have gotten subsidies, now
those subsidies, because of the economy, are being cut back or
cut down substantially.
Dr. von Wachter. I think any subsidy that can keep young
workers in a job or help them to obtain a job are crucial. So
even paying a young worker, giving a bonus, a reemployment
bonus, or paying the employer to hire young workers is
worthwhile for the reasons we discussed, because getting a
first job and keeping it is so important.
In fact, the point I wanted to make in the discussion of
the minimum wage and of community colleges, it that it is
important to bring employers back onto the table and discuss
with employers what employers need, which type of training in
young workers they want. This way the information of where
young workers would be most needed, where the growth jobs might
be will be provided automatically. And I just want to point out
the most successful job training program in the world is the
German apprenticeship program. These firms can effectively pay
subminimum wages by giving a training guarantee. What that
means is that successful firms choose to provide training.
There is an active market where firms compete for high school
graduates, providing direct information on where the most
promising jobs are.
It could be happening right out of high school or again
community college, that could be linked as effectively as
another way of having a job subsidy, so allowing minimum wages
for firms who guarantee training.
Representative Cummings. Thank you Madam Chair.
Chair Maloney. Thank you. Mr. Snyder.
Representative Snyder. Thank you, Madam Chair, and thank
you for having this hearing. I want to continue a bit the
discussion of Mr. Cummings. And he and I were talking back and
forth about this issue of high school dropout rates. I mean, it
really is a discouraging thing, I mean, when you look at the
last several decades. I think 20 years ago, none of us would
have predicted, I don't think, that in 2010 we would still be
talking about 25 percent high school dropout rates in some
populations. So I would like each of you to spend a little bit
more time on that about what is it that we need to do. Where
are we missing the boat? I mean, I think it is probably a
combination of things. There is not one answer. You have got
subsets of kids. But what do we need to do. Mr. Sherk, let's
start with you.
Mr. Sherk. The problem with high school dropouts involves
education reform much more than labor issues. One of the
interesting things you saw in the economy of the late 1990s, a
very good economy, but unfortunately you had a number of youth
dropping out of high school to take jobs. At the time it was a
very strong youth job market and they did not enjoy school so
they were dropping out to take these jobs. Of course they were
hurting themselves for the rest of their working lives because
of a very shortsighted decision. I think it is much more a
problem of how do we fix the school system and reform education
than it is an issue of what do we do about the labor market.
But once you have these dropouts, it has very severe labor
market consequences for them going forward.
Dr. Holzer. If I could address that, Mr. Snyder.
Representative Snyder. Why don't we just march down.
Mr. Wing. Do you know something, that is a great question.
Because as I go around the country, I am appalled by that to
see in the intercities that we see 60--50, 60, 70 percent
dropout rates. It is unacceptable to see that in this country.
And I think one of the things that we are trying to do through
our Pathways program is really get those, and the pathways
program is really designed for intercity rural kids, those are
the ones we are trying to go after, and to find the minority
candidates.
Because there, I think it was said earlier that there are
some really bright kids, they just need some guidance there.
And so that is what we do with our Pathways program is we get
into the middle schools and start to encourage those kids. Not
that they are going to become pharmacists, but to encourage
them to take the math and science courses that are going to
enable them then to get into high school and get excited.
And that has been working for us, and we have been--like I
said, Veronica is one example, but we are seeing thousands of
those kind of kids that are getting turned on to see that there
is a career path. And then you have mentors, the pharmacists
and the managers and folks become and people in the circuit
become the mentors to help them.
Mr. Jones. I will be very brief. Obviously, as Mr. Sherk
has said, there is a major educational reform problem here. We
have this debate in New York City all at once. Many in the
Department of Education feel that if children have not acquired
basic reading and numeracy skills by the fourth grade, it is
basically a long slide. I don't believe that. I couldn't read
in the third grade. I managed to recover. But I think the issue
becomes that--we have a couple of things. We have been
spending, even in the city of New York much less on young
people in very poor communities than we do not.
Examples of that are the Stuyvesant High School, one of the
best in the country, the $13 million just spent on the bridge
across the highway, I have no operating labs in many of my high
schools in poor communities, so there is disproportion going
there. But I also think there is something else which I think
is more--actually I never thought I would be there. That we
have to have a serious discussion on career and technical
education. New York City has one of the poorest systems of that
sort in the country, despite our enormous dropout rate. And
this is, when we poll people at 200 percent of poverty or less,
which we do every year, after they talk about better teachers,
better paid teachers, smaller class size, the third thing they
talk about is a focus on career and technical education for
their kids, because they recognize to come out with a general
diploma in this environment, in this global economy without
real skills that can allow you to become independent is not the
way to go.
That then education could build on that, but the finances
have become so critically important for working families that
this notion of a long childhood where you can sort of lope
along finding yourself just isn't available. And I think we
have to start taking this seriously as early as junior high
school. Summer employment should not be a generalized thing, it
should start to link up with actual job skills and taking
things along in an exciting way, but something that can
actually give you a career when you are out of it and let you
then decide how your educational progress will go from there.
Dr. Holzer. I want to echo the points about a career in
technical education. I think when people start dropping out of
high school, again in these low-income communities, 25 percent
is the average nationwide and in some communities it is much,
much higher, as Mr. Wing said. Some young people drop out
because they are very far behind, but many drop out because
they don't see the point. And they don't see any pathway to
success in their schools, in their families and in their
neighborhoods for people who look like themselves. And we have
let those pathways erode.
Now historically, we had something called vocational
education that was disliked in low-income and minority
communities because it was viewed as a form of tracking; oh,
you middle class kids get to go to college, but the low-income
and minority kids get trapped into voc-ed.
And in many cases it was an academic backwater. That no
longer has to be the case. And we have good examples of high
quality career and technical education like the career
academies, like tech prep, where the academic component is very
strong and young people are still encouraged not just to get a
high school diploma but to go beyond that and get good post
secondary training, but at the same time, they get occupational
training and good labor market experience and growing in high
rate sectors, and the evaluation evidence on all those is very
positive.
So we have to rebuild not old-fashioned voc-eds but high
quality career technical education linked to strong sectors of
the economy. There is other evidence of things like mentoring
programs, certain kinds of case management that also tend to
reduce dropout rates. But I think there are two ways to attack
this. You can try to prevent dropping out early on, which we
certainly do, and then you can try to reconnect the people that
have dropped out.
Now, earlier, Mr. Brady counted up hundreds of employment
programs of disadvantaged young people. And he is right, we
have had this scattershot approach of a lot of tiny programs.
If you add them all up, the resources in those programs are
very, very small. As a percentage of GDP, this country actually
spends very little compared to other industrialized countries
on active job training and labor market programs. But we have
efforts to reconnect high school dropouts that have proven to
be successful. I will mention a couple.
The National Guard runs a program called the challenge
program funded from the Department of Defense that has had
remarkably strong effects in random assignment evaluations on
getting young people not only their GEDs and their high school
diplomas and then getting them into further education. So
programs like that certainly need to be in hand. We also had a
program started in the Clinton Administration called the Youth
Opportunities program which targeted money to low-income
neighborhoods both for schooling and employment with a lot of
the money going to high school dropouts. That program was very
quickly killed off in the Bush Administration, and, in fact, an
evaluation report that was quite positive was embargoed for
many years, perhaps because the results were quite positive in
that evaluation. But we know ways to improve both enrollment
and graduation rates and reconnection rates for these young
people who have already dropped out as well as improving their
labor market success.
Chair Maloney. Thank you.
Dr. von Wachter. Currently in most States, the compulsory
schooling age is 16. There was a time where at 16 you could get
a decent job in a factory in manufacturing. Those jobs are
mostly gone because of the way the economy has changed and
focused on more technical, more highly skilled jobs. One way of
addressing the problem of youth unemployment is to force people
to take some form of training until age 18. This is done for
example in Germany, which has the highest youth labor force
participant rate in the world. In this way, individuals would
enter the labor market with more skills and have more
opportunities. It is not surprising that people age 16 who are
low skilled and think of dropping out of high school don't see
many labor market opportunities, since there aren't that many
opportunities for these people. So letting them enter the labor
market later with a better skill set may allow them to better
compete in the labor market.
Chair Maloney. Thank you. I would like to ask Mr. Wing and
Mr. Jones: In April, the unemployment rate for our young people
reached an all-time high of 19.6 percent in that age range of
16 to 24, which is truly a crisis number. Mr. Wing, you have
run a successful job training program, and Mr. Jones, in your
testimony, you talked about using HUD money in public housing
projects as job training. There is one specific program that is
moving through Congress now. It is $300 million for youth
summer employment. Can you offer ideas of how we might target
that program in a way that would give the career education
opportunities that Dr. Holzer and Dr. von Wachter have been
talking about? Is there a way we could tie it to successful
programs and pharmacies, such as you have done, Mr. Wing, that
at the end of the summer, there is an opportunity like the
young woman you described who is now in college and has become
very inspired with her experience in working in a pharmacy?
Is there a way we could use the program's funds in a more
productive way to employ not only for the summer, but to
inspire and give a vision for our young people in the future?
And Mr. Jones, you have been running these programs or involved
with them in many ways, and you might have some insight that
might help us in directing these funds in a more productive
way.
Mr. Wing. Well, I agree with what you are saying there. And
I think one of the things that was mentioned earlier was
talking about year round. I think that it is great to have a
summer program, but I think these are things that need to be
year round so that the kids really can learn all the
different--there are different times and there are different
things that happen during different times of the year. And I
think one of the things that we have noticed with these kids,
that they are resilient, they really are dedicated. And when
they get the opportunity to come to work they are going to stay
to work. And even through going through school, several of
these folks that we have examples of, that they are working two
or three different jobs because they are helping to pay for
their education, but they are also helping their parents
because they are struggling.
So I think it is important that we look at not just summer
programs, but that we make these and expand these into year
round programs so that while they are in school, they can be
taking the things that they are learning in school and then
applying them at work and vice versa. And I think one of the
things that we are seeing is that at the community colleges we
are having our pharmacists and our managers, they are becoming
volunteers to do teaching, do some of the classes. And even in
the high schools too, we are doing that. So that the kids are
really learning from and the managers and pharmacists are
becoming mentors to them.
Mr. Jones. Just very briefly. I would tend to agree year
round programs work much better. There is a problem with not
having sort of rigor in summer youth employment jobs. It is an
opportunity to start having certain skills provided so young
people start to understand what the work life is. I mean, this
is the first approach. And we never--I used to be head of youth
services for the city of New York, and we never had the rigor
back then. That was a long time ago, but it is still lacking.
And if this is going to be the opportunity, a rare opportunity
to connect young people to the world of work, we should you
know require that they come to work on time, do they get
evaluated at the end, no matter how you do this to make this a
real work experience that can give people the structure of what
the world of work is like.
And I think just the notion of here is your check, come
here, but at the end of it there is no connection to another
employer, whether private or public, there is no real
definition of whether you did a good job or a bad job. I think
it is a wasted opportunity with scarce money. So I do think we
have to seek rigor. It may not be immediate. But as these jobs
go on, it should be year round, it should hit out of school
youth as well as in school youth and it should really start to
look more like a real job so that young people can get a taste
of what this is about.
Chair Maloney. Thank you very much. Mr. Brady.
Representative Brady. And I think this is a healthy
discussion. I appreciate Mr. Snyder commenting about dropout
rates that impact, how we address it. You know, I do think
there is, and I don't know if Dr. Holzer made the point or Mr.
Jones, but there are some real opportunities for kids who
aren't going to college or choose not to. There seems to be, as
a layman not in the education community, but there seems to be
a disconnect between what the parents and I think students want
and what the educational leaders want, in that technical
vocational training is frowned upon as tracking, Dr. Holzer, I
think used that word, almost giving up on kids if you do that.
Yet in southeast Texas, for example, you always know your
own area better, but up until last year, our biggest labor
problem is that we couldn't find 10,000 welders to work on the
refinery expansions, the new natural gas projects, everything
that was going on. Now, obviously that has cooled down because
of the economy.
But even this year we lost the Eastman project, $1.6
billion, 1,500 construction jobs, due both to the global
economy and the fear of cap and trade. But the point was that
we were having trouble finding those workers because education
sort of frowns upon that. And that our curriculums at the State
level, not necessarily the Federal, are really geared toward
that college degree. You know, a welder in southeast Texas
starts at $35,000 a year, not much in New York, but it is a
start in Texas. You know, skilled welders are up to $80,000 to
$90,000. You can raise a family on that. So my question is a
general one. How do we reinstate, not for everyone, but for
those who choose to, which require a lot of training in
themselves, the vocational and technical job paths where
dropout rates can be addressed, where there is an alternative?
You know, this path is usable, it is workable, it creates real
revenue for you and your family so you don't have to drop out.
Let me just open it up, Madam Chairman, with your permission.
Dr. Holzer. Congressman, I agree with you very strongly.
And I fear that some of the discussions of education reform
that are occurring right now place too much of the emphasis is
on academic--you know, academic skills are very important. The
achievement gaps between middle class kids and low-income are
very important issues. But sometimes the conversation becomes
too narrow and we talk about an academics-only set of standards
that I think is inappropriate and ignores these parts of the
labor market that I think you accurately describe where there
are good opportunities for noncollege graduates, but they need
to have something beyond usually just a high school diploma.
They need to have some significant on-the-job training or
some significant career education. I think the way to counter
this is to make the career technical education high quality,
number one, to make sure that it combines strong enough
academics so that people who want to go on to post secondary
and should go on have the background to do that.
This should not be viewed as a dead end in and of itself.
It needs to be one of many pathways that people can see when
they are in high school. Some pathways lead into the labor
market but they go back afterwards for post secondary. But
there are good job opportunities that can be accessed right now
with those skills. And I think young people need to see those.
I think young people, even people in community college, often
don't have a clue about what the labor markets are like in
their areas and what I think information is. First of all, it
is very important and very lacking. And I think young people
need a sense of the range of careers out there. Good paying
jobs for kids with no skills are disappearing. But, in fact,
good paying jobs for folks with strong academic plus
occupational skills and some post secondary certificates remain
strong, and I think we have to rebuild the quality of those
programs, the links to the labor market and the perceptions
that they can matter that can be a viable alternative.
Mr. Wing. I would like to add to that too. I think that is
a great question. Because I think it is not just looking at
getting kids prepared for college. We also have to look at the
kids that are going to go to the community colleges or that
they are going to go to technical schools, and I think really
the program we have, the Pathways to--that is in Boston is a
great example of getting kids that are dropouts. They get
excited. They want to come to work.
And we really have seen a great increase in retention with
those kids because they know that this is their chance to get
ahead and have a career opportunity, and so they are really
digging into it. And then at that point, they are going on to
get additional education. So we see, you know, working
together, and I think the important thing that I would want to
say about all of this is that you have to have the
partnerships, you have to develop those relationships with
government agencies and the foundations and different
organizations that are going to help you to bring all of the
things that Dr. Holzer is talking about together. And that is
what has helped us to be successful, especially in some of
these tests that we have done.
Mr. Jones. Just a New York example, and I will be brief.
The aviation high school which is one of the most successful of
our voc-ed or technical education, even with the vagaries of
the airline industry, those graduates are immediately picked up
with really great paying jobs. And I think what has relieved me
somewhat, because I come out of a generation where the notion
of voc-ed was anathema, a no black child. My father wasn't even
allowed to touch tools for fear he would not become a
professional. But when I started--when we started polling and
started talking directly to the constituencies we are trying to
help, they got it, they don't want their young person to have
to live with them or not be able to support themselves, they
want good paying jobs with skills. And they recognize that the
path we are going on, which is this generic education that is
supposed to be leading to theoretically to a four-year college
is not leading their kids to independence.
So I think you have to rest back on the base now of working
people and the struggles they are up against and their hopes
for their kids to be able to make it into the economy.
Representative Brady. Thank you all very much.
Chair Maloney. Thank you very, very much. Mr. Cummings.
Representative Cummings. Thank you. This has been a very
interesting discussion. Let me ask you. First of all, a lot of
this seems to be about vision, young people seeing their
future. Several of you have mentioned that. And Mr. Wing, if
you can answer me quickly, what caused CVS to do what you did.
Because I agree with Mr. Brady in one of our rare moments
of agreement that this has to be not only do we spend dollars
in the public, but the private folks like you all have to make
a contribution too. So I am trying to figure out what is it
that caused you all to say, wait a minute, was this a board
decision, did somebody just come up and say, the government
says can you do this, how did that come about?
Mr. Wing. It is very simple. It is a business decision, we
need good people. And so it is hard to find people. And so this
was one of, this is one of our main sources of getting people,
is to be actively recruiting people and developing those
partnerships. So we put money into it and the agencies put
money into it. It is a partnership.
Representative Cummings. When I listened to the discussion,
I couldn't help but think about a program that I, along with
the University of Maryland in Baltimore, our professional
school, put together about 5 years ago where they joined in
with our career medical, allied medical high school. They
brought in 25 every summer and spend about $1,600 for eight
weeks. And what they do is they put them alongside scientists.
I mean literally for a whole summer. It is a wonderful program.
And these are intercity kids. And what we discovered, I always
go to the graduation and it always sort of makes me feel so
emotional, Mr. Jones, because I find that these kids say, for
example, one will be working with a scientist that is dealing
with breast cancer, and then they will get up and they will
talk at the graduation and say, do you know what, I was so
interested in this because my aunt had breast cancer or my
cousin, and now I think I can do something about it, and AIDS
and all kinds of things.
It is just amazing. And to hear them, the vocabulary that
they then acquire. I mean, I have to go back and get a
dictionary. But they don't realize that they are getting really
excited about this. Then the other piece that we did was that
we went in the community college so that those kids would have
a pathway to come out of high school and go to a community
college. Another program--and then we hooked them up with the
University of Maryland again so they could go on for a 4-year
degree.
I think that you all are right, not every kid needs to go
to college, but I also believe that kids need a vision. And I
think that, and when I think about my own experiences growing
up, a lot of my vision came from my various jobs. But there is
one other thing Dr. von Wachter, that you did not talk about.
What a job also does is it gives kids another family. You
know another group of adults looking over their shoulder. I
tell my own kids, I say, look, if you go out there and you do
the best you can at what you are doing, I promise you an adult
will come by, some adults will come by and help you. And I find
that to be very key. Is that a factor, Dr. von Wachter?
Dr. von Wachter. It is a very important point, so I agree
with the things that you and Mr. Brady said. Kids need a
perspective, so it is important to create pathways for
partnerships between community colleges and four-year colleges,
or high schools and community colleges, to show that if
somebody takes a vocational degree, he knows he can then move
on to community college and possibly a 4-year college. The way
other countries do that is they have specialized degrees that
allow people to improve their specialized training at
increasing levels. For example, if you are a welder then you
can do certain types of technical community college degrees,
but you can't major in English.
To create an environment fostering skills at all levels, in
some sense a family, the important thing is to get business on
board. Yet, many small businesses probably can't afford a
training program of their own. And so it is important to forge
partnerships with community colleges or high schools, where the
high school or the community college provides some of the
formal training and then the smaller business complements that
training. This represents again to small businesses, it gives
the individual sort of a family, as you are saying, and then it
creates possibly a lasting partnership.
Dr. Holzer. If I can also say, so this is the key question.
Mr. Wing said CVS does it because it is in their best interest,
so the question is why then don't more companies see it as
being in their best interest. And I think Mr. von Wachter is
correct that for small companies the costs are very high. But I
think there is a couple of other things we know. Number one, a
lot of businesses are simply distrustful of the quality of
young people in the basic skills. Nobody wants to invest in
folks who don't have the basic skills to build on that
investment to make the investment successful.
And, of course, their other concern is that they will make
the investment and then the young person will disappear and go
to their competitor or go somewhere else. I think it is an
important role for these partnerships, but also for, number
one, making sure that the quality of these kids coming out of
these CTE programs in high schools and community colleges, make
sure that the quality of their training is strong and then the
businesses will be more comfortable with it.
Then I think number two is there has to be some government
resources and technical assistance to make this happen because
otherwise firms don't want to invest their own resources even
in successful kids that might want to disappear on them. So I
think it has got to be an effort where government makes some
investments, does some coordinating, brings along industry
partnerships, connects them with the schools, and all those
pieces I think have to work for businesses to want to invest
their very scarce resources in these young people.
Mr. Wing. I just have one other thing to add to, Mr.
Cummings, what you were saying. I think when you described that
experience, that summer experience, I mean, I want to echo
that. We see that same thing. That these kids--I mean, the
parents come to a dinner at the end of the--when they graduate
or when they finish up they come to a dinner and the parents
are saying to us, oh my gosh, I didn't know my kids would know
all these things, and they are so proud and they can't imagine
what they went through.
And I think the child doesn't realize what they went
through. And the things that they have studied, they are
looking at cancer research and things that are really turning
them on. And I think that is important. I think we have got to
continue to encourage that. And I think that is one of the
things that I would say from Dr. Holzer's comments is that I
mean we are committed to that and we would help to get other
companies to get involved.
Chair Maloney. Mr. Snyder.
Representative Snyder. Thank you, Madam Chair, and thank
you all for being here today. Madam Chairman, my guess is that
this hearing has taken a little bit different attack than maybe
I thought it was going to because you rightfully have called a
hearing to talk about where we are with this sky high number in
youth employment. And yet, what we are all now discussing is
the chronic challenges that we all have. I think, Mr. Wing, you
talked about the black, the high school dropout rate for
minorities as being unacceptable. The reality is we have all
accepted this for several decades. We are outraged by it, but
we haven't figured out how do deal with it. We as a society
have accepted it.
And that number is going to go back down once we go through
this recession, but the reality is we are still going to be
grappling with what Mr. Sherk is talking about, education
reform, we are still going to figure out how to get Mr. Brady
his welders and the same in Arkansas with our natural gas
plague that is going on. We are still going to be grappling
with the problems of parenting skills and addiction and the
terrible things that young kids can get tempted.
And we are grappling, I think, with the very real issues of
the chronic challenges in America, the greatest opportunity
society in the world, and yet we still have these chronic
challenges that are really exacerbated when we have the
recession like we have had.
Mr. Cummings is one of my heroes. And I have a picture of
him on a big poster board back home. And I talk about him
during my speeches. I have got 3\1/2\ minutes left, Mr.
Cummings. I suspect these folks would be interested in hearing
your story about being a child of sharecropper parents. Do you
want to take a few minutes to tell your story?
Representative Cummings. Very briefly, back in the 1940s my
parents moved from South Carolina to Baltimore before six of
their seven children were born and they moved for one reason,
to get them a decent education. Mom and dad only had a second
grade education, but they knew that they wanted their kids to
do better. And so when I got in school, they put me in the
third group, which was basically our special ed group, told me
I would never be able to read much over fifth grade level or
sixth grade level.
Representative Snyder. How old were you then?
Representative Cummings. I was about 10 or 11. I went to
the counselor and told him I wanted to be a lawyer and he said
you must be kidding. And he said some words that have echoed in
my mind ever since. He asked me this question. He said, ``Who
do you think you are?'' And that question has haunted me all my
life.
So anyway, I was determined that I was going to get out of
there. And so there was a gentleman, a fellow named Mr. Posey,
my sixth grade teacher that worked with me and sent me to the
library every day, and eventually I got out of special ed, went
on to become phi beta kappa to go onto law school, passed the
bar the first time, and become a member of the Maryland
legislature and now a Member of Congress of the United States
of America.
And I say only in America. But when we talk about these,
for example, these teenage jobs, one of the first jobs I had
was a pot washer in the Baltimore Country Club. I washed pots,
I scrubbed them with Brillo, and I got a lot out of that job. I
was happy to get it. I mean, I was getting about a dollar an
hour. But I met a lot of very interesting people who influenced
my life, members of the club.
So when I look at our young people, and I watched you, Mr.
Jones, I could understand your frustration. We begin to ask
ourselves what is going to happen to all these kids? We have
got about 50 in Baltimore, but I imagine the black male dropout
rate is probably around 60 percent. That is a lot of folks. And
then the question becomes what happens to them? And I want to
yield back.
Mr. Jones. May I just say this isn't business as usual,
that is what I am afraid of. And I want to impress upon people,
this is not what it has been. To drop out in my childhood
wasn't the end of the road if you were willing to work.
Actually, I think a former head of Con Edison in New York never
got his high school diploma. The trouble is things have moved
on. And we had a panel that Mayor Bloomberg put together that I
participated in and did some of the research for looking at the
construction trades. That was construction trades with a point
in. Okay, you drop out, Joe, or whatever, and you will go work
construction and move yourself up through that rank.
When they told me don't bother to apply to
preapprenticeship unless you have a high school diploma, and
the fact that Starbucks now is looking for a couple of years of
college, because they can get it with six people applying for
every one low wage job, this is not going to revert to where we
were. And that is why I think this is much more dangerous than
anything I have ever seen, and that is why I am getting a
little crazed here, because I don't think we are going to have
the same kind of opportunities, as the economy begins to
improve, we have already seen signs that young people without
credential were not riding the last wave up.
Now I am worried that we are going to have steady State
rates of higher unemployment and literally no place in the
economy whatsoever for this kind of young person.
Representative Cummings. Thank you.
Dr. Holzer. Can I also just say something about that. We
have one very, very large and very expensive program in America
for young high school dropouts. It is called incarceration. And
we incarcerate more young people than any other country in the
industrial world. If you are a young black male who drops out
of high school, your odds of becoming incarcerated are 70
percent nationwide by the time you are 30. And that
incarceration is not only enormously expensive in a budgetary
sense, tens and tens of billions of state--mostly state dollars
spent every year. Then these young men come out and they are
essentially unemployable because this marker of having a
criminal record makes other employers not want to touch them.
There is a whole range besides the education and training
programs we talked about, there is a whole range of other
policies. Extending the earned income tax credit to young men
who don't have custody of children, for instance, that would
make even low wage jobs more attractive. Trying to convince
States not to pass laws that bar these people from so many
areas of employment. Child support reforms that would not drive
these young men out of the labor market if they were in
arrears.
There is a whole range of other things that make it almost
impossible for these young men to find even low wage jobs. And
all of those, I think, need to be rethought if we want to
reduce those terrible costs that incarceration imposes on us.
Chair Maloney. Thank you. I have been informed that we will
be having votes shortly, so all good things must come to an
end. I do want to thank my colleagues, and all the witnesses
for your enlightened testimony and your ideas on a really huge
challenge facing unemployed young people in our country. The
truth is, it is going to be a slow, long climb to get us where
we need to be in terms of creating jobs in the economy. This is
the fourth hearing the Committee has had on long-term
unemployment in different sectors of our economy, and you have
all given us wonderful insights and wonderful ideas to work on
and follow up on and I want to thank all of you for your
testimony today. It is truly appreciated and insightful. Thank
you. The Committee is adjourned.
[Whereupon, at 11:54 a.m., the Committee was adjourned.]
SUBMISSIONS FOR THE RECORD
Prepared Statement of Carolyn Maloney, Chair, Joint Economic Committee
Just over one year ago, the current Administration took office
while the country was suffering from the worst economic crisis since
the Great Depression.
In fact, Council of Economic Advisers Chair Christina Romer
testified to this committee that the shocks we endured in the ``Great
Recession'' were actually worse than those of the Great Depression.
But today, it is clear that America is on a path toward economic
recovery:
The most recent employment report showed that the economy
has gained jobs for 4 months in a row. In April, 290,000 jobs were
created--with a total of 573,000 jobs created since the start of 2010.
After 4 straight quarters of negative growth, the economy
has grown for three quarters.
These improvements in our economy are proof that actions taken by
this Congress and the Administration have put our economy back on
track.
While we are making progress, the road to recovery will not be
without bumps.
Although we saw significant job creation in the past two months, we
need stronger job creation to reduce unemployment.
Some groups are suffering more than others. Today's hearing focuses
on younger workers who are facing extremely high rates of unemployment.
The JEC released a report today showing that one-in-five workers
between 16 and 24 is unemployed--the highest rate of unemployment ever
recorded for this age group.
While 16-24 year olds comprise 13 percent of the labor force, they
make up 26 percent of the unemployed.
The youngest workers, those ages 16-17, experience the highest
rates of unemployment.
The unemployment rate for 16-17 year olds was 29 percent in April
2010.
While education reduces the likelihood of being unemployed, the
benefits of a college degree are not uniform among 16-24 year olds.
The unemployment rate for young black college graduates was 15.8
percent in April 2010, nearly double the 8.0 percent unemployment rate
for all young college graduates.
These numbers will take on a stark reality as millions of new
college graduates start knocking on doors looking for a job. And for
teens looking for their first job, it will be even worse.
The scarring effect of unemployment among younger workers has
lasting consequences for their attachment to the labor force, their
productivity and their future earnings.
As Dr. von Wachter testified before this Committee last month,
these younger workers face reduced earnings even 10 to 15 years later.
The costs to the economy in terms of lost output for these workers
are great, which will have an impact on our debt and deficit.
Today, the House began debate on H.R. 4213, the American Jobs and
Closing Tax Loopholes Act, a bill to create jobs, support those without
jobs, and lay the groundwork for new employment opportunities in the
future.
H.R. 4213 makes many key investments in our people and in our
future.
In addition to extending unemployment benefits and COBRA premium
support through the end of the year, the bill funds summer jobs for
more than 300,000 young people.
Job creation is critical, of course, but so are job training and
skill building. We need to identify training and placement programs
that are getting strong results and figure out how to scale them so
they reach more workers across the country.
I look forward to hearing more creative solutions from today's
panel on how to solve the unemployment problem for America's younger
workers.
__________
Prepared Statement of Representative Kevin Brady
I am pleased to join in welcoming today's witnesses before the
Committee, and I would like to thank the Chair for holding a hearing
this morning on this important topic.
The success in one's working life is largely path-dependent.
Therefore, getting off to a good start is important for young people.
That is one reason why a high level of youth unemployment is so
troubling.
In January 2009, top Obama Administration economists, Christina
Romer and Jared Bernstein, forecast that if Congress passed the
President's stimulus plan, the unemployment rate would remain below 8.0
percent, and payroll employment would increase to 137.6 million by the
fourth quarter of 2010.
Congress enacted Obama's stimulus plan in February 2009, but the
results have been disappointing. Since then, the unemployment for all
workers has never been below 8.0 percent, and today it is 9.9 percent.
So far, the Obama Administration is 7.4 million payroll jobs short of
its fourth quarter forecast.
However, young American workers age 16 to 24 have fared worse than
their older counterparts. Since February 2009, the number of unemployed
workers ages 16 to 24 has increased by 707,000 to a total of 4.2
million in April 2010. Moreover, the youth unemployment rate soared
from 15.8 percent in February 2009 to 19.6 percent in April 2010, an
all-time high for this data series.
Given the severity of this problem, I am very interested in what
today's witnesses have to say about the high level of unemployment
among young American workers. Like one of today's witnesses, Harry
Holzer, I want to find what government job-related programs and private
sector initiatives actually help young Americans find and keep that
important first job and what programs are wasteful and ineffective.
The cost of paying for inefficient and misdirected government
programs through deficit spending will remain a debt burden on our
children and grandchildren. For example, one of today's witnesses,
James Sherk, observes:
[T]he 2008-2009 bailouts and stimulus packages will cost the
average 22 year old $145,900 during his working life--$280 a
month. That is the equivalent of requiring college graduates to
buy and throw out a high end iPod every month.
In conclusion, today's panelists offer different solutions to the
problem of youth unemployment. Some advocate more government spending,
while others emphasize the private sector. Like Presidents Kennedy and
Reagan, I believe that a rising tide lifts all boats. Instead of more
wasteful government spending on ineffective job-related programs, we
should promote entrepreneurship and business investment to increase job
creation and reduce youth unemployment.
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