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Young workers bear brunt of recession © Goodshoot/Corbis // Young workers bear brunt of recession © Goodshoot/Corbis

Extra10/17/2009 12:01 AM ET

Young bear brunt of the recession

Only 46% of Americans aged 16-24 had jobs last month, the lowest since the government began counting. Advocates urge action to avoid a 'lost generation.'

By BusinessWeek

Bright, eager -- and unwanted. While unemployment is ravaging just about every part of the global work force, the most enduring harm is being done to young people who can't grab onto the first rung of the career ladder.

Affected are a range of young people, from high school dropouts, to college grads, to newly minted lawyers and MBAs from Britain to Japan and across the developed world. One indication: In the United States, the unemployment rate for 16- to 24-year-olds has climbed to more than 18%, from 13% a year ago.

For people just starting their careers, the damage may be deep and long-lasting, potentially creating a kind of "lost generation." Studies suggest that an extended period of youthful joblessness can significantly depress lifetime income as people get stuck in jobs that are beneath their capabilities, or come to be seen by employers as damaged goods.

Equally important, employers are likely to suffer from the scarring of a generation. The freshness and vitality young people bring to the workplace is missing. Tomorrow's would-be star employees are on the sidelines, deprived of experience and losing motivation.

In Japan, which has been down this road since the early 1990s, workers who started their careers a decade or more ago and are now in their 30s account for six in 10 reported cases of depression, stress and work-related mental disabilities, according to the Japan Productivity Center for Socio-Economic Development.

When today's unemployed finally do get jobs in the recovery, many may be dissatisfied to be slotted below people who worked all along -- especially if the newcomers spent their downtime getting more education, says Richard Thompson, vice-president for talent development at Adecco Group North America, which employs more than 300,000 people in temporary positions.

Says Thompson: "You're going to have multiple generations fighting for the jobs that are going to come back in the recovery."

Video: Job-market's wounds will take years to heal

What's more, the baby boom generation is counting on a productive young work force to help fund retirement and health care. Instead, young people risk getting tracked into jobs that don't pay as well, says Lisa B. Kahn of the Yale School of Management. That would mean lower tax payments for Social Security and Medicare.

Only 46% of people aged 16-24 had jobs in September, the lowest since the government began counting in 1948. The crisis is hitting even recent college graduates. "I've applied for a whole lot of restaurant jobs, but even those, nobody calls me back," says Dan Schmitz, 25, a University of Wisconsin graduate with a bachelor's degree in English who lives in Brooklyn, N.Y. "Every morning I wake up thinking today's going to be the day I get a job. I've not had a job for months, and it's getting really frustrating."

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The case for action is strong. Governments should act now before the damage gets even worse, argues David G. Blanchflower, an economist at Dartmouth College who recently served on the Monetary Policy Committee of the Bank of England. He's not sure what will work, but he favors trying everything from subsidizing education and training to cutting minimum wages for young people and trainees. "It has to be now," says Blanchflower. "It can't be in two years' time."

Continued: Blame the young

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