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Maybe kids today aren't lazy; teen jobs don't pay off the way they used to

Working that cash register might not has as big an ROI as it used to.
Working that cash register might not has as big an ROI as it used to.
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Those lazy kids aren't working as much as they used to, but it might not be such a big deal. The teen employment rate has fallen off steeply, from more than 45 percent around the turn of the millennium to just over a quarter today. So while the recession may have exacerbated this trend, it was clearly in effect well before the downturn, according to data from the Bureau of Labor Statistics.

FRED chart teen work

One common storyline during the downturn was that fewer teens working was a bad thing — it makes them less employable down the line and, moreover, sets them up on a lower wage trajectory.

But that theory may need to change. A new working paper from the National Bureau of Economic Research finds that teen jobs were once associated with much larger wage bumps later in life than in recent years.

What they studied

Researchers from Middle Tennessee State University and the University of Virginia looked at data from the National Longitudinal Youth Surveys from both 1979 and 1997. Those surveys look at people born in 1957-64 and 1980-84, respectively. They examined both hours worked in high school and wages when those students were 23 to 29 years old.

They also controlled for as many variables as possible — race, ability (as measured by 8th grade GPA and standardized test scores), and parental education, among others — in order to make sure they were comparing students that were as alike as possible, aside from their working hours.

The results

The benefits to working appeared way smaller for the younger group (today's young Millennials) than they were in the 1970s and early '80s, when that first cohort went through their teen jobs. Teens working 20 or more hours per week back then went on to have wages that were 8.3 percent higher than their peers. For people in the younger cohort, teen jobs only had a 4.4 percent effect. In addition, researchers found that the effects are far larger for women than men.

Altogether, researchers were able to explain only around five-eighths of the decline. They found this portion was due to the way teen employment affects adult occupations and work experience: "[S]enior-year employment reduced the likelihood that a member of the NLSY79 [older] sample later ended up in a (typically low paid) service occupation, while this probability was increased for the NLSY97 [younger] cohort." Meanwhile, educational attainment did virtually nothing to explain the decline in the future wage gains brought about by a teen job.

What it means

If this trend is still holding and teen jobs have a lower and lower future payoff, maybe teens know what they're doing by not working right now. And maybe today's parents may be just fine not forcing Junior to work at the movie theater if he doesn't want to. (Sending your kid to coding camp might set her up better for a high-paying career.)

Moreover, it also may mean that the recession didn't hurt America's future workers as much as some economists once thought. Amid the downturn, plenty of writers (myself included) told about the lasting effects of jobless youngsters.

Then again, there's plenty more research to do. This paper's authors controlled for parental education but not income. Though that is a good proxy, it's not perfect, and it may have allowed some bias into the results — after all, as the paper states, teen employment isn't random. It's reasonable to assume a teen from a low-income family will want a teen job more than a rich kid. If that bias crept into the study, it brings in the complicated issue of social mobility alongside that of the effects of teen jobs.

In addition, the researchers have plenty they can't explain — three-eights of the decline in teen jobs' future payoff, for example. In addition, they don't get into exactly why a teen job today would be more likely to lead to low-paying service work. It may be that there's a growing "skill premium," says Baum. If that's true, it may be that teens could do better to invest their time in learning lucrative future job skills than standing behind a burger counter.

And as always, one caveat with any NBER working paper is that these papers aren't yet peer-reviewed.