August 13, 2008

Candidates Must Address Youth Unemployment

Posted by Karlo Barrios Marcelo at 3:00PM

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There's a problem with the youth unemployment rate -- it's too high. According to the Bureau of Labor Statistics, the July unemployment rate for teenagers was 20.3 percent. Compare that to 5.7 percent unemployment rate of all Americans and you begin to understand the magnitude of the problem.

In the context of the increased participation of young voters and the unemployment rate, CIRCLE's director Peter Levine argues that this campaign season reflects only the issues of college-educated young voters, the majority of young voters in this primary season:

"[W]e hear some talk about the cost of college and some discussion (albeit not enough) about issues that especially concern idealistic college students, such as climate change. But there is silence about the serious plight of working-class youth."

There are some solutions that will alleviate youth joblessness, however, which candidates can talk about and promote.

Youth entrepreneurship provides more than just an avenue to self-employment. By teaching entrepreneurship in the schools, young people learn money management skills and what it takes to start and run a business. The Aspen Institute Youth Entrepreneurship Strategy Group (YESG) promotes "entrepreneurship education for students in Title 1 high schools as policymakers grappling with the reauthorization of No Child Left Behind are considering high schools part of a long-term strategy to create greater economic opportunity in the US." Non-profits can also do their part to teach entrepreneurship and some already are, such as the National Foundation for Teaching Entrepreneurship.

Through government grants and corporate competitions, young people could apply their entrepreneurial aptitude and fresh ideas to spur American innovation for the next generation.

Very few young entrepreneurs will become millionaires. Thankfully, that's not the point.

Self-employment means that a young person can be their own boss and harmonize their work schedule and lifestyle. Perhaps more importantly, owning a business is sometimes the difference in making ends meet in difficult economic times--also known as 'patching' your income. This is especially important for youth with low-wage jobs that rarely provide an easy pathway to prosperity.

The businesses to which I refer are usually classified as micro-enterprises, a subset of small businesses. FIELD, an Aspen Institute public policy program where I serve as research associate, defines micro-enterprises as businesses with fewer than five employees and less than $35K to start-up. Many of them have only one employee -- the owner. In 2005, there were 24 million micro-enterprises nationwide. The number of those owned by young people is unknown. There are programs focused on developing youth entrepreneurs, such as Prudential Young Entrepreneur Program, a regional program started in 2002 that continues to be a successful program today.

Micro-entreprise development organizations (MDOs) -- the non-profit organizations that provide them with micro-loans, business training, and technical assistance -- are another player that can support youth entrepreneurship. These non-profits are an excellent resource to explore business ownership, because they have a community focus and provide much needed loan services to those clients considered too risky by commercial banks. Additionally, MDOs educate their clients (the entrepreneurs) in basic accounting, marketing, purchasing, pricing, business plans, and many other topics at much lower fee (sometimes, free), making them accessible resources for working-class youth.

According to the last "census" of MDOs in 2002, there were 650 organizations, 65 percent of which were established in the 1990s.* Not only have fewer micro-enterprise development programs been developed since 2000 when compared to the 1990s, but the 2009 budget for the U.S Treasury's Community Development Financial Institutions (CDFI) Fund is significantly lower -- a $65.4 million budget cut. The CDFI Fund, along with the Small Business Association, is one of the largest federal funding sources for MDOs.

At a time when youth unemployment is rising, candidates should look inward at the American entrepreneurial spirit. By aiding young people with the skills to exercise their innovation, MDOs offer the best community-based approach to economic development.