The cost of jobless youth: $9 billion in lost taxes

The Great Recession hurt many generations, but one lingering result is an ongoing challenge for “millennials,” or adults age 18 to 34, in finding work. 

While this generation is facing long-term problems from years of unemployment, the entire nation is facing massive hidden costs, according to a new report by youth advocacy group the Young Invincibles. 

“Every year of historically high young adult unemployment means lower tax revenue and higher safety net expenditures for federal and state governments,” the report notes. “Taxpayers of all generations bear the burden.”

The Young Invincibles estimates the impact of lost federal and state taxes due to “severely high unemployment rates" for 18- to 34- year-olds at $8.9 billion each year. If those costs were directly shared among individual taxpayers, it would add $53 to each American’s federal tax bill, the group says.

The unemployment rate among 20- to 24-year-olds stood at 11.6 percent in November, compared with 5.9 percent for people 25 years old and over. 

While other think tanks and advocacy groups have studied how the lack of work for the millennial generation will impact them individually, this new study seeks illustrate how the higher unemployment rate is currently hurting affecting state and federal economies. 

Some states are worse hit than others, the Young Invicibles report finds. While some of the states hurt the most from tax losses are the largest by population — California, New York and Pennsylvania are on the list — less populous states such as Kentucky and Alabama are also feeling the burn, the study found. 

Below are the top 10 states for lost tax revenue: 

- California, $219.2 million
- North Carolina, $114.6 million
- Georgia, $82.6 million
- New York, $67.5 million
- Illinois, $65.1 million
- Michigan, $64.9 million
- New Jersey, $57.8 million
- Alabama, $56.7 million
- Pennsylvania, $52.2 million
- Kentucky, $50.8 million

But when the report considered the revenue impact relative to each state’s taxpayer base, the findings shifted to smaller states. Kentucky is suffering the most, with a per-taxpayer impact of $80.46 in lost taxes from high youth unemployment. Alabama was second, with $80.38 in lost tax revenues.

The total cost of an unemployed 25-34-year-old to federal and state governments is $9,875 annually, according to Young Invincibles.

“Putting that in perspective, the average tuition and fees for an in-state resident at a public college during the 2013-14 school year was $8,093,” the study notes. “In any giving year, we lose more money on unemployed young people than it would cost to invest in sending them to an in-state university.”

So how should state and federal governments address the problem? Young Invincibles points to more investment in public work programs such as AmeriCorps and spending on programs to reconnect young workers with the work force, such as the Youth Opportunity Grant, which was defunded in 2005. 

  • Aimee Picchi

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