Earnings of Black and White Youth and Their Relation to Poverty

This paper examines the relation between youth employment and poverty for black and white families. An increase in the employment proportions of black men ages 16–19, which have lagged far behind their white counterparts, would reduce poverty among blacks to a moderate but meaningful degree. We provide evidence of a small positive feedback relation between black youth employment and family incomes that would magnify gains in both variables if either variable were increased. We also provide evidence that improvements in labor market conditions that affect youth employment, in the educational attainments of black youth, and in other policy-related variables would raise both youth employment and their family incomes. Earnings of Black and White Youth and Their Relation to Poverty I. PURPOSES AND MOTIVATION Economic analysis of the labor supply of young people who live with their parents traditionally includes attention to the effect of parental income or wealth on the youth’s employment and earnings. In this paper we examine a particular aspect of the reverse relation: the effect that work by young men ages 16–19 has on their family’s income and poverty status. To state the topic in this way signals that the relation between youth employment and family income is reciprocal. Identifying causality is beyond our reach, but we can quantify the association of these two economic outcomes for black and white families with a rich data source, the Survey of Income and Program Participation (SIPP). The decline over time in the employment of black youth relative to white youth and the disturbing prospect of this trend for the future economic status of adult blacks are familiar issues. This paper deals instead with the contemporaneous influence of youth employment on family income and on the black-white difference in the incidence of poverty. We show that low employment by black youth and family poverty combine to create a depressing economic condition for a sizable minority of black families. These statistics on racial differences in youth employment and the incidence of poverty, along with finding an unexpected positive relation between the income of parents and the employment of their teenage children, motivate our study. We discuss each of these points in turn. The Time Trends of Youth Employment Table 1 shows the time trends from 1955 to 1995 in the ratios of civilian youth employment to the civilian youth population, E/P, for male and female, whites and blacks, in the age groups 16–19 and 2 TABLE 1 Employment-to-Population Ratios (E/P) for Youth Ages 16–19 and 20–24, by Race and Gender, 1955–1995 MEN WOMEN 16–19 20–24 16–19 20–24 Year White Black White Black White Black White Black 1955 .520 .526 .804 .784 .370 .262 .435 .406 1956 .541 .521 .823 .781 .389 .278 .441 .384 1957 .524 .474 .805 .788 .382 .266 .434 .411 1958 .476 .419 .766 .714 .350 .229 .427 .392 1959 .481 .414 .808 .759 .348 .205 .414 .416 1960 .481 .438 .805 .784 .351 .247 .424 .413 1961 .459 .411 .788 .756 .346 .232 .430 .382 1962 .464 .419 .796 .763 .348 .231 .435 .398 1963 .447 .374 .791 .749 .329 .213 .438 .401 1964 .450 .377 .793 .781 .322 .218 .454 .436 1965 .471 .394 .802 .816 .337 .201 .461 .476 1966 .501 .406 .810 .829 .375 .230 .483 .476 1967 .502 .389 .805 .803 .377 .248 .499 .473 1968 .503 .387 .786 .780 .378 .248 .508 .512 1969 .511 .390 .787 .773 .395 .251 .533 .516 1970 .496 .355 .768 .729 .395 .223 .537 .49