While labor force participation in California has mostly recovered to its 2019 levels, the overall trend masks notable differences by age. Dueling concerns around labor shortages—especially among young workers—and declining enrollment in higher education reflect a shift by young workers entering the workforce during the COVID-induced recession. This shift presents an important contrast with the experiences of the Great Recession—which scarred a “Lost Generation” of college graduates entering the labor market.
The aftermath of both recessions led to vastly different experiences among young adults, especially 16–19 year olds. Over the first two years of COVID, this group increased their participation in the labor force by nearly 4 percentage points. Participation has dropped since, though it remains 2 percentage points higher in 2023 than in 2019. A reverse pattern followed the Great Recession: participation among 16–19 year olds fell continuously for several years, reaching nearly 10 percentage points below its 2007 levels by 2012.
The patterns for 20–24-year-olds are similar following both recessions but less striking. In the first year of the COVID recession, their participation in the labor force declined by 4 percentage points but has since recovered about half of that loss. For 20–24-year-olds in the Great Recession, declines were smaller at first but then continued to accumulate; by 2012, nearly five years after the recession began, participation had fallen by 6 percentage points.
Importantly, the labor force decisions of young adults often reflect a tradeoff between school and work—for those 18 and under it also includes a decision around whether to drop out of high school. Following the Great Recession, young adults in both age groups were more likely to be enrolled in school at least part-time, and this trend continued through the first five years after the recession. Conversely, the share in school fell notably for 16–19 year olds during the COVID recession—from 80% in 2019 to 75% so far in 2023.
In other words, during the Great Recession, more young people opted for school instead of working; during COVID, the opposite occurred. Despite headlines and anecdotes of young workers opting not to participate in the labor market, the data show the opposite has occurred in California. Why might more young people have opted for work in recent years? Rising wages—particularly among many lower-wage, entry level jobs typically held by younger workers—are one significant factor.
California’s higher education system has also felt the change, with enrollment declining across many schools but especially in the community college system. On net, the drop in school enrollment has been larger than the rise in labor force participation among 16–19 year olds: in 2019 over 91% were working or in school, compared to under 88% today. This corresponds to roughly 60,000 more young Californians neither in work nor school.
While the change is small, the long-term ramifications of choices to work, gain schooling, or do neither at this age are consequential and may warrant policy attention. Furthermore, rising wages that pull workers from school into employment may also dissuade Californians from attaining a higher education, which research shows is a stable path to higher-earning jobs in California. Policies to address labor shortages by easing child labor laws may have the same effect.
California is moving further past the COVID recession and the economic impacts of the pandemic but into the headwinds of high interest rates. In this environment, policymakers will want to pay careful attention to young adults to ensure they avoid long-term scarring from the rapid pace of economic change.