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Diana Furchtgott-Roth: It's a tough time to be young and unemployed

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One indication of the weakness of the job market is that research institutions are getting too many intern applications -- from college graduates who should be getting paid jobs.

Generally, intern applicants are studying for B.A. degrees in economics and looking for some practical research experience to accompany their coursework. They might be enrolled at local universities, or come to Washington on one of many Washington Semester programs, such as those run by American University or the University of California systems.

Now, applications are flowing in from young people who already have B.A.s in economics. In any other year, they would already have jobs. After all, they're not comparative literature majors. One reason people major in economics is because economics is supposed to be a marketable degree.

Here at Hudson Institute there's Harold Walbert, who graduated cum laude from the Honors College at the University of West Georgia, where he majored in economics and minored in finance. After graduation, Harold moved to Washington to attend Johns Hopkins for graduate school. Harold majored in economics rather than in music so that he could get a job. But now he's being paid to play music rather than to run regressions. Life is strange sometimes.

Another intern, a graduate of an elite liberal arts college, has an interdisciplinary degree in economics and mathematics. The intern, who prefers that his name not be used, has research experience and received two research grants. He helped a nonprofit achieve record statistics in his first month of internship through a targeted online advertisement campaign.

Dear readers, both of these interns are available for paid employment now, if you have any.

The unemployment rate for 20- to 24-year-olds is 16 percent, far higher than the overall unemployment rate of 9.5 percent. Two years ago, the rate for this age group was 10 percent. Men are having a tougher time than women. Their unemployment rate is 18 percent, compared with 13 percent for young women.

By some measures, it's never been this difficult to find a job. Almost half of the unemployed have been out of work for six months or longer, a record since the Labor Department began keeping track of these data in 1948.

And upcoming requirements on employers to offer health insurance or pay a penalty discourage employers from hiring low-skilled workers, because employers can't reduce these workers' salaries to compensate for the extra benefits.

Unless the economy turns around soon, the lack of job opportunities is going to have a major effect not only on the lifetime earnings of young people but on their appetite for risk.

Just as those who grew up during the Great Depression are more frugal, current and future graduates might be more risk averse. Once they have jobs, they might be more likely to avoid looking elsewhere, reducing the traditional dynamism and job mobility that made America a major economic power.

This risk aversion has been a feature of European economies, where high unemployment has meant a preference for government employment and a lack of job mobility in the economy.

Take France. A high percentage of graduates of the most prestigious universities, such as the Ecole Normale Superieure, sign up for jobs in the French government civil service. This leaves fewer talented French for entrepreneurship and business.

It's workers' potential aversion to risk that would do America's economy the most harm. Innovation comes from new companies, startups, venture capital. Facebook and Microsoft, now major employers, were started by students who took risks.

That's why President Obama and Congress, when they return from vacation, need to get serious about keeping taxes and government spending low to get Americans back to work.

Examiner Columnist Diana Furchtgott-Roth, former chief economist at the U.S. Department of Labor, is a senior fellow at the Hudson Institute.