The Summer Job Surge: Supply or Demand?

The summer teen employment surge is largely a consequence of seasonality in supply, not demand. To see this, note that a pure summer demand surge would draw teens into the labor market with low teen summer unemployment, high summer real wages, and low summer unemployment among persons not enrolled in school during the academic year. The hypothetical demand surge would also have to be quite large – about as large as doubling the size of the nation’s military in a mere two months – because the end result is about a million new jobs for teens.

In fact, teen unemployment spikes in June as the labor market absorbs more than one million teens. Unemployment of persons aged 25 and older (not shown in the figures) is high throughout the summer, peaking in July at almost 700,000 persons above trend. Median nominal and real weekly wages for teens are often at their lowest of the year in the third quarter (July – September), and presumably hourly wages are even lower due to longer teen summer work weeks. These patterns reverse when the academic year ends.

Also consistent with the supply interpretation, Mulligan (2010b) shows how age groups with the largest summer log employment and log unemployment spikes are those with the greatest school enrollment rates during the academic year, and the summer log employment spike may even be negative for groups with near zero school enrollment.

Nor do many of the summer jobs for teens appear to be in industries that have a significant spike in labor demand, because 77% of those jobs are in industries that expand their employment of persons aged 25-34 less than two percent, if at all. Based on calculations from the May, July, and September 2005 Current Population survey, the top industry hiring teens in the summer was “arts, entertainment, and recreation” (accounting for 19 percent of the teen summer jobs), which had no change in the number of persons aged 25-34 employed. The second industry (also accounting for 19 percent) is “accommodation and food services,” which actually cut its employment of persons aged 25-34 by 4 percent during the summer.

These are all indicators of supply shifts during the summer that are large, and exceed the demand shifts.

About Casey B. Mulligan 76 Articles

Affiliation: University of Chicago

Casey B. Mulligan is a Professor in the Department of Economics. Mulligan first joined the University of Chicago in 1991 as a graduate student, and received his Ph.D. in Economics from the University of Chicago in 1993.

He has also served as a Visiting Professor teaching public economics at Harvard University, Clemson University, and Irving B. Harris Graduate School of Public Policy Studies at the University of Chicago.

Mulligan is author of the 1997 book Parental Priorities and Economic Inequality, which studies economic models of, and statistical evidence on, the intergenerational transmission of economic status. His recent research is concerned with capital and labor taxation, with particular emphasis on tax incidence and positive theories of public policy. His recent work includes Market Responses to the Panic of 2008 (a book-in-process with Chicago graduate student Luke Threinen) and published articles such as “Selection, Investment, and Women’s Relative Wages,” “Deadweight Costs and the Size of Government,” “Do Democracies have Different Public Policies than Nondemocracies?,” “The Extent of the Market and the Supply of Regulation,” “What do Aggregate Consumption Euler Equations Say about the Capital Income Tax Burden?,” and “Public Policies as Specification Errors.” Mulligan has reported on some of these results in the Chicago Tribune, the Chicago Sun-Times, the Wall Street Journal, and the New York Times.

He is affiliated with a number of professional organizations, including the National Bureau of Economic Research, the George J. Stigler Center for the Study of the Economy and the State, and the Population Research Center. He is also the recipient of numerous awards and fellowships, including those from the National Science Foundation, the Alfred P. Sloan Foundation, the Smith- Richardson Foundation, and the John M. Olin Foundation.

Visit: Supply and Demand (in that order)

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