Meet the ‘disconnected youth’: A growing group of Gen Zers who aren’t working or going to school

• One in three Americans ages 18 to 24 have no income, according to a new report.
• Young Americans are also increasingly depressed and not enrolling in college.
• An analysis from the St. Louis Federal Reserve examines the plight of young workers.

Gen Zers may be reshaping the world of work, but only if they have a job. And for many, that may not be the case.

A new study from the Institute for Economic Equity at the Federal Reserve Bank of St. Louis looked at the challenges young people ages 18 to 24 face in today’s economy. They found that more than one in three people had no income.

In particular, the researchers studied a group dubbed “disconnected youth,” who are not working and are not in school either. In 2022, disconnected young people represented 13% of this age group; this share has been increasing overall since 1998, according to calculations by the Federal Reserve Bank of Dallas.

Certainly, many young people do not yet have an income because they are still studying and live on loans or family assistance. But for those who aren’t, the lack of income could hurt Gen Z’s ability to save for retirement or make larger purchases later. It can also take a toll on their mental health, weighing them down as they try to get ahead in a tough economy.

Young Americans face stagnant incomes

The Dallas Fed found that, even after a post-pandemic decline, the rate of disconnected young people has increased since the late 1990s.

At the same time, college enrollment rates have fallen as young Americans question whether further education is worth it, especially amid the growing student debt crisis. For many Gen Zers, staying in school isn’t important to them.

The lack of income has weighed on the ability of many young adults to create wealth. For young adults, the median household had a net worth of just $11,200 in 2022, according to the St. Louis Fed’s analysis of the Federal Reserve’s Survey of Consumer Finances, far lower than that of the typical American adult household, or $192,100.

Entering adulthood without a job or source of income can have significant consequences for young adults later in life. For example, as the research explains, a lack of financial stability means a lack of savings: they will not be able to put money aside in retirement and “invest in their future”, whether by buying a house or creating a business. This comes as their Millennial and Gen the market.

And the number of young adults without income is increasing; in 1990, approximately one in five young adults reported receiving no salary income. In 2022, it’s more than one in three, according to the new study from the St. Louis Fed.

“This is striking because the job market in 2022 was the strongest on record, and yet real earnings, including young adults without wages, remained essentially unchanged as this group made up a growing proportion of the youth population adults,” the St. Louis Fed said. the report said.

The inflation-adjusted incomes of Generation Z, among those with income, have increased somewhat over the past five decades, although even excluding non-earners, younger people have seen their incomes stagnate more than all adults.

Struggling to maintain steady employment can negatively impact mental health, and rising health care costs have made it even more difficult for many young Americans to get the care they need. The percentage of young adults experiencing depression each month exceeded 12% in 2022, more than triple the percentage in 2017, according to a national health survey and analysis from the St. Louis Fed.

The rise of disconnected youth worsens historical inequalities

White young adults have a median net worth about triple that of black and Hispanic young adults, despite relatively similar median incomes, due to the racial wealth gap. Achieving more equitable wealth outcomes could boost economic growth, as more people could afford housing or pay off debt.

“The report confirms that even during the tightest labor market since World War II, there is a limit to the ability of economic growth to reduce the ‘structural’ unemployment faced by many young Black and Latino people, as well than a growing number of young whites,” William M. Rodgers III, director of the Institute for Economic Equity at the St. Louis Fed, told BI in an email.

This comes after young people were among the first to lose their jobs and income due to the fallout from the pandemic. The unemployment rate for 16- to 24-year-olds reached 27.5% in April 2020. After falling following pandemic-related rehiring, this rate has returned to pre-pandemic trends – and also does not reflect those who are not. actively looking for work.

The report says these growing disparities are evidence of interventions such as improving access to community colleges and job training, creating more apprenticeship positions, and investing money and attention in structural barriers such as the criminal justice system and mental health.

“Research affirms the importance of investing in the physical and mental health of young people. Otherwise, the economy will not be able to operate at its full potential today or in the future,” Rodgers said.

Are you or were you a “disconnected young person”, or a supportive one? Contact these journalists at jkaplan@businessinsider.com, asheffey@businessinsider.comAnd nsheidlower@businessinsider.com.

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