Every Californian deserves to be able to meet their basic needs for housing, food, and other necessities. But millions of people in California struggle to make ends meet every day – including young people with jobs, for whom a job does not guarantee economic security.
Low pay and unstable work make it especially difficult for young adult Californians to make ends meet as they may be working part-time while going to school, just starting off their careers, or blocked from educational and workplace opportunities that lead to higher-paying jobs.
California’s young workers should not be left on their own to build economic security as they seek opportunities for good-paying jobs. California can build an inclusive state where generations of young people can live, work, and thrive across the state. Young workers need state leaders to implement policies that:
- increase low wages
- improve the quality of jobs
- expand worker bargaining power
- address workplace and other discrimination
- invest in public supports that ensure young adults can meet their basic needs.
One way state leaders can support young workers is by ensuring they have access to tax credits such as the California Earned Income Tax Credit, or CalEITC, and by increasing the amount of cash provided through those tax credits.
For Young Adults Especially, a Job Does Not Guarantee Economic Security in California
Young adult Californians are especially unlikely to be able to meet their basic needs despite working, according to data from the California Poverty Measure. Among working Californians ages 18 to 24 (excluding college students living independently who are supported by their parents), about 1 in 5 do not have enough resources to afford basic needs – roughly twice the share of workers ages 25 to 64.1Budget Center analysis of US Census Bureau, American Community Survey public-use microdata developed for the California Poverty Measure, a joint project of the Stanford Center on Poverty and Inequality and the Public Policy Institute of California. Microdata used to construct the California Poverty Measure were downloaded from IPUMS-USA (University of Minnesota, www.ipums.org).
In part this reflects the fact that young adults, and particularly Black and Latinx youth, are more likely to be paid low wages. More than 3 in 4 Californians ages 18 or 19 and nearly half of workers ages 20 to 29 were paid low wages in 2021, compared to around one-quarter of older workers.2UC Berkeley Labor Center, Low-Wage Work in California Data Explorer (May 12, 2022). In addition, national data show that average wages tend to be lower for Black and Latinx young adults compared to all youth, highlighting how discrimination and structural racism block many young people of color from economic stability early in life.3Natalie Spievack and Nathan Sick, The Youth Workforce: A Detailed Picture (Urban Institute: July 2019) and Natalie Spievack For People of Color, Employment Disparities Start Early (July 25, 2019). Data limitations mean it is often not possible to reliably show the diverse range of experiences among Asian Americans and Pacific Islanders. But national studies show that income and poverty rates and hourly wages vary widely among the diverse communities who identify as Asian or Pacific Islander. Asha Banergee, Understanding Economic Disparities Within the AAPI Community (Economic Policy Institute: June 7, 2022) and Cy Watsky, The Economic Reality of the Asian American Pacific Islander Community Is Marked by Diversity and Inequality, Not Universal Success (National CAPACD and Prosperity Now: November 2020). In addition, many Asian and Pacific Islander Californians report experiencing workplace discrimination and wage theft – particularly those with low incomes. PRRI and AAPI Data, The Working Lives and Struggles of Asian Americans and Pacific Islanders in California: Findings from the 2019 AAPI California Workers Survey (November 18, 2019).
Working Part-Time Involuntarily or to Accommodate Life Situations Leads to Low Earnings for Many Young Adults
Some youth are only able to work part-time because they need to accommodate life situations – such as only being available to work hours that do not conflict with school schedules – while others are stuck in part-time jobs involuntarily because they cannot secure full-time work.4Young adults in California are about twice as likely to work part-time as older adults. More than half of California workers ages 16 to 24 were employed part-time, on average, from 1994 to 2021, which was more than twice the rate of part-time work for workers ages 25 to 54. Economic Policy Institute analysis of Current Population Survey microdata from the US Census Bureau. Young California workers are nearly twice as likely as older workers to work part-time involuntarily.5On average, California workers ages 16 to 24 were nearly twice as likely to work part-time involuntarily as adults ages 25 to 54 from 1994 to 2021. This means they wanted and were available for full-time work, but were working part-time because they could not find full-time jobs. Economic Policy Institute analysis of Current Population Survey microdata from the US Census Bureau.
They are also more likely to experience periods of unemployment and change jobs more frequently than older workers, which can reduce their annual earnings. National data show that Black and Latinx young adults are especially likely to be underemployed, defined broadly as being unable to secure a job, despite being available to work, or working part-time involuntarily because they cannot find full-time work.6 Economic Policy Institute, State of Working America Data Library, Underemployment by Race and Age (2022). These data reflect a measure of underemployment that includes people who work part-time involuntarily plus people who are not working, but want a job, are available for work, and searched for employment within the past year.
Investing in the CalEITC Would Boost the Economic Security of Young Workers
Many policies are needed to address work conditions and workers’ needs to ensure California doesn’t lose a generation of young people who want to establish lives and careers in the place they call home. But young Californians can’t change the job market or job conditions alone. One concrete step that state leaders can take to help build pathways to economic security for young Californians is to expand and increase tax credits such as the CalEITC, which has helped millions of workers earning low wages pay for their basic needs.
Investing in the CalEITC would boost the incomes of young people as they are just entering the workforce, helping to put them on more stable financial footing as they work and go to school or begin their careers. Nearly one-third of Californians who receive the CalEITC are under age 25 – around 1 million Californians in total. The CalEITC is particularly important for these young adults because the overwhelming majority of them are currently excluded from the federal EITC and they typically get limited assistance from other public supports.7The federal EITC currently excludes workers under age 25 who are not supporting children in their homes. Just 5% of California workers ages 16 to 24 lived with their own children in 2019, according to the US Census Bureau, American Community Survey, suggesting that most young adult workers do not qualify for the federal EITC. In tax year 2021, the federal EITC was extended to many of these workers – those ages 19 to 24, excluding those attending school at least part-time. But this expansion expired after one year. The exclusion of young childless workers from the EITC “is based on the assumption that young adults receive familial support in their transition to adulthood, which is untrue for many and disproportionately unlikely for young people of color.” Amelia Coffey, Gina Adams, and Heather Hahn Young People and Tax Credits: The Earned Income Tax Credit and Child Tax Credit (Urban Institute: February 2021), p. 8. Young adults without children also generally do not qualify for major public supports unless they are disabled and unable to work, and benefits they do qualify for are typically limited. Gina Adams, Heather Hahn, and Amelia Coffey Stabilizing Young People Transitioning to Adulthood: Opportunities and Challenges with Key Safety Net Programs (Urban Institute: February 2021).
Young adults ages 18 to 24 would especially benefit from increasing the CalEITC because most of them currently qualify for very small credits. This is because the CalEITC provides very little support to people without dependent children, and the vast majority of young adults are not supporting children in their homes.
Californians without dependent children qualified for a maximum credit of just $255 from the CalEITC in tax year 2021 – an amount that would not even cover one-fifth of one month’s rent for a studio apartment in Los Angeles.8Fair Market Rent (FMR) for a studio apartment in Los Angeles in 2022 was $1,384. FMRs are published annually by the US Department of Housing and Urban Development and are broadly representative of typical rent paid within a metropolitan area.
The CalEITC Can Be Especially Meaningful for Young Adult Workers of Color
Most California workers under age 25 who are likely eligible for the CalEITC are people of color. This includes about 58% who are Latinx, 9% who are Asian/Pacific Islander, and 6% who are Black.9Due to data limitations, it is not possible to present reliable estimates for Pacific Islander individuals alone or for American Indian or Alaska Natives. Budget Center analysis of US Census Bureau, American Community Survey public-use microdata, using an income tax simulation model developed for the California Poverty Measure, a joint project of the Stanford Center on Poverty and Inequality and the Public Policy Institute of California. Based on CalEITC in tax year 2019, adding ITIN filers, who became eligible for CalEITC in tax year 2020 Viewed another way, young Black and Latinx workers are especially likely to qualify for the CalEITC, likely reflecting the fact that these workers are more likely to be paid low wages.
Specifically, about half of Black workers ages 18 to 24 likely qualify for the CalEITC, as do about half of Latinx workers ages 18 to 24. In addition, about 2 in 5 white workers in the same age group likely qualify for the CalEITC, as do more than one-third of Asian/Pacific Islander young workers.
This means that an investment in the CalEITC would benefit around 1 in 2 Black and Latinx working young adults, and around 1 in 3 Asian and Pacific Islander and 2 in 5 white young workers.
California Can Help Generations of Young Adult Workers Build Economic Security
California’s young workers want to live and work in their communities and should be able to count on access to economic pathways in the state they call home. But having enough money to make ends meet and securing a good-paying job during the ages of 18 to 24 can be a challenge for many Californians who may be managing school, trying to start careers, and blocked from educational and workplace opportunities.
State leaders can ensure young California workers are not on their own to build economic security by:
- adopting policies that push low wages
- improving job quality
- addressing workplace and other discrimination
- strengthening public supports that help young adults meet their basic needs.
Investing in tax credits such as the CalEITC that specifically benefit young workers is one important step policymakers can take to help generations of Californians meet basic needs and thrive in their communities.
Support for this report was provided by the Conrad N. Hilton Foundation.