American youths have experienced labor market adversity during the last decade. This project analyzed the reasons for earnings disparity among white and nonwhite, males and females in the labor market. The comparison was made by using the human capital framework to analyse the extent to which various personal characteristics and market factors contribute to earnings for a representative sample of American youths. The data used in this study were obtained from a survey conducted by the Opinion Research Center for the Division of Extension at the University of Texas. These data provide information about the earnings, age, training, schooling, location, occupation, and functional competency or ability of the persons surveyed. The analysis of these data determined the returns on various forms of human capital investment for the different groups. It was found that increased competency or functional literacy was most important to white females and nonwhites in explaining labor market success. White male youths' performance in the labor market was not greatly affected by increased competence. The study recommended that functional competency improvement programs be made available to youths. (Author)