Youth labor market successes and problems have roots in young people's childhood experiences. The many components of basic skills and employability skills are acquired through the educational process. Each skill has its counterpart in the expected outcomes of young people's education. Data in labor market research can be interpreted as empirical estimates of basic and employability skills. These data can be evaluated to see how various dimensions of basic and employability skills affect young people's labor market experiences. Data suggest that youth who have diplomas have acquired more knowledge than dropouts. Only a few rough estimates of the numbers of young people with deficiencies in their educational backgrounds are available. The major reason for difficulties in attempting to estimate the dimensions of the educational problem is the lack of agreement on a set of definitions for "educational deficiencies." The literature indicates that the characteristics of young people's families, the schools they attend, the areas in which they live, and youth's own attributes operate separately and in combination to affect dropout status. Research shows that although the acquisition of basic skills has a payoff in the job market, the payoff to a diploma seems to be even greater. (61 endnotes) (YLB)