Generation Risk, meet Generation Chain-Smoking Ennui
We journalists love giving names to generations.* It's a bad habit, but hard to resist once you get started. Just yesterday, I pronounced my children members of Generation Won't-Use-The-Potty. I think I've identified a powerful demographic trend among the 2-and-under set--I could give you more than three examples--but I'm hoping it's not a durable one.
The international edition of Newsweek has a story on "The Lost Youth of Europe." (Hat tip to the highly useful Informed Reader.) According to the article, the kids of baby boomers are locked out of good jobs and can't afford decent homes. We also learn that Europeans, too, have a flair for demographic shorthand. In France, 20- and 30-somethings are known as "Génération Précaire," or the Precarious Generation. In the UK, they're the Boomerang Generation, Maggie's Children (that's as in Thatcher), and (ugh) IPODs--insecure, pressured, over-taxed and debt-ridden. In Germany, it's Generation Intern, because so many young folks can't snag permanent gigs. Anything we can learn from this? You could use it as an argument against expanding the social safety net here--the Newsweek story says that "the same labor rules that protect the jobs of the middle-aged shut out the young [and] dwindling birthrates mean there will soon be fewer workers to support the retirees." But the U.S. is a long way from looking like France, and we'd still have one of the most flexible economies in the developed world if we adopted universal health care and, say, wage insurance. The European experience does show that there's a downside to booming housing markets. (I mean besides the occasional crashes.) Says Newsweek: Across the continent, spiraling property prices and poor job prospects are conspiring to keep youngsters living at home. According to the Italian Institute of Social Medicine, 45 percent of the country's 30- to 34-year-olds still sleep in their old beds and enjoy Mama's home cooking. In France, the proportion of 24-year-olds now living with their parents has almost doubled since 1975, to 65 percent. Even in the U.K., with its enviable record of job creation, the average age of the first-time home buyer has climbed from 26 in 1976 to 34 today. Property prices are now eight times higher than the median earnings of the ordinary twentysomething.I lived in the U.K. for a couple of years, and even to an expatriate New Yorker the real estate market seemed insane. (Back in the five boroughs, we have not yet felt the need to come up with a slang term equivalent to the British "gazump"--meaning to accept a bid on your house and then renege upon receiving a better offer. As in, "I thought I had that flat in Rising Damp Mews, but I was gazumped.") So I was interested to read the work of economist Andrew Oswald of the University of Warwick, who contends that encouraging more and more home-ownership can be counterproductive. Oswald writes: High home-ownership levels block young workers' ability to enter anOn the other hand, of course, home-ownership has given middle-class people a chance to build a nest-egg over time, and probably encourages more stable communities. But it's always possible to have too much of a good thing--whether you're talking about the European Dream of job security and income stability or the American Dream of owning a home. *Note: Obviously, this isn't the post on the Medicare funding gap I foolishly promised in my last post. That's still in the works. This isn't only a problem in Europe. I'm 34 and I, my fiance', and many of my friends are in the same boat. We have Bachelor's degrees at a minimum, and most have Master's degrees and PhD's; so we're not talking about undereducated people. Most of us are working way-below capability, in jobs that have no real upward potential. And while Michigan has cheap homes because - well, the economy is horrible here and everyone's moving out - we look at places we can move to have a shot, and the home prices make it unlikely we can afford anything any time soon. Again, we're already in our late-20's and early 30's. I try to remain optimistic, and I believe we'll all figure out something in the long run (self-employment seems the only route), but the situation is not pretty for our generation.
I lived in Germany for 3.5 years, and in Italy now for about 1. The main point is correct in terms of the cost of "social safety net" is a contributing factor, but there are many other factors being overlooked. First, the percentage of the total European population, especially young adults, posessing a college degree or higher is much less than in the U.S. Secondly, with the expansion of the EU, many of the common place jobs are now being outsourced to eastern European bloc countries since labor costs are considerably less. Third, there is a cultural aspect, especially in Italy, that makes a child staying at home highly social acceptable (where in the U.S. I think young adults are more encouraged to leave home). Finally, there is the aspect of what sectors of job there exist. For example in Italy, the richest area is the north, with a lot of concentration on the textiles. Most of these companies, and companies in general, are family-owned, or very small in size. The competition form global markets, especially China, is having an incredible impact on the Italian economy, and these small businesses, which unlike in the states, do not consolidate for a larger market share and competitiveness. The half-decade old single currency implementation of the Euro also hit all European countries hard. Since the adapation of a single currency within all different states/economies, individual countries are now having a difficult time control fiscal policy to combat inflation and recession. Since each country has its own unique situations, to adjust interest rates to combat inflation in Germany, may cause a recession in Italy, or vice versa.
In conclusion, even though there is a heavy cost in terms of taxes to support their social policies of retirement of an over-populace pension population, universal healthcare, and support very inflexible labor laws/protection, the various cultural, social, education, and avaliable labor markets are all major contributing factors to account for the difference between the American and European current differences. One of two things can happen. The Geezers will finally die off and release all their hoarded capital back into the stream, or, anti aging drugs will change all the geezers, Boomers and 30 something GenXers back into 20 year olds. At that point we'll be so happy going buck wild that buying a split level won't be so important any more. We'll all live in those MTV loft apartments for $100 a room.
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