The Lost Generation
We all grew up learning about the fabled promises of our capitalist system. If you worked hard and had a little luck you would be successful. You could be a millionaire! And as a broader society we were creating our own utopia, piece by piece, where every generation was better off than the next. But the American dream has soured. Income is dropping, unemployment remains perilously high, and loss of benefits is creating a house of horrors for the middle class. Economics is a long game, with sudden shocks and booms leaving lasting effects. Today’s youth are inheriting a diminished future due to structural changes in the economy developing for decades and brought down like a hammer with the Wall Street crash.
It is hard to put into perspective the way The Great Recession (2007-2009) decimated the U.S. economy. While boom and bust cycles have permeated over the past century, this was the worst since the Great Depression. In case you are not already well aware, unemployment currently hovers around 9%. In a healthy modern economy it should be around 5% and such labor statistics do not account for those no longer seeking work or those underemployed.
During the recession almost 9 million jobs were lost. Due to population growth 15 million jobs will need to be created by 2014 to return to pre-crash employment levels. To achieve this goal employment must grow by 3 percent for almost four years. Of course we are nowhere near this mark, which is higher than during the Clinton boom years of 1993-2000.
The recession ended two years ago, but during that time of budget cuts and layoffs corporations learned they could do more with less. Terrified of losing their jobs, workers have become more productive, making up for the employment gap and causing corporate profits to return. Those jobs aren’t coming back.
This recession has affected every strata of the economy, but it has had an especially disastrous effect on young people. Recently released census data shows the current crop of young adults in their 20’s has become a “Lost Generation,” suffering from lack of opportunity and growing into adulthood much slower than generations before.
Faced with no other choice 85% of college grads moved back in with their parents last May. But once they do find a job the effects will linger for the rest of their lives. Those unlucky enough to graduate in a recession will earn significantly less money over the course of their entire career.
As reported by the Wall Street Journal, “For example, a man who graduated in December 1982 when unemployment was at 10.8% made, on average, 23% less his first year out of college and 6.6% less 18 years out than one who graduated in May 1981 when the unemployment rate was 7.5%. For a typical worker, that would mean earning $100,000 less over the 18-year period.”
The reason for the loss of wages is higher competition for jobs in the labor pool coupled with the fact graduates will often settle for lower-wage, lower skill jobs that signify underemployment. This puts them behind and in continual competition with new graduating classes.
Again according to the Wall Street Journal, “This year, employers say they’ll hire 22% fewer college graduates than last year, according to the National Association of Colleges and Employers, an organization of career counselors. At the same time, colleges are expected to see the highest number of graduates in a decade. The average starting salary for graduates who do get jobs, meanwhile, dropped.” This is simple supply and demand, where there are too few jobs for each incoming wave of college graduates who are finding out their degree is a per-requisite rather than any sort of guarantee of a good job. This leads to underemployment, pushing all they way down to the bottom and making matters even more disastrous for those without a college degree.
Because we are now facing a decade of high-unemployment, this does not affect just a few unlucky graduating classes either. It affects an entire generation of young people who will grow up earning much less, facing far fewer opportunities, and enjoying little job security or stability. This is the jobs crisis.
For further graphs and figures on unemployment visit: http://www.cbpp.org/cms/index.cfm?fa=view&id=3252