Tuesday, January 11, 2011

Economics: It’s a Bad Time to Be Young and Educated

The effects of poor economic conditions traditionally fall more heavily on the young than on the older more established workers. The depth and duration of the economic malaise seems to be exacerbating the situation and generating some unusual social conflicts. Consider the following chart provided by “The Economist.”

One would expect a youth to adult ratio of about two to be typical. There are a few surprises. Countries that one thinks of as well-run and well-organized, such as Sweden, New Zealand, and Luxembourg, have a ratio of over four. Is there trouble in paradise? Everyone seems to be suffering in Spain and Estonia. Germany, Switzerland and Israel seem to have figured out a way to tamp youth unemployment, although I suspect Israel’s situation might have something to do with military service. It would be interesting to learn why Denmark and Sweden are so different.

One of the tenets of a modern society is that education is the entry path to financial security. There are a number of indications that even that assertion is being called into question.

Starting on the home front: the unemployment for college graduates in the United States is hovering at all time highs. While still much better than for non-college graduates, the lot of recent graduates is much worse. That rate is more consistent with the population as a whole. What is less evident is that those who do find jobs are often grossly overqualified for the work. Consider this report:
“Underemployment and hidden unemployment remain a major problem for young college educated workers, with less than 50 percent holding jobs requiring a college degree between January and August 2010.”

“The largest portion of young college graduates under 25-years of age was employed as cashiers, retail clerks, and customer service representatives; none of these positions requires a college degree, report’s authors Andrew Sum and Paul Harrington.”

“Overall, 175,000 young college graduates occupied such positions, compared to 146,000 who have been working as engineering and computer specialists.”

“Only 37,000 young college graduates have found jobs as engineers compared to 80,000 working as waiters, waitresses, and bartenders. Some 148,000 people who graduated recently ended up as bank tellers while the overall number of computer professional jobs for young college graduates stood at 109,000.”
Even China, with its booming economy, is having trouble accommodating the aspirations of its well-educated youth. College enrollment is reported to be decreasing because of the difficulty in finding appropriate positions after graduation. This report is from “The Economist.”
“In July nearly 28% of this year’s graduates had failed to find work. Many who have are disappointed with their wages. A recent study by Cai Fang, an economist, found that average starting salaries for college graduates hardly changed between 2003 and 2008. They are nowadays comparable to the steadily rising wages of uneducated migrant workers.”

“In this environment, government jobs become even more attractive. The pay is not great, but it is offset by job security and good welfare benefits. Competition, however, is fierce. This year there were 16,000 jobs on offer, one for every 64 test-takers. There were nearly 5,000 applications for the most sought-after post, that of ‘energy conservation and technology equipment officer’.”
A rush to gain the security of a government position is not a sign of a healthy economy.

Here is a report from the New York Times on unrest in Southern Europe.
“Francesca Esposito, 29 and exquisitely educated, helped win millions of euros in false disability and other lawsuits for her employer, a major Italian state agency. But one day last fall she quit, fed up with how surreal and ultimately sad it is to be young in Italy today.”

“It galled her that even with her competence and fluency in five languages, it was nearly impossible to land a paying job. Working as an unpaid trainee lawyer was bad enough, she thought, but doing it at Italy’s social security administration seemed too much. She not only worked for free on behalf of the nation’s elderly, who have generally crowded out the young for jobs, but her efforts there did not even apply to her own pension.”

“The outrage of the young has erupted, sometimes violently, on the streets of Greece and Italy in recent weeks, as students and more radical anarchists protest not only specific austerity measures in flattened economies but a rising reality in Southern Europe: People like Ms. Esposito feel increasingly shut out of their own futures. Experts warn of volatility in state finances and the broader society as the most highly educated generation in the history of the Mediterranean hits one of its worst job markets.”

“Even before the economic crisis hit, Southern Europe was not an easy place to forge a career. Low growth and a corrosive lack of meritocracy have long posed challenges to finding a job in Italy, Greece, Spain and Portugal. Today, with the added sting of austerity, more people are left fighting over fewer opportunities. It is a zero-sum game that inevitably pits younger workers struggling to enter the labor market against older ones already occupying precious slots.”

“As a result, a deep malaise has set in among young people. Some take to the streets in protest; others emigrate to Northern Europe or beyond in an epic brain drain of college graduates. But many more suffer in silence, living in their childhood bedrooms well into adulthood because they cannot afford to move out.”
Let’s make one more stop, in Tunisia. Again, from the New York Times:
“The Tunisian government ordered the closing of all schools and universities in the country on Monday until further notice in an attempt to quell escalating riots over poverty and unemployment.”

“At least 14 people have died in the riots, according to the official Tunisian news agency, which also reported the school closings. Opponents of the government contend that riot police officers have shot and killed many more since the riots broke out three weeks ago.”

“The riots began about three weeks ago after a 26-year-old man with a college degree, in despair at his dismal prospects, committed suicide by setting himself on fire. He had been trying to sell a container of fruits and vegetables, and the police confiscated his merchandise because he had no permit.”

“His self-immolation unleashed the pent-up anger of Tunisia’s educated and underemployed youth, and soon that of others as well.”

“On Monday, security forces surrounded a university where hundreds of students were trying to protest, according to Reuters. The rioting showed signs of spreading from provincial towns toward the cities of the Mediterranean coast which are central to the tourist industry, Reuters reported.”
These incidents were acquired in just a few days of observation, not searching. I suspect there is a lot more unrest out there.

People look at unemployment figures for college graduates, and seeing low numbers, assume that unemployment will not be a problem if only we educate more of our children. However, the numbers they are looking at are a record of the past. They are not necessarily a prediction of the future. There is no economic law that says that all new jobs created in the economy will require a college degree. We may have to change our expectations—or change our economies.

1 comment:

  1. “Companies are starting to hire again, but many are turning their backs on older job seekers.” If you’re over 40 and out of work, Even though the national unemployment rate among older workers is lower than that of younger workers, none of the recent gains in hiring have occurred for the older bracket. For help visit:

    employment tips


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