But even education can't help in a jobless recovery. My daughter graduated from a top university last May, and like over half of her class, had no paying job waiting.Another one of the more interesting comments also pointed out some of the other implications of the economic scenario laid out by the BIS study. To recap, the BIS study described the dire consequences of their projections of the trajectory of ever increasing government debt in the major industrialized countries [emphasis mine]:
[W]e note the risk that persistently high levels of public debt will drive down capital accumulation, productivity growth and long-term potential growth. Although we do not provide direct evidence of this, a recent study suggests that there may be non-linear effects of public debt on growth, with adverse output effects tending to rise as the debt/GDP ratio approaches the 100% limit (Reinhart and Rogoff (2009b)).The demographic implications of this forecast are dire for anyone who is under the age of 20 today. In economies that experience reasonable rates of growth, young people enter the work force in their 20s, acquire experience and go on to progress further in their chosen field.
What happens when this age cohort has to face the stiff headwind of slow growth?
Opportunities are likely to be much more limited for this generation and they are less likely to get on the first rung of the ladder in order to learn their craft. If they don’t get on the first rung, then the opportunity to progress further in their careers would be further limited. Could we see a generation of 30-somethings with nothing more than McJobs on their resume?
What’s more, governments may not be brave enough initially to restrain the growth in entitlement programs, as the aging Boomer demographic represents a powerful electoral force. What happens if this under-20 cohort further has to bear the burden of paying for their parents and grandparents?
Will this be the Atlas Generation, doomed like the mythical Titan Atlas to hold up the sky on his shoulders?
David Merkel of Aleph Blog put it another way:
As my wise former boss once said, "We don't make the mistakes of our parents, we make the mistakes of our grandparents." Our parents typically warn us of the problems they survived, but not those that their parents did. Thus we fall into the forgotten problem, and why big busts tend to recur about once every two generations.
Is the Atlas Generation about to become the next Depression Kids?
An Atlas in every basement?
To be sure, not everyone who is under 20 will wind up that way. There will undoubtedly be plenty of opportunities in selected industries in the coming decades. I believe that we will see exciting breakthroughs in life extension research and nanotechnology, just to name a couple, in the coming decade. Nevertheless, the operative word is “selective”.
I illustrate my point with a story from my own experience. I graduated with an undergraduate degree in Computer Science in 1980, the height of the “inflation” boom decade of the 1970’s. Computer Science grads were hot back then. Everyone in my graduating class who wanted a job got a job. Most got multiple offers. Two years later in 1982, at the height of the recession, about 2/3 of the class found jobs and some people had great difficulty. Some years later, a friend and I informally compared the career progression of the class of 1980 (my year) with the class of 1982. The class of 1982 appeared to be hobbled in their careers compared to the 1980 graduates and never really recovered from their poor start. Were we smarter than them? Or better than them?
The answer is no and no. My graduating class just got a lucky break.
I do fear for the under-20 generation today. They will have to work harder and fight harder for fewer rewards than we did. Some will return as adults to live in their parents’ and grandparents’ basements despite their innate talent, ingenuity and efforts.
Lisa LaMotta at Minyanville summarized this problem for the older generation in a slightly different way in her post The Top Five Unexpected Costs of Retirement [my comments in brackets]:
- Living longer [outliving your retirement savings]
- Adult children with money problems [my sentiments exactly]
- Higher taxes, higher inflation [see my previous post All roads lead to inflation]
- Health care and dental care [they're going up]
- Repairs for your older home