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Guest Manifesto: Generation G, The Lost Generation

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Guest Manifesto: Generation G, The Lost Generation

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By: Alpha Dominance

September 2008, the credit markets freeze up and the world economy enters a tailspin. Here in the states we are stricken with the sharpest economic decline since the great depression. Job creation dries up as companies simultaneously engage in vigorous cost cutting (read headcount reduction). A year later the Fed speaks of green shoots and a jobless recovery (is this an oxymoron or what?). Our present official unemployment rate hovers around 10% but this figure excludes those who no longer qualify for unemployment benefits, those who have given up the job search, and those who never broke into the job market in the first place. Enter Generation G, the Lost Generation. This article shows how youth are disproportionately suffering the effects of the decline in the job market and highlights the lasting effects this can have on their professional lives.

By Peter Coy

Bright, eager—and unwanted. While unemployment is ravaging just about every part of the global workforce, the most enduring harm is being done to young people who can’t grab onto the first rung of the career ladder.

Affected are a range of young people, from high school dropouts, to college grads, to newly minted lawyers and MBAs across the developed world from Britain to Japan. One indication: In the U.S., the unemployment rate for 16- to 24-year-olds has climbed to more than 18%, from 13% a year ago.

For people just starting their careers, the damage may be deep and long-lasting, potentially creating a kind of “lost generation.” Studies suggest that an extended period of youthful joblessness can significantly depress lifetime income as people get stuck in jobs that are beneath their capabilities, or come to be seen by employers as damaged goods.

Equally important, employers are likely to suffer from the scarring of a generation. The freshness and vitality young people bring to the workplace is missing. Tomorrow’s would-be star employees are on the sidelines, deprived of experience and losing motivation. In Japan, which has been down this road since the early 1990s, workers who started their careers a decade or more ago and are now in their 30s account for 6 in 10 reported cases of depression, stress, and work-related mental disabilities, according to the Japan Productivity Center for Socio-Economic Development.

Only 46% of people aged 16-24 had jobs in September, the lowest since the government began counting in 1948. The crisis is even hitting recent college graduates.

Most analyses of youth employment focus on people aged 16 to 24, which includes everyone from high school dropouts to wet-behind-the-ears college grads. But in this era of rising educational requirements, some people don’t start their careers until their mid or late 20s—and these young college grads are taking it on the chin as well.

According to a BusinessWeek analysis, college graduates aged 22 to 27 have fared worse than their older educated peers during the downturn. Two years ago, 84.4% of young grads had jobs, only somewhat lower than the 86.8% figure for college graduates aged 28 to 50. Since then, the employment gap between the two groups has almost doubled.

It seems strange at first blush that young people are the biggest victims of the current economic slump. One could easily imagine that companies in a recession would prefer to hire young people, who are cheap, and slough off older workers, who are expensive. But both employers and older workers are sitting tight, taking as few risks as possible in an uncertain environment. With no openings, employers are refusing even to look at the résumés of those on the outside looking in.

The sense of stasis in many Western countries is reminiscent of Japan, where talk of a lost generation has been around since as long ago as 1995. Some 3.1 million Japanese aged 25 to 34 work as temps or contract employees—up from 2 million 10 years ago, according to the Ministry of Internal Affairs. Many Japanese blame the young people themselves, saying they are spoiled, alienated “freeters”—a term meaning job-hopping part-timers. But economist Souichi Ohta of Nagoya University argues that a big part of the problem is Japanese employers, who value long experience at their companies—which newcomers by definition don’t have.

Europe offers different lessons about what to avoid. In Spain, employers generally put older workers on long-term contracts that are hard to break. When demand slumps, they get rid of the younger workers, notes Alfredo Pastor, an economist at Spain’s IESE Business School and former Spanish Secretary of State for the Economy. That’s one reason Spain’s unemployment rate for 16- to 24-year-olds is a sky-high 39%. The rate is 24% in France and 19% in Britain.

Economists in several countries have studied the damage such high unemployment can cause. Kahn of Yale found that graduating from college in a bad economy has a long-lasting negative effect on wages. For each percentage-point rise in the unemployment rate, those who graduated during the recession earned 6% to 7% less in their first year of employment than their more fortunate counterparts. Even 15 years out of school, the recession graduates earned 2.5% less than those who began working in more prosperous times.

As we see here the negative effects of unemployment on youth entering the ostensible job market are both damaging and long-lasting. Their elders may scoff that they have no responsibilities or dependents, they aren’t approaching retirement, they don’t have seniority and should just suck it up. What they are saying in effect, is that they don’t matter, but they fail to realize they are creating a monster: disaffected youth. Youth are impressionable and their experiences at this phase of life can set them upon a path they will follow even when the job market improves. If there’s one thing we should recognize about humanity it’s that empathy is fostered only by reciprocity. Turn your back on this subset of the population and they will return the favor in kind. The fresh faced youth who enters the job market today might get a job and become a productive member of society. Theymight on the other hand experience months or years of rejection and poverty and hunger. Their optimism crushed and their sense of opportunities to come abolished, they will turn to crime to meet their needs. After all, it is well known that incidence of crime, particularly crime with financial motives is related to poverty and unemployment:

From 1979 to 1997, federal statistics show the inflation-adjusted wages of men without a college education fell by 20 percent. Despite declines after 1993, the property and violent crime rates (adjusted for changes in the country’s demographics) increased by 21 percent and 35 percent respectively during that period.

Weinberg said the strongest finding in this new study is a link between falling wages and property crimes such as burglary. However, the study also found a link between wages and some violent crimes – such as assault and robbery – in which money is often a motive.

The weakest relationship occurred with murder and rape – two crimes in which monetary gain is not usually a motive.

“The fact that murder and rape didn’t have much of a connection with wages and unemployment provides good evidence that many criminals are motivated by poor economic conditions to turn to crime,” Weinberg said.

The theory behind why crime increases in the wake of falling wages is simple, he said. “A decline in wages increases the relative payoff of criminal activity. It seems obvious that economic conditions should have an impact on crime, but few studies have systematically studied the issue.”

National crime rates rose from 1979 to 1992, when wages for less skilled men were falling. Crime declined from 1993 to 1997. This decline in crime corresponded to a leveling off and slight increase in the wages of unskilled workers across the nation in that period, Weinberg said.

Even for the gainfully employed the payoff is plummeting and the relative economic benefit of the thug life is increasing. We work harder and are more productive but compensation is flat to negative. These forces too will push more youth over to Generation G. (Click on Image below).

Add to this the widespread assimilation of thug culture, unprecedented access to guns and drugs, and it’s little stretch to see this time as the crucible forging a whole new generation of G’s. Our legion brethren are out there now, getting their knocks and exploring their alternative sources of income. Many of us already are leading double lives, chameleons by day if we are gainfully employed, but donning our G colors when dusk falls and hitting the streets in search of a better life and a little fun in the process. What’s not to love after all? The ladies love a G. Who wouldn’t love the easy money, the finer things in life and the unshakable respect that comes with being a cold-blooded G? It all adds up to a winning proposition compared with hunger and a life on the government dole begging for a shitty job at McDonald’s no?

People have always feared youth. They act differently, they don’t have a vested interest in maintaining the status quo and the accepted social order. They are faster, more technologically adept, better educated and stronger. Now they are being actively denied entry into this domain. Now there is good reason to be afraid of turning a generation of youth into a lost generation, Generation G. Be afraid, be very afraid: The G is gonna get you. Our ranks are growing by the day. Watch for Generation G coming soon to a block near you.

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