Why youth unemployment is high - The Daily Reckoning

Why youth unemployment is high

Nov 5, 2014

Baltimore, Maryland

Dear Diary,

Not much action in stocks or gold yesterday. Americans were busy at the polls...participating the solemn fantasy of modern democratic government.

Approximately 60% of people who were eligible to vote stayed away from the polling stations. Among young people, 18-29, the total was even higher, about 75%. The rest wasted their time standing in line and giving their ballots to the usual grifters, panderers and earnest nincompoops who fill public offices.

One of them, Michael Grimm of Staten Island, had a commanding lead when last we looked. Representing New York's 11th Congressional District, the local paper says he is 'hot headed' and 'distasteful.' It claimed he was making Staten Island the "laughing stock of the nation" after he was indicted on 20 counts of mail fraud, tax fraud, and perjury. In April, he threatened to throw a reporter off the balcony of the Capitol building.

--- Advertisement ---
Strike it Rich" with these small caps...

Small Cap investments offer a huge money-making potential...

If you're able to pick out the right businesses at the right time of their lives, you could truly "Strike it Rich" with small caps.

In fact, we've been picking out such "Strike it Rich" Small Caps for a select group of investors for more than 6 years now.

And here's how we've performed:

250% in 2 years and 1 month
288% in 2 years and 5 months
160% in Just about 2 years
217% in 3 Years and 11 months
177% in Just about 2 years

Interested in finding out how you could get such solid and high-potential small cap recommendations as well?

Just click here for full details...

Perhaps the reporter had it coming; we don't know. But we understand the voters who cast their lot with Grimm; at least they have no doubt what they are getting - exactly what they deserve.

But the problem with political jokes, as Henry Cate observed, is that they get elected. And then, we all have to live with them.

In the meantime, we turn our attention to the plight of young people, most of whom wisely refrained from voting, realizing that they would get nothing out of it.

Young people are entering a very different world from the one in which we set out. We see it in the newspaper reports. We see it in our own household. We have six young adults in the family, aged 21 to 36. Only one owns his own house. Only one is married. Only one has children.

We were on the Jordan Goodman radio show yesterday, telling listeners why youth unemployment is so high:

"In Europe, Japan and America we have aging economies," we explained. "Over time more and more people figure out how to use the government to get privileges and benefits they couldn't get on their own. Some are relatively small potatoes - such as special parking places and electric wheelchairs for people who say they are crippled. Some are big potatoes - billion dollar security contracts, for example. Everybody wants to get something in the easiest way possible. And the easiest way is often to pay a lobbyist to get a special deal for you...your industry...or your business. Typically, people want to protect their wages and lifestyles by imposing restrictions on new entrants. Licensing. Regulations. Professional certifications. In the largest sense, they want to seal the borders so that foreigners can't get in and compete honestly for jobs. But almost every industry and profession has its own hustle going - from import quotas, to subsidies, to labor rules. Like the trade guilds of Old Europe, they try to keep their fees and salaries high by keeping out new competitors.

Who are the newest competitors? Young people. They try to enter the workforce and find doors shut. That's why youth unemployment, ages 20-24, is more than 50% in Spain, 22% in France and in the US twice the rate of unemployment for everyone else.

And that's why America's housing market is doomed. Burdened with a trillion dollars of student debt...and denied access to good paying jobs...young people can't afford to buy 'starter' houses.

"First-Timers Fade Further," announces a headline in the Wall Street Journal:

    "First time buyers made up the smallest share of US buyers in nearly three decades, a traditional solid slice of the housing market whose absence is raising questions about the impact of the crash on potential homeowners."
Why? Just follow the money.

Since 1974, the gross income earned by the 25-34 aged cohort, as a percentage of the median, fell by more than a quarter. Which leaves more young people living with parents...or renting.

    "Rising rents and repaying student-loan debt makes saving for a down payment more difficult, especially for young adults who've experienced limited job prospects and flat wage growth since entering the workforce," the WSJ quotes Lawrence Yun of the National Association of Realtors.
This affects not just the housing market, but the culture too. Like their Japanese and European peers, young Americans don't seem as to be taking the bull by the horns. They are hanging back...reticent...reluctant. Less engaged...less competitive...less likely to start new businesses...and less independent. What do they want? What do they expect? Not only are they not rushing to buy houses, they're also delaying marriage and not having so many children.

Good? Bad? We don't know. Certainly, it is different.

Bill Bonner is the President & Founder of Agora Inc, an international publisher of financial and special interest books and newsletters.

Disclaimer: The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. Please read the detailed Terms of Use of the web site.

Recent Articles

How to Build Affordable Homes in India July 19, 2018
Rajiv Talwar, the CEO of DLF, makes a few interesting points in a recent interview.
Deep State Turns on Trump July 19, 2018
In the last half-century, no president has ever seriously challenged the Deep State. Bill discusses the repercussions of same in today's issue...
A Sense of Melancholy July 18, 2018
Donald Trump: Traitor? July 18, 2018
Is Trump undermining the foundations of the Warfare State and the Police State? Is this a challenge to the power of the Deep State itself? Bill Bonner offers insights into the same.

Equitymaster requests your view! Post a comment on "Why youth unemployment is high". Click here!