Europe’s Doomed Generation

The New York Times reports on the straitened prospects of Europe’s young, especially those of Southern Europe. The paper cites demographic trends, political roadblocks and sclerotic economies as reasons for sky-high unemployment and marginal futures for young people: “Europe’s Young Grow Agitated Over Future Prospects.”

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 daughter of a fireman and a high school teacher, Ms. Esposito was the first in her family to graduate from college and the first to study foreign languages. She has an Italian law degree and a master’s from Germany and was an intern at the European Court of Justice in Luxembourg. It has not helped.
“I have every possible certificate,” Ms. Esposito said dryly.

It seems to me that the Times conflates several rather distinct issues in chronicling the malaise of Europe’s young. It is not obvious that accumulating “certificates” is the optimum path to gainful employment. Europe has long tended to prize credentials over actual productivity, but that is probably a secondary issue in the current crisis.

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.

But what causes that “low growth?” That is the key issue, but not the principal focus of the Times article.

[E]xperts warn of a looming demographic disaster in Southern Europe, which has among the lowest birth rates in the Western world. With pensioners living longer and young people entering the work force later — and paying less in taxes because their salaries are so low — it is only a matter of time before state coffers run dry.
“What we have is a Ponzi scheme,” said Lawrence Kotlikoff, an economist at Boston University and an expert in fiscal policy.
He said that pay-as-you-go social security and health care were a looming fiscal disaster in Southern Europe and beyond. “If these fertility rates continue through time, you won’t have Italians, Spanish, Greeks, Portuguese or Russians,” he said. “I imagine the Chinese will just move into Southern Europe.”

That’s true, and it is a very serious problem–Italy, Spain and other European countries are in the process of going out of business. (Does the Times’s endorsement mean we can take Mark Steyn off the list of dangerous extremists liable to prosecution in Canada?) But isn’t that a separate problem? Other things being equal, shouldn’t a low birthrate and consequent shortage of young people make it easier for those relative few to get jobs?

The problem goes far beyond youth unemployment, which is at 40 percent in Spain and 28 percent in Italy. It is also about underemployment. Today, young people in Southern Europe are effectively exploited by the very mechanisms created a decade ago to help make the labor market more flexible, like temporary contracts.
Because payroll taxes and firing costs are still so high, businesses across Southern Europe are loath to hire new workers on a full-time basis, so young people increasingly are offered unpaid or low-paying internships, traineeships or temporary contracts that do not offer the same benefits or protections.

Now we’re starting to get to the heart of the matter. Governments have interfered with the labor market to such an extent that, for an entire generation, the market barely functions at all. More:

[M]any young people in Southern Europe see labor union leaders like Mr. Fernández, and the left-wing parties with which they have been historically close, as part of the problem. They are seen as exacerbating a two-tier labor market by protecting a caste of tenured older workers rather than helping younger workers enter the market.
For Dr. Kotlikoff, the solution is simple: “We have to change the labor laws. Not gradually, but quickly.”
Yet in Greece, Italy, Portugal and Spain, any change in national contracts involves complex negotiations among governments, labor unions and businesses — a delicate dance in which each faction fights furiously for its interests.
Because older workers tend to be voters, labor reform remains a third rail to most politicians.

That is what happens when government inserts itself into every employment decision and when labor unions are given quasi-official powers and status. The result is economic disaster, a disaster first suffered by the young. What has happened in Europe, especially Southern Europe, is a flashing red alert, warning the United States not to follow the same path of government interventionism and union empowerment. Yet that is exactly the direction in which the Obama administration is trying to take us. It is deeply ironic that Obama came to office in part because of support from young voters who are too ill-informed to see the effects that his policies, if implemented, would have on them.

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