Generation Demoralized

It’s a scandal how little talk there is of what really amounts to a national calamity: youth unemployment. It soared after the recession began in 2008, and it only grew higher after the recession supposedly ended. It is approaching 19% according to the official data. But official data tell only trends and part of the story. They don’t reflect the ghastly reality on the ground.

These data exclude students not looking for work or people helping out around the house or people who haven’t done anything to seek employment for four months. And whereas most countries calculate youth as age 15-24, U.S. law generally deems a person ready for remunerative work at 16, as if a 15-year-old is a babe that needs to be coddled and protected from the wiles of the world of wage slavery.

The real story is buried in the Department of Labor’s statistical release: “The employment-population ratio for youth — the proportion of the 16-24-year-old civilian noninstitutional population that was employed — was 48.8% in July, a record low for the series.” In other words, most people in this age range do not work at all. Forget 19%; the problem affects 52%. That’s an incredible fact.

The trend is generating lasting damage. If you read the biographies of history’s great creators, they all tell of wonderful and crazy experiences of work in early youth, by which I mean 11 or 12 years old. By the time these people were 20, their lives were pretty well set. As the biographies all report, work instills an ethic of attentiveness, getting along with others, discipline to stick to a task and pride in a job well done.

And work is a fantastic teacher, better than the classroom. You learn about inputs and outputs, accounting and why it matters, customers and business relations, the competitive marketplace, the strictures and framework of profitability. It requires the acquisition and applications of new skills. It teaches kids to be other-regarding and to push themselves to the limits, instead of selfish and indulgent toward sloths. These are lessons you have to acquire early in life, and they stick with you forever.

The classroom does none of this. Neither does sitting on the sofa playing Wii. I’m a champion of video gaming for kids, but let’s get real: It has a fraction of the sociological and economic value of a real job. It is escapism, whereas working for a business is the real thing.

How can we sit by and watch an entire generation — many millions of kids — be denied all of this? Do we really believe that these kids are going to be prepared for the highly competitive workplace after 16 years of desk sitting? How are they going to learn that the value of a person’s labor in the marketplace is directly linked to the value they bring to a firm unless they get out there early in life and see how the whole game is played?

Kids are much quicker learners than adults, which is why when these lessons are taught early, they tend to stick. It is too late to enter the workforce at 24. The person who does this is not in a good position to compete. You can read all the books you want on how to conduct yourself in an interview, but there is no substitute for knowing from experience what a boss is looking for in an employee. A would-be employee who is clueless about this always imagines himself or herself as a buyer of a paycheck, rather than a seller of labor resources. That attitude does not go over well in the tight marketplace for work.

I’m particularly intrigued by the existence of the vast numbers of unemployed young people who drop off the data collectors’ radar completely. These are kids who might have thought about working at the age of 15 or 16 but became discouraged rather quickly when they realized that (1) getting a job is harder than they thought, (2) the pay is lower than they imagined and (3) it is much easier to sponge off mom and dad as long as permitted. Sloth and stupidity become a way of life.

Let’s talk about the law. The minimum wage is an obvious villain here. It says to the young person: You have no right to lower the asking price for your labor below a floor that the government establishes. In this sense, the minimum wage really is a violation of human rights. It certainly leads to unemployment. We’ve seen the largest-ever increases in the minimum wage in recent years, so it is hardly surprising that youth unemployment has been profoundly affected.

Ten or 20 years ago, it was rather easy to get around the minimum wage laws, the tax reporting requirements, the child labor laws and all the rest of the apparatus that keep kids out of the workforce. Every family had friends in business who needed help, and the kids could be paid cash. Today, this is no longer true. Everyone is scared of the government. If you get reported for hiring under the table, you face prosecution and the potential death of the business. Hiring young people for cash is no longer worth the risk. So the opportunities have dwindled. This is particularly true in urban areas.

The entire crisis could be ended right away with the right repeals. We need to end the child labor laws (they never helped anyone and only hurt now), the minimum wage, the payroll tax and crazy restrictions on hiring and firing. We would see the entire labor marketplace light up immediately, with young people in particularly high demand for their computer skills and fast teachability. Why doesn’t this happen? Ignorance, political stalemates, labor unions and cartels that benefit from the laws as they are.

The future of civilization is paying a huge price for shutting these people out of the workforce. It is a price will we be paying for many decades ahead because kids grow up to become the adult population of the future. As the saying goes, these minds are terrible things to waste. But that is precisely what is happening. Tragically, it doesn’t seem like too many people even care.

A final piece of advice for every kid and parent: Buck the trend. Don’t let the system beat you. Any youth who starts working now, even against all odds and in whatever way this is possible — even if it means working for free — is going to have a huge advantage in the future.

The Daily Reckoning