The future of any country is its young adults. Those in their early to mid-20s, who’ve just entered the workforce and will become more and more productive as they age into their 40s and beyond.
It’s these guys who create the radical new innovations and consumer trends. They’re the workers of the future who’ll support retiring households. They’re the ones who will have kids and create future demographic growth. They’ll buy houses, cars, furniture and everything else, spending more until they are 46 or 47 years old.
At least that’s how it should be.
Unfortunately, that’s not what’s happening…
The Echo Boom generation is not seeing the job opportunities and stable geopolitical environment their parents did when they first entered the workforce in the late 1950s / 1960s.
Instead, this younger group has witnessed 9/11 and rising warfare, terrorism and civil unrest around the world. They’ve lived through the greatest financial crisis since the Great Depression. And now they’re suffering unbearably high unemployment rates.
Look at the chart below. It shows youth unemployment rates compared to overall rates world wide.
As you can see, youth unemployment is generally about twice the overall unemployment rate. And the highest rates are where you would expect them… in southern Europe.
Youth unemployment in Greece sits at 55%. In Spain its at 53%. In Portugal, 38%. And in Italy, 35%.
That is unbelievable.
Even more unbelievable is that these unemployed youth are not rioting in the streets more frequently.
The numbers in France are also high, at 24%, with Ireland at 30% and the U.K. at 21%.
These statistics show how really weak most of Europe is.
Youth unemployment in the U.S. is at 16% and in Canada it’s at 14%. That’s only a fraction of what the euro zone guys are dealing with, but it’s still unacceptably high.
And Australia is higher than I would have expected with youth unemployment at 12%. Even major emerging countries have high youth unemployment with Turkey at 18%, Russia at 15% and Brazil at 13%.
Now, there are two major reasons for this trend:
1) The world economy is slowing but southern Europe is slowing harder and faster than anywhere else.
2) The Baby Boom generation is choosing to stay in the workforce longer, given the slowing economy and their paltry savings that were decimated in 2008. And now they can’t get any return on fixed-income investments so they’re moving to higher risk investments again… a move that will backfire on them again, likely between 2014 and 2016.
What does this do to this new generation?
On the negative side many young adults are not working and growing their skills. This will put them behind in the future and is likely to crimp overall productivity for years to come.
Second, many will emigrate out of the weakest economies, those with the poorest demographic trends (like southern Europe). That will only worsen those countries’ demographic trends.
But there is a bright side in all this.
The Bob Hope Generation faced a similar fate in its “coming of age” period. It saw the Great Depression and then World War II. But those challenges made that generation harder-working, more savings-oriented and more civic-minded… the opposite of the Baby Boomers who grew up in a great economy and saw no major wars until Vietnam.
The next decade only promises even higher unemployment and youth unemployment rates for Echo Boomers around the world. Will they rebel against this and against ever-rising government debts and entitlements? Will there be a generational war ahead?
Time will tell, but a decade from now, when the next global boom begins, the youth of today will be the hard workers of tomorrow sobered by a very difficult decade and no longer the “spoiled kids” of Baby Boomers as they are viewed today. Even more importantly, they’ll be the innovators and entrepreneurs countries like the U.S., Canada, Singapore, Australia and New Zealand need.
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Ahead of the Curve
A persistently high rate of unemployment, particularly youth unemployment, has a polarizing effect on the economy. It’s good for some stakeholders, but bad for others. And on a net basis, the jury is still out on how an under-worked, underpaid generation will affect economic balances over the coming decades.