The Occupy movement has the wrong target. The problem in the industrialized world, be it the U.S., Spain, France, or Greece, is not the super-rich. The real issue is that the young population has been taken for an expensive ride by the older generation. It is not the 1 percent, it’s the Baby Boomers and their international peers who have molded their respective economies, their rules, laws, and tax systems to benefit their age group (and retirees) with total disregard for younger and future generations.
A very well educated generation is not only having trouble finding jobs (witness the high unemployment rates of the “young” across the industrialized world, reaching 25 percent in Spain and close to 50 percent in Greece), but they are forced to play in a sandbox created by the Baby Boomers (the “old”) in which the “young” are disadvantaged along five dimensions, with varying degree depending on the respective country — labor laws, two-tier corporate benefits, tax laws, educational expenses, and public debts/entitlements.
Labor laws: The older you are and the longer you have worked, the more protected you are. While in the U.S. this protection is moderate (e.g., anti-discrimination laws), in some European countries it is almost impossible to fire somebody over a certain age. Some countries have two labor markets — one rigid protecting the “old” and their benefits, one for the “young” built upon temporary and no-benefit work arrangements. While protecting the “old” from the competition of the “young” might have made sense in good economic times, in a turnaround, be it a company or country, you have to cut the expensive areas with disregard of any past promises and put all your energy into nurturing the cost-efficient producers of future income.
Two-tier corporate benefits: If you are “young” and have a job, chances are that you subsidize your “older” co-workers next to you in the office. Many tenured employees still have cushy defined benefit plans and retirement health care plans while new employees are getting lower value cash plans, if at all, and no retirement health care. Thus, new employees are subsidizing the long-timers, i.e., the “old.”
Tax laws: With the exception of certain tax advantaged college savings plans in the U.S. (e.g., 529 plans), there is not much help for the “young.” No way to deduct or carry forward educational expenses or initial vocational training costs. No tax help for (“young”) renters while lavish housing mortgage deductions and mortgage help is provided to (irresponsible) “older” owners. No easy tax deduction of individual health care costs, while companies enjoy tax deductions for providing “Cadillac” health care benefits to the employed tax-free.
Educational expenses: College costs in the U.S. have risen above inflation for quite some time (and even in Europe, where education has been available for nominal value, countries have reduced educational spending, introduced tuition, etc.). Students are willing to pay whatever is necessary to signal future employers their value by getting into the highest ranking school possible. Since all students act directionally the same, but are of different ability, there is plenty of tuition on mediocre schools spent in the U.S. Expressed differently, the demand is price insensitive and allows the suppliers, colleges, to do whatever they want tuition related, as long as there is no disruption through technology (e.g., online teaching), arbitrage (e.g., students study abroad), or any other collapse in demand (e.g., surge in vocational training programs).
Public debt/Entitlements: The exploding public debt and massive, unfunded “pay-as-you-go” entitlement programs are all expected to be paid for by the “young” and future generations. It is no coincidence that neither political party wants to touch these entitlements — it’s the great collusion of the “old” — no matter their political allegiance — to make the “young” pay.
Taken it all together, the “young” are asked to finance the unsustainable entitlements of the “old,” subsidize them at work, receive fewer tax breaks, while being asked to shoulder more of their own education expenses and accept a no-security labor world that has a bias against them. It is not far-fetched to foresee that this inter-generational “arrangement” is going to collapse at one point in the future should economic conditions deteriorate further.
Given the voting power of the Baby Boomers and their international peers, it is unlikely that the situation will change anytime soon, though. That leaves the “young” who are not part of the “lucky sperm club” two options: to rebel and fan social unrest with questionable outcome, or to emigrate to a booming emerging economy with less anti-young-age bias. The earlier they leave, the better off they may be.Photo Credit: © Blotty | Dreamstime.com