Fleecing the young.

Author:Lomasky, Loren
Position:Youth Employment Trends - Column
 
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It's (Not So) Great to Be Young!

The good news, announced Barack Obama in his 2015 State of the Union address, is that America has climbed out of its economic quagmire. After peaking at 10 percent in October 2009, the official unemployment rate had retreated below levels obtaining at the commencement of the Great Recession. In early 2016 the rate hovers near a relatively comfortable 5 percent. If, however, you are a would-be worker aged sixteen to twenty-four, your chances of being unemployed are more than twice as great--indeed, greater than the worst chances experienced by the overall labor force during the height of the recession ("Monthly Youth" 2016). Nevertheless, young Americans may count themselves fortunate. The euro area confronted in summer 2015 an unemployment rate slightly north of 11 percent, and one in every four youth job seekers failed to secure employment ("Youth Employment Trends" 2015). Of course, aggregate figures hide strikingly different experiences across borders. Characteristically, young Germans do nicely compared to their European generational peers, experiencing 7.2 percent unemployment. The corresponding figure for France, though, is 23.7 percent and for Italy a sobering 40.9 percent. Greece is yet worse, where one out of every two young aspirants is stymied. Because everything in that country that can go wrong has gone wrong, its experience may be excused as anomalous, but Spanish young people also suffer disappointment at the same rate (Trading Economics n.d.). There, appropriately named indignados resort to milling around streets in protest and abandon mainstream political parties for equally feckless populist ones. They and their generational peers across the continent are protesting a future that as far as they can see is without promise. At an age when young men and women are biologically and culturally primed to take on adult responsibilities, they find themselves stuck in an extended childhood. From Madrid to Athens and points in between, young people languish.

It is not my intent to dull the reader into insensibility with a deluge of statistics. Let me simply say that the United States is pretty grim for labor-market entrants and that, with only a few exceptions, Europe is no continent for the young. Of course, youth carries within itself its own remedy, so perhaps this cohort will also mature, as others have, into lives of full employment. Without discounting that possibility, it is worth asking why this generation has found entry into self-sufficiency so difficult and speculating about the distant effects of a delayed first step on the rung of the personal-advancement ladder.

Once America's young men and women do secure gainful employment, they will contribute (i.e., be taxed) a substantial proportion of their wages to Social Security. The program's most important component is payment of pensions to those who have reached retirement age. From Social Security's beginning in the 1930s, it has operated on a pay-as-you-go basis. That is, payments are funded out of current tax receipts. Because the original ratio of payers to recipients was very great, the tax burden could be minimal. In 1950, there were 16.5 contributors for every beneficiary, but by 1965 the ratio was four to one; by 2010 it was slightly less than three to one; and by 2030 it is projected to decrease to approximately two to one and then steadily lower for the rest of the century ("As the Population Ages" 2015; Social Security Administration n.d.). (1) This means that during their working lives the baby boomers have carried a payment burden much greater than their parents did but considerably smaller than that which today's twenty-year-olds will bear. Millennials either will pay more for support of the aged or receive less themselves when they achieve pension eligibility or, most likely, both. It is arguable whether the likely return to their Social Security payments is economically or morally adequate. (2)

What is not arguable is that these later generational cohorts find themselves parties to a bargain not of their own making, the terms of which are markedly inferior to that which was and is being enjoyed by their predecessors.

Federal and local government employees are remunerated by both current salary payments and benefits. The latter include defined pension payments primarily based on final salary level and years of service, and these payments extend until death (or beyond if dependents are also covered). In practice, what this means is that many individuals are being taxed to pay the pensions of former employees who have performed no services for decades, perhaps since before the taxpayer in question was born. The greater the share of government revenue that is expended to support such payments, the less that is available to secure current services. Retired police chase no criminals, nor do people who have never been hired for the force because strained budgets do not allow it.

Because the federal government is able to borrow without constraint and to print money as it deems necessary, the pressures it faces are less than those confronted by state and municipal governments. Demands on the latter are already notable and inevitably will grow more acute. In July 2013, Detroit filed for bankruptcy, the largest metropolitan default in U.S. history. It can be argued that in virtue of a long history of economic decline and political mismanagement Detroit is an exception (our own Greece, if you will). Nonetheless, it is only the most spectacular instance of municipal failures that now also include Harrisburg, Pennsylvania, and a handful of cities in California that have already filed or are on the verge of doing so (Farmer 2013). Unlike cities, states do not go bankrupt, at least not yet. They do, however, find themselves increasingly hard-pressed by pension obligations. Illinois and Rhode Island are running neck and neck in a race to the precipice of default. Restructuring proposals are currently being litigated. Unions, unsurprisingly, oppose all attempted clawbacks of promised pension payments. But whether employees eventually do suffer some loss in benefits or not, the biggest extra burden will fall on taxpayers and, of this group, disproportionately on the young.

I mention these phenomena by way of suggesting that moral philosophy's concern with the justice of the basic framework of society stands in need of rebalancing. Theorists have devoted considerable attention to injustices committed across lines of race, gender, sexual orientation, ethnicity, and, especially, economic position. (3) Far less attended are concerns of intergenerational fairness, (4) That omission is serious. Measures that have done very well by the Baby Boomers are much less generous to their children and worse still for their grandchildren. (5) "Terms of trade" between old and young have become progressively (6) restructured in favor of the former, not only in the United States but to an even greater extent in the European Union. Political economists have scrutinized these developments with much greater attention than philosophers. The latter group's neglect of them is to be regretted. Unemployment, debt, retirement age, social welfare programs, pension law, labor-market regulation, minimum wage, and the like are not merely items that confirm the appropriateness of the name "the Dismal Science" but also components of institutional structures that bestow benefits and burdens on citizens. I contend that these benefits and burdens do not fall willy-nilly on people of various ages but rather overwhelmingly tip the generational balance in favor of the old. From the Social Security Act of 1935 to the Patient Protection and Affordable Care Act of 2010, better known as "Obamacare," a stream of legislation differentially benefits the old at the expense of the young. (7) Sometimes the age factor is explicit, as it is with old-age pensions. Sometimes it is implicit, as when those who already are well entrenched in the labor force are protected by measures that damage the prospects of those who are not. Harms to the young are sometimes inadvertent, foreseen but unintended consequences of policies that are directed elsewhere than to generational issues. For example, Obamacare's goal of universal health insurance does not single out any particular age group with regard to coverage, but the individual mandate to purchase coverage means that the relatively healthy young are bearing an actuarial penalty for the sake of the relatively unhealthy old. (For now I set Medicare aside.) Other harms must surely have been both foreseen and deliberately brought to bear on the young, although with very little public acknowledgment. The most glaring example is funding of current consumption either through debt or contractual undertakings, the payment of which will come due only decades later.

If I am correct in the claim that intergenerational distortions are a primary--I am inclined to say the primary--contemporary justice failing of the affluent West, then an adequate diagnosis and projected therapy much exceeds what can be broached in an essay of modest dimensions. The aim here is to be suggestive rather than comprehensive. First, I identify three important normative principles that importantly bear on issues of intergenerational equity. I then apply these principles to direct in-period transfers across generational cohorts and to debt and pension promises. I next turn to issues of labor-market regulation, including wage legislation and worker protection, and then move from social and economic policy to noneconomic burdens that may be inflicted on future generations. More precisely, the latter discussion is offered by way of an apology for not making these burdens central to the accusation of transgenerational injustice. In the last two sections, I speculate concerning the compatibility of liberal democracy and generational fairness, and in...

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