Trends: The Scarred Generation

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This blog originally posted on the Community & Regional Resilience Institute 

retirementIn my last post, I started outlining some of the trends that will drive change over the next decade (at least). I started with the amazing advances in health care that will extend our lifespans. Before I leave this topic, I want to direct those of you who are interested to a special issue of The Scientist that delves more deeply into the advances being made in preventing the diseases associated with aging. In my opinion, “Global Graying” will have – is having – a much greater impact on our futures than Global Warming. Globally, providing health care to the elderly as we are now is not sustainable. Japan and parts of Europe are already at a point where there are only two working age people supporting the social costs of each of the elderly.

The UN estimates that by 2060 there may be only about 1.5 workers per elderly dependent in much of Europe and only one worker supporting each of the elderly in Japan and only about two in the US and Russia. By that time, China will also be at about the same point. The advances in medicine will tremendously reduce the health care costs of the elderly by shifting the health care paradigm from disease treatment to disease prevention.

As noted above, our current modes of paying for health care for the elderly are not sustainable. There are several reasons for this.

  • Central banks in the developed world have consciously followed policies that have devalued savings. For those who are retired and rely on their savings to defray some of their costs, this has been a major blow. In the U.S., we have seen a deterioration of the value of our savings on the order of 1% per year since 2009. Similar trends have been seen in the UK and most of the more solvent members of the European Community. Greece, however, gave its savers a 40% “haircut” (and probably will scalp them even more). In Japan, Abenomics has reduced the value of savings about 10% already, with [much] more to come. And this in a period of relative deflation. If Abenomics is successful, it would lead to inflation of at least 2% year and increased taxes.
  • The impacts of the Great Recession are still being felt throughout much of the world. Technically, many parts of Europe are in an economic depression. In the U.S., our economic recovery has been weak, but real. However, the recovery has been fueled by the advances in fossil fuels (sorry for the pun!) and by the growth of the health care industry.  Unfortunately, most of the new health care jobs are relatively low paying.
  • In the US, the near collapse in oil prices is reversing many of the gains made to date. In fact, without the growth in the number of Oil (and gas) Patch jobs, the US would have seen almost no increase in the number of jobs since the previous employment peak. We are now seeing thousands of workers migrating away from the Montana and the Dakotas because the companies they have worked for are in serious difficulties.
  • In the U.S., the number of businesses closing their doors has exceeded the number of new businesses since 2008. Over the last 40 years, we have seen an inexorable decrease in the rate of business creation. If this slide continues, it is difficult to see where the jobs will be to support the costs of Global Graying.
  • Oh, and China’s economy appears to finally be slowing down.

One other factor: in the U.S. and Europe, younger workers have been disproportionately impacted by the Great Recession. Globally, youth unemployment is three times the average for all workers. In Spain, 51% of the workforce aged 16-24 are unemployed. For the entire Euro area, youth unemployment is 23%. In the UK, it is 16%, and 13% in the US. Based on historical experience (those who start their careers in periods of high unemployment earn less over their entire career), these youth will make much less over their lifetimes than their parents did. It should be no surprise that the International Labor Organization calls them the “Scarred Generation.”

Further, labor force participation is down globally. Thus, the higher unemployment among youths seeking work is coupled with a larger number of people who have given up on looking for work. Together these bode ill for the global economy and for its ability to support unemploymentcosts of Global Graying.

In the U.S., the numbers also reflect another disturbing trend for our future: the Scarred Generation is tilted toward men and especially African American men. Last year, unemployment among men aged 16-24 was 20% higher than for women. The unemployment rate for African Americans was almost twice that of the entire population. The upshot is that the unemployment rate for black men was 36.5% for those 16-19, and 22.1% for those aged 20-24.

I worry about how this Scarred Generation will impact our nation’s ability to appropriately respond to and recover from future disasters. This is a quiet crisis with great danger for us. But also a tremendous opportunity: if we can heal the Scarred Generation, our economy and our resilience can be greatly enriched.  One of the keys to doing this is education; I’ll discuss this in my next posting.

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