Europe's Record Youth Unemployment
theatlantic.com
theatlantic.com
I find one thing about the unemployment rate in Europe truly scary:
There are a /lot/ of youths there with nothing to lose.
Keynesian economics, turning first world countries into second world countries since 1936.
First of all, the European countries with the strongest welfare states do just fine. Also, social expenditures are not actually much different in the United States compared to EU countries -- it's just that more of it comes out of pocket [1]; in the end, it still comes out of your paycheck (as an employee) or profit (if self-employed). In fact, the US has higher net social expenditures than Spain (as a percentage of GDP).
Second, money creation does not work the way you understand it. The majority of what economists call the M2 money supply is not created by the government or the central bank, but by private banks through fractional reserve banking [2], i.e. loans.
And as a matter of fact, the M2 money supply [3] in Greece [4] and Spain [5] has cratered in recent years. The private banks have been "unprinting" money, if you like that terminology. While in theory this might have come from money being transferred to Germany etc., money supply growth across the Eurozone as a whole has also slowed down since the crisis [6], as opposed to the US [7]. Note that it is normal for the money supply to grow with the economy, even absent inflation, because M2 (= money in circulation) is an indirect indicator of economic activity.
Finally, much as "printing money" is favored as a term by some people, this is not actually what Quantitative Easing is. What Quantitative Easing does (simplifying a bit) is a central bank making loans in lieu of the private banks when the latter fail to do so in sufficient measure. The QE process has the central bank buying private assets with money it created to compensate for a shortage in the money supply; the crucial difference (compared to printing money) is that the process is easily reversible; when the economy recovers, the central bank sells these assets again and destroys the money it gets back. Thus, the central bank retains control over the total money supply. QE is what the US Fed has been doing to prop up the money supply in recent years because Congress couldn't get its act together.
Borrowing, likewise, is in the current situation in no way comparable to "printing" money. In fact, short term government bonds of most developed countries (T-bills or their equivalent) not called Greece, Spain, or Italy go for yields below the very low inflation rate: investors buy bonds even though they're technically losing money; similarly, those governments could technically make money by borrowing more at the moment because the aforementioned investors are willing to loan it to them at effective negative rates.
[1] http://www.oecd.org/els/soc/OECD2012SocialSpendingDuringTheC... (a convenient chart is on page 8).
[2] http://en.wikipedia.org/wiki/Fractional_reserve_banking
[3] http://en.wikipedia.org/wiki/Money_supply#Empirical_measures...
[4] http://www.tradingeconomics.com/charts/greece-money-supply-m...
[5] http://www.tradingeconomics.com/charts/spain-money-supply-m2...
[6] http://www.tradingeconomics.com/charts/euro-area-money-suppl...
[7] http://www.tradingeconomics.com/charts/united-states-money-s...
Of course there are complications when you're dealing with a common currency, but the budget constraints and subsequent skyrocketing of debt hasn't alleviated the situation. If anything its burdened the finances of the periphery with an unbelievable amount of default risk, which if I understand austerity economics correctly, that is exactly what it's meant to avoid via boosting investor confidence. Odd how even though results were different, people still believe it's a good solution to the Eurozone's woes.
They differ though on who pays overall.
Inflation is a tax on anyone holding €-denominated assets. For those who have denominated debts at a fixed interest rate, it's a boon. I'm sure France wouldn't complain if they end up repaying their 10-year bonds at a negative real return.
Austerity is largely the opposite: countries (and people) who are in the worst financial situation feel the most pain.
It's perfectly understandable that those with money will want more austerity, while those without want more inflation.
Do we have evidence that indicates the alternative is any better? There's nothing that says both options can't be terrible.
"The 17 countries that share the euro will have halved the pace of budget consolidation in 2013 compared to 2012, as the overall budget deficit of the euro zone fell by 1.5 percent of GDP in 2012 but will only shrink a further 0.75 percent this year, the European Commission forecast this month.
The United States plan to reduce their budget deficit by 2 percent of GDP in 2013 against 2012. Unless policies change the overall euro zone consolidation will be only 0.1 percent of GDP in 2014, the Commission said, against 1 percent in the U.S." http://www.reuters.com/article/2013/05/27/us-eu-economy-idUS...
But the U.S is coming down from a higher level.
That, and the economic models that are consistent with recent behaviour in these economies are saying that the alternative is better. Also, we know the trade-off here - austerity is bad for wage-earners, the poor, people with few, no, or negative assets in the denominated currency. Inflation is bad for net asset-holders in the denominated currency and importers.
Now, given that most of the vulnerable people in a society fall into one group that can be a moral basis for action and it is easy to see which side of the political spectrum is more likely to align on each particular side of the debate.
(I post this feeling assured you probably won't read the response since a whole day has passed, but what the heck!)
They can't keep writing political checks their economy cannot cash.
I am not sure that among young, comfortable, teached from kindergarden about tolerance, socialistic version of human rights there is enough energy to start anything (like making mind effort not to choose stupid and promising every for free politicians).
The intellectual condition of european youth is rather poor. Spaniards have choosen socialistic government who was dealing with important stuff like human rights for monkeys. Go figure...
What are the prospects of an unemployed young person getting a job at any point in the future, even when the economy recovers? Is there a strong bias towards new grads, that would lead to a "lost generation" that permanently suffers in the job market? How does society look on the unemployed? Do they look at them with sympathy or scorn?
Lastly, how do the young unemployed feel? Are they angry? Are they carefree? Or are they filled with despair and hopelessness?
Is homelessness also skyrocketing, or do the unemployed receive benefits of some kind?
In Southern Europe it's not unnormal to live with your parents way into your twenties or even early thirties. And it's not considered embarrassing either. In the cafés of Barcelona, Rome, Athens, you will meet the well dressed 31 year old guy with a smart phone in his pocket a laptop on his knees and a girlfriend by his side. He drives a nice little car, goes on vacations once or twice a year, has a master in something soft, which he got for free, and he is covered by free health care. He lives with his parents or - if he is lucky - in one of their spare apartments (lots of Southern European families have more than one home). He may have a low paid job or he may be unemployed living with a bit of government welfare and occational help from daddy.
I mean, most of these states aren't raising taxes, but are playing with monetary gears to keep money injection from spurring inflation (albeit they have had huge taxes for decades).
Notably, the well doesn't care whether or not you steal water from it. The water was never 'owned' by it in the first place.
This isn't to say that an ownership-oriented society is bad because it is unfree; just that it is inherently unfree, like any other formal system for living in cooperative groups.
So in my view, the argument for private ownership-oriented societies from freedom falls apart. And we're back wondering why we shouldn't 'steal' from the well.
Education pays for itself because it is an investment. The average person will be more productive and earn more (thus increasing GDP and also their personal tax payments) if they have an education rather than being illiterate. ROI for education is extremely good. Countries like Switzerland and Germany do not subsidize education just because it's a nice thing to do, but because it's a positive sum game.
Furthermore the free education is a hugely false fact. For almost 20 years now if a child is not getting education outside of the public school system he/she will not be getting anywhere close to getting onto the 3rd educational level (College or University). The funding and the personnel is inadequate to say the least.
Mind you the public sector is governed by the 5-out-1-in rule (5 people leave 1 gets assigned a position) in general but in the education sector this analogy is rounding up to 10-out-1-in.
As I understand it unemployed Greeks receive free health care for up to one year. After that period, patients must pay for their own treatment. That's still more than many places in the US.
The fact that public education is (often?) so bad that private tutor schools are needed to enter university doesn't change the fact that education is mostly free in Greece.
How many people from those countries immigrate to the US or wish to? If they're willing to work, and a company here has offered them a job, I say bring them over!
Give me your tired, your poor,
Your huddled masses yearning to breathe free;
The wretched refuse of your teeming shore,
Send these, the homeless,
Tempest-tossed to me
I lift my lamp beside the golden door!
The article mentioned that about 30% are college educated. It would be interesting to look at a breakdown of degrees. For example, many Science, Technology, Engineering, and Mathematics graduates are highly sought after in industry. Additionally, are the degrees reputable from an international perspective and in fields suitable by commerce and industry?
College-educated is just an easy metric to approximate this distinction.
I can see that you've been on HN for a while, but in the future it would be great if you could consider stating your concerns directly. (Unless you're just trying to make a joke, in which case it doesn't make complete sense to me. We're talking about positions that require college education.)
Or do you genuinely believe that allowing a greater level of immigration will have more drawbacks than benefits?
This community really makes me facepalm sometimes. It is the only group that can, while getting free massages, catered meals, free shuttles to/from work, get paid well into the six figures, and enjoys an incredibly high standard of living even by its own country's standards, still make noises as if they're the exploited proletariat that can't make ends meet.
Whatever the effect of skilled immigration - some argue it raises all boats, others argue it suppresses wages, "down to poverty levels" is dishonest hysterics when applied to our industry.
The chances are in favor that they would drive down the pay of the first quartile of programmers based on quality, not the savants making 100k+/y.
I'd hate for the job market to be even harder for fresh CS grads not out of an Ivy League or state school. Most of my graduating class just gave up and went for cheaper masters programs, I figured I'd learn more on my own (and I was right, I learned half a dozen new languages, and a lot of the practical parts of development like regexes, sql, unix commands and sysadmining, etc).
Also, why are you complaining about Microsoft, et al? They are dead-set on reducing tech workers' wages through immigration. You should applaud them.
> Paul Auster wrote that "Bartholdi's gigantic effigy was originally intended as a monument to the principles of international republicanism, but 'The New Colossus' reinvented the statue's purpose, turning Liberty into a welcoming mother, a symbol of hope to the outcasts and downtrodden of the world".
http://en.wikipedia.org/wiki/The_New_Colossus
> The statue is an icon of freedom and of the United States: a welcoming signal to immigrants arriving from abroad.
http://en.wikipedia.org/wiki/Statue_of_Liberty
I'm not complaining about the companies that can get Visas. I work for one of them. I'm just pointing out a fact that seems to be true.
I hope it's getting clear to everyone that this is not a "union" anymore..
Also, the figures for Greece are the February figures. The largest industry in Greece, tourism, takes off right about now, and last year on the beach in Greece there were plenty of young Greeks working the beaches, bars and hotels. But of course, many of these jobs are unofficial so they may continue to count as unemployed.
As for tourism, yes, it's going to be slightly reduced in July, but do you think it's nice to wait for 3-4 months to work?
Also, they are going to vote for an austerity measure to give seasonal workers an unemployment aid not every year but every two years. At the same time a former minister of defence, who is jailed for corruption scandals, is receiving two pensions every month.
Furthermore, the ECB is controlled by a money-printing Italian and last time I checked, German influence in the ECB was extremely low, especially compared to the relative size of Germany within the EU.
They didn't experience a huge housing bubble (like Spain) They don't have a big productivity problem (like Greece) Their government's finances weren't totally unsustainable (like Spain or Greece) They don't depend a great deal on tourism (like Greece). No one seems to want to go on vacation to a rioting and unstable country.
Hopefully things will improve for those countries... but it's pretty easy to be a pessimist given the situation.
When in doubt and able, default.
I also wonder if Europe has higher unemployment due to a lower frequency of "at will" employment. Hiring someone seems to be a much greater consideration in countries where it's difficult to let someone go. Poor performers are likely to stick around longer and impact the team much more.
Would employment be lower if at-will employment were more commonplace and lawful in Europe?
Clever move from Germany and prescription for the disaster (collapse of EU - that' optimistic and would help Europe to recover, or less optimistic like war) when people realize how they were cheated.
Greece, despite misarable situation, is still buying war ships... from Germany.
oDesk and similar don't seem to attract what I would consider to be 70% of a country's workforce. Any sense of if they have training / skills?
Where are these people looking for work (online)?
Employing someone in EU is like accepting them into a kindergarten, you assume full responsibility for them as if they weren't adults.
Matt Henderson gives an eye-opening first-hand report from Spain here:
http://www.dafacto.com/2011/02/12/the-unfortunate-consequenc...
Allow the employers to fire easily, they will have no problem hiring again.
Friends in Greece who work for the government have not been paid for 6 - 9 months. But they stay in the job for whenever the pay day does come.
Friends in Spain work for cash in hand because their potential employers save money on the various social insurance costs they have to put up, but cannot afford because times are tight.
Local mid size companies are using the down turn as a great excuse to let people go, while pushing their own salary up. (Noted from friends who work in payroll who have access to that kinda info)
Evidence is somewhat mixed based on this chart. The UK has traditionally had lower severance ("redundancy") pay requirements, and is lower on the chart, but close to the EU average. Germany is fairly low on the chart as well, so... maybe youth unemployment is driven more by GDP / worker productivity / promotion of internships / demographics, any number of confounding factors.
The risk of even discussing this idea, even agnostically, is it can beg attacks on the social safety net, so everyone drowns in the quicksand of passionate partisan shouting.
Maybe there's a way to sidestep the traditional arguments and get something out of the discussion. Say we assume the European safety net is non-negotiable, but say we also believe that employee protections may make employers reluctant to hire. Is there a way to implement the same social protections that would blunt the unintended consequences?
Edit: for the record, I'm from Bulgaria and our unemployment rate for under 25 years-olds is 28%, according to latest Eurostat data. Back in 2008 we were at nearly German levels (11% vs 10%). Interestingly, Germany is the only country whose rate has gone down rather than up in the last few years. Their graph is almost perfectly asymmetrical with the ones for countries of Eastern Europe.
Edit: You can even see this in the graph. German youth unemployment peaked in 2005, well before the financial crisis but after a decade of slow growth, also cf. [0].
[0] https://en.wikipedia.org/wiki/Sick_man_of_Europe#Modern_use
Sure the local market may be in shambles, and the level of effort/risk to bring on new permanent employees may be out of whack. Assuming the talent and drive exists, shouldn't this drive the freelancing segment?
a lot of those youths do have jobs, but simply are paid cash in hand. when asked, they are unemployed for tax and insurance reasons. as long as illegal immigrant workers are working on the fields of spain, uneomployment simply cannot be that bad.
nobody is starving. roads, bars, stadiums are full. money is circulating in the system. it just is black, untaxed.
That is how countries end up like Greece.