The danger of a lost generation

July 24, 2009

– Christopher Swann is a Reuters columnist. The views expressed are his own —

NEW YORK, July 24 (Reuters) – For the first time in three generations, Americans across the nation are facing the threat of long-term unemployment. Already more than one in four jobless Americans have now been out of work for more than six months, the highest level since records began in 1948.

For both individuals and national economies, long-term joblessness has proved to be extremely corrosive. Skills atrophy after extended periods of enforced indolence. Then, when an economy recovers, these workers are no longer in a position to fill new jobs.

As a result the potential maximum speed at which the economy can grow declines, and the workers themselves come to be seen as “damaged goods.” Those unlucky enough to be graduating in 2009 may find that their salaries never match those of similarly qualified peers who finished in 2006.
To his great credit, President Obama has been quick to spot the danger. Under the administration’s stimulus package, the unemployed can now claim benefits well beyond the standard six months. In some badly afflicted states, insurance will last up to a year and a half.

The government is also offering $4 billion in funds to retrain workers. Tax breaks in the package aim to make it more affordable for young people to sit out the recession in school. Another $12 billion for community colleges has the same goal.

Yet even this heroic effort may be too little, too late for many Americans.
The closest analogy to America’s current unemployment crisis is probably Japan. Here too was a nation accustomed to minimal long-term joblessness. In Japan the lost decade produced a lost generation.

Faced with a “hiring ice age,” graduates settled for lower status or temporary jobs. By the time companies were in the mood to hire again in bulk around 2007, they chose fresh graduates. Many of Japan’s thirtysomethings never caught up.

A multitude of academic papers suggest that an early bout of long-term unemployment can have an even more pernicious result. According to a recent study by Tom Mroz at Clemson University, a six-month spell of unemployment at the age of 22 tended to reduce wages the following year by eight percent.

More worryingly, almost 10 years later these workers were still paid about three percent less than their peers, even controlling for education, region and personal characteristics. Other studies have shown an even more powerful hit, with wages still about 10 percent lower five years after the initial period of joblessness.

“Youth unemployment creates permanent scars rather than temporary blemishes,” says Dartmouth Professor David Blanchflower. An unfortunately timed demographic bulge means that there will be an unusually large number finishing school over coming years. For more experienced workers, there is a risk of permanent displacement from the labor force. This risk is especially great for workers in financial services — an industry that is unlikely to grow back to its peak size any time soon.

This is a problem that few nations have ever had much success in combating. Even before the latest economic crisis struck, half of the jobless in Germany and Italy had been out of work for more than 12 months. Japan, too, has had trouble bringing its long-term jobless rate down. “Getting a job during the crisis in most countries is becoming an even more daunting challenge,” said Stefano Scarpetta, head of employment at the Organization for Economic Cooperation and Development.

The United States may have better luck thanks to the flexibility of its labor market. Still, Obama has been right to focus heavily on training.

Even if the skills learned in community colleges prove to be useless, avoiding a damaging period of inactivity may offer value for money for taxpayers in the long run. For many, the best way to avoid being damaged by a weak job market will be to stay out of it.

For previous columns, Reuters customers can click on [SWANN/]
(Editing by Martin Langfield)


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Jobs are important but so is ethics and character. Not to say people lack these being fresh out of school, but how many are ready to do as they are told without a second thought when the money is good. These times are not a bust for these folks. Entrepreneurial spirit and faith in ones ability to succeed get nowhere until they try. Try. Be disruptive. Create a need, work and produce. Make a place rather than look for it.

Posted by DanO | Report as abusive

Clearly with all we have heard about churn and program trading, retail investors must be nervous that, like houses before the crash, stocks may be priced incorrectly. They are likely priced way too high and there could be a crash. So many people now mistrust Goldman Sachs and their low life friends, and the government that allows them to be the bank at the monopoly table, that many are smart to stay on the sidelines, IMO. I am not an investment counselor, just a person who wants to warn folks about the manipulations of the markets.

Unemployment will rage in the public sector when the furlough mania is finally revealed as still not enough to cut state and municipal budgets.

Where will government workers find non-government work ??

So far, the furloughs diguise the hidden partly-unemployed …or those who don’t collect benefits. But California government employees are all taking 10% furlough pay cuts, which adds up to a bleak tax revenue picture across the board.

It appears that true unemployment figures are way off the mark when you consider the reduced payroll picture in its totality.

It’s probably an eye-popping negative revenue statistic hidden away from view by the White House. They’ve delayed the midyear budget update until next month so it won’t mess up the healthcare reform measure anymore than it already is ( my guess ).

Fed revenue has got to be taking a much greater hit than budgeted.

Posted by rayman in CA | Report as abusive

Periods of joblessness normally provide an entry point into increased entrepreneurial activity as the only viable option to certain sectors of the talent pool. Restrictions of this portion of the talent pool will delay economic recovery.

It is not the corporate manager or the recent college grad that leads the economy out of recession, it is the seasoned American Entrepreneur and experienced US Small Business.

These are the Two (2) Critical Assets that have always lead the US Economic Recovery, to disable or ignore them will prolong recessionary forces.

Job creation will come from getting MONEY to these areas.

For starters, the Washington Administration should at least revise and publish -for the people to see the difference- two sets of unemployment. The current DOL published unemployment rate – and the BLS U-6 tables which currently shows June nationwide unemployment at 16.5% !! A much different and eye awakening number- which in itself is self-explanatory, since it carries unemployed people whose unemployment benefit expired. That the DOL- does not do -thus DOL unemployment numbers are highly suspect.
The definition of unemployment is not dependent upon filing for unemployment benefits. The estimate of unemployment is based on a monthly sample survey of households. All persons who are without jobs and are actively seeking and available to work are included among the unemployed. (People on temporary layoff are included even if they do not actively seek work.) There is no requirement or question relating to unemployment insurance benefits in the monthly survey.
“BLS has also separate estimates of persons outside the labor force who want a job, including those who have stopped looking because they believe no jobs are available (discouraged workers). In addition, alternative measures of labor under-utilization (discouraged workers and other groups not officially
counted as unemployed) are published each month in the Employment Situation news release.”
Thus, a bifurcated labor employment view will help to understand what is “reality”. There has to be an emphasis
by the current Administration to recognize- only the consumer can bail this country out- and not Washington.
There is much talk of further bonus payments at certain financial institutions and Wall St. This flies into the face -and shows- the lack of oversight and understanding
Washington has. After all, did the current Treasury Secretary not arrive from the Federal NYC Reserve? Yes he did.- and he looked the other way- when it came to bonuses- and will do so again. AIG received 170 Billion in taxpayers money-but handed out bonus pay to top employees in the amount of $218 million-when the company posted a 4th quarter loss of $61 Billion. Now AIG intends to shelve out several hundred more million dollars in bonuses. Has anyone filed a criminal complaint against any- no- and it is highly unlikely that will ever happen.
Such taxpayer money to bail out those living in luxury will when it could be used for retraining, schooling, starting entire new jobs- is of no concern- to those at the top of the pyramid. Further, the public reading about further bonuses – will only be further disgusted and reason- there is no hope – a recovery without jobs- and lean into further trepidation.
There is no doubt- this administration is a one-time administration – one only has to pay attention to the “accumulated ” deficit , rather than the yearly budget deficit- and reason- there is no hope.
It starts with the people- to train , school,to put money into their hands-not once- but twice, three times and that is better use of public money than allowing bonus payments on Wall St.
Sincerely Michael

Posted by Michael | Report as abusive

Enjoying four years (or sometimes more) securing a college degree and then experiencing this employment market is a challenge. Losing your job at any time is a devastating experience. . .Some handle it well. . others not so well.

My Son graduated year prior to last and came up with a novel and successful way to seek employment. ( ) It worked for him and others. . . .but finding employment now has got to be harder work than enjoying employment a few years ago. . .

good luck everyone in need.

Obama declared his programs a success. His programs are doing what he wanted them to do. He is growing government at the expense of the private sector. He is making more and more people dependent upon government. He is pushing a health care reform bill that will be partly administered by the department of defense and will include death counsilors for those people that will be denied medical care even after they pay into the governments coffers, as their lives are deemed negatively by Obamacare. He is advocating Unions for all businesses with his card check policy, to keep the employees under even more government control, as well as employers. He is advocating cap and tax which is designed to drastically raise energy prices with the only way to save costs, is to not use energy. That is his purpose. To force everyone to do without or pay the price. He has taken control of car companies, government motors, he has taken over banks. Now he has the mass media doing stories on the oil companies in preparation of taking them over. This man wants to rule every single resident in this country with an Iron fist while charging them an arm and a leg to do it. Congress wants to add a VAT-value added tax, to everything you purchase. This government wants to grow and grow and take more and more from the private sector to feed their cancer. This government has already spent this generation’s money as well as the next generations. Now they are working on the third generation so that they can turn the people of this Country into slaves to pay back a debt to foreign countries. Pelosi cannot find enough garbage cans to throw our money down, neither can Reid, Dodd, or Frank just to name a few. They are all purposefully trying to destroy this country for the simple purpuse that they can. Definately the change everyone voted for.

Posted by Peanut1000 | Report as abusive

Even worse is the fact we have been borrowing from future generations to pay for stimulus today. It should be clear that they will not be in a position to pay. Municipalities face a future of crumbling infrastructure.

Apparently this is all an issue of perception or mind over matter. Disciples of Psychology 101 believe that companies operate more profitably when they are managed by cheerleaders. Because lack of positive attitude causes reduced profits. If you believe you are going down the gutter, you will be in the gutter. Because of course belief gives us the power of teleportation. For instance, I can believe I am on Jupiter. I’m there right now on the surface. The gases are choking. Now I’m going to believe I’m back at my desk. Whew.

I know for sure that these problems are challenging. But the instant you let somebody beguile you into thinking otherwise, suddenly you don’t have to deal with the problems. So they linger and worsen. It’s the sign of a weak and puny intellect to think that real-world problems are caused by perception. I’m here to assure you that you lost the Iraq War, leaving the country with nothing, not because of poor attitude but because of an inferior military force and commanders who don’t have any idea how to win a war. This is because they spend too much time discussing perception and psychology.

In terms of what I think can help the employment situation, I recommend that the government play no favorites. People make it a career both giving and getting government contracts. That is a layer of dried mud that has hardened over time. The only way out of this hole is real innovation – not the perception of it. The scientists funded by the government aren’t necessarily the people who will come up with the great ideas. We it only that simple.

Posted by Don | Report as abusive


I’m a 58 yrs old degreed engineer on layoff notice from BA. I rent an apartment near where I work, just moving into a larger unit the week before my layoff notice.

Another huge aerospace company RIF-ed me in 1991 (I turned 40) when engineers in so Calif and all over were really washed up. Then they brought in the son of Rockwell’s majority shareholder so he could have the job instead of my work going undone. ‘90s were horrible for engineers everywhere. I used up a lot of unemployment responding to ads that led nowhere, did some state funded training, temped desktop publishing, started advertising services business out of my home, and brokered printing press work and worked as an engineer too on some very low paying short contracts. My parents died and my share of the sale of their house got me through that period too. What a difficult period that was! I responded to work out of state too, but absolutely nothing came up. I remember getting my first modem then to find a job.

Ironically my dad was one of those who struggled against the likes of Joe Kennedy in the 1920s to help form the Maritime Union, USA’s first union. All during his time the country was motivating people to leave farming and fill up the factories in the cities. Huge agra-business conglomerates were born during that time. We all on board? –okay … time for the Great Depression in 1929 which ended some time in the 30’s or 40’s depending where in the world you’re at.

91-97 aerospace engineers were getting filtered from job interviews all over. 1997: I got hired back to the same workgroup that laid me off in 1991 six years later! –BA acquired them. In the late 90′s I started on a MS degree, first in aeronautical and then in systems engineering; I thought that might save me. I’ve had to learn 6 different CAD/CAE softwares over the last 30 yrs. OF COURSE MY PAY HAS NEVER CAUGHT UP TO MY JUNIORS. Aerospace engineers union got busted up in 2000 where I work.

Now I’m working with all bosses in their mid 20′s. They want to bring in someone else to do my work this time too. –Boss leaked it to me.

There’s little mercy for a talented, well-schooled, hard working man in our world. The 80′s were full of contracting and companies moving off-shore. The So. Calif area used to manufacture every kind of thing. Now, not so much at all. Now huge employment and rich HMOs are getting what the mortgage crooks didn’t manage to get. Almost all of the manufacturers I worked at and also as a part time college student aren’t even there any more.

I sometimes feel that never having had children saved me then, and that not having gotten back into a mortgage saves me again now. These are pathetic feelings to own, so I push them away except for now that I write this. Married, no young ones or elders to worry about or fall back on.

Reuters’ writer also ignores the mass layoffs of the ’70s. Engineers had layoffs in 1980-81 when I graduated college. All during the 80′s, under Reagan, companies were consolidating, downsizing and going offshore. What about the layoffs of the dot COM bust in 2000-2001?

You conservative commenters can peddle your highhanded dreams to someone else, not me; my whole career has been the story of the shrinking pie in southern Calif. Any reporters want to talk? (jazysaurus@hotmail)

Posted by So Calif Sr Engr | Report as abusive

For now I’m sitting this one out.. I survived the lovely 1980s..Graduated High School in 1983…A little sabbatical is in order here.. Figure it out, I won’t ever be able to retire in the traditional sense like my Dad…Thanks….Good Luck.

Posted by Frankie G | Report as abusive

I’m afraid that the simple truth is that the US elites who actually make and shape economic and political decisions are deeply corrupt and have been for some time. In a functional society the elites of course look after their own interests first, but see their own interests as sufficiently interwoven with the long term interests that the two flow along together — however imperfectly.

Taking to the extreme the ‘every man (or woman) for him (or her) self’ notion as being synonymous, through the ‘magic of the marketplace’ as being best for society as a whole is of course nonsense.

So we have a deep dysfunctionality in which decision making elites pander to the worst in the broader populace and scoop up the treasure for themselves.

I see, unfortunately, no end in sight to this process. The society appears incapable of handling any significant change whatsoever, let alone one which involves sacrifice and cost(s).

Thus the decline of empire.

Posted by Big Al | Report as abusive

Start your own business. You can and should have more than one revenue stream. Everyone should. What is different about this economic crisis is the level to which it ascended. The rich have been hammered too. Do whatever you have to do within the law and within reason to aquire as many assets as possible.

And use them to build a better mousetrap.

This president has been losing much support over the last two months, and now with him coming out and accusing the cops of racial profiling, he has lost even more. So all those job seekers and those who have lost jobs can now all blame it on their ‘race’! Shame on those who keep on harping on race as the reason for everything in their lives.

Posted by karen | Report as abusive

The demand for labor is far, far weaker in this recession than, say, the recession of the early ’70s. At that time, the recession meant that college graduates only had three job offers to choose from instead of six. Today, college graduates are lucky to end up with unpaid internships.

Labor conditions have been deteriorating for decades, thanks to idiotic trade policy that grants free access to the American market to every badly overpopulated nation on earth, all with bloated labor forces desperate for work, while getting no access to equivalent markets in return. It’s tantamount to economic suicide. During the presidential campaign, Obama promised to fix broken trade policy but so far has done nothing, even in the face of dumping by the Japanese and tariffs imposed on American goods by Mexico.

Our labor market will continue to deteriorate until something effective is done to restore a balance of trade.

Pete Murphy
Author, “Five Short Blasts”

Hello – Impoverishment of the people and enrichment of the banks in bogus boom and bust is an old story in civilization. They always get the legislatures to help them, and vet the candidates, Obama included. The main way for “we the people” to win is to avoid banks and that which banks, including central banks like the “Fed”, do. We need to avoid loans, limit use of Federal Reserve Notes, develop barter, develop local scrip systems and community credit unions, grow household and community gardens, give up this wasteful consumerism for good, be glad for what we have and take care of it, vote more intelligently, and hold the elected reps accountable big time. This could be the time in our country’s history to apply the brains and skills to start over, and cut the banks, AND the legislators they bought, out of the picture for good.

Lots of you who have been laid off are very smart and have magnificent skills. We need them. Let’s take the time to step away from the financial “beast” and build a sustainable society that works for everyone, starting locally with what we have on hand. The big banks and the Fed will hate it and whine…Gee whiz. (WHAT ?! we DARE to avoid loans and interest payments ? only buy what we need? take care of our communities and goods to make them last ? ) use BARTER ? buy locally ?
live simply ? don’t need a FED ? Gosh ..)

Posted by grandpa | Report as abusive


Thanks so much for posting the link to

I am strongly considering the use of their services to help me find a job in these times.

Again thanks so much for posting.

There is till time to stop the bleeding… however… “it’s the foreclosures stupid… it’s the foreclosures”…

Go back look at our history… you will find that we have never had an economic crisis of this origin… IN residential real estate… to be sure the housing market has always been impacted by downturns… but it has never before been the origin of the crisis… WITHOUT EXCEPTION everything that the Fed, Treasury and congress have implemented have been a top down solutions to a bottom up crisis… and guaranteed to, as they are doing, fail.

What is needed is the requirement that any holder of any loan secured by 1-4 unit residential real estate, and has received any federal funding, either directly or indirectly, offer loan modification along the lines of the following terms…
1. NO loan qualification… they are there, keep them there, we all gain.
2. 50 year amortization
3. 5 year reset; 2% up or down each 5 year period, 9% life time cap.
4. the lesser of the 10 year treasuries or 4% for the initial rate.
5. the then current loan balance, no further write downs.
6. loans already in default to carry a forbearance agreement.
7. waiver of any reduction in real estate taxes during the life of the loan.

This will end the free fall in real estate values, syop the bleeding at the lenders and banks, free up over $150 billion per year in disposable income; and most important
of all, halt the hemorrhage in the real estate tax base for the local governments. It will also halt the decimation of credit ratings that ALL of the loan modification programs require.

This can and will work… had congress heeded the advice of Chairman Bair two years ago, all of this might have been avoided… but then, compared to Chairman Bernanake, Sec. Paulson and Sec. Geitherner what does a woman know about finances!… it would appear, everything…

An excellent column presenting information that I’ve seen nowhere else.

Posted by Sherwood Ross | Report as abusive

Skills training and education are fine, but unless they match America’s needs, they will be a total waste. I’m not confident that either the government or academicians are up to the task.

Let’s face it. From a global perspective, America has a serious imbalance between needs and wants on one hand, and its’ ability to satisfy them. Far too many dollars are being expended on government, entertainment, and leisure activity. Until we produce goods and services that can be exchanged with China and other emerging markets, our standard of living will decline.

Posted by Neil C | Report as abusive

It’s called a post real estate bubble recession amplified by the 1995 Democratic Congress (elected during Bush’s term) socialist sub-prime housing attempts.

Real estate bubbles happen, the downside is usually limited to rich speculators who hold on to property too long. It boosts the economy though job creation of rapidly appreciating real estate values. This was decided by the Bush administration to combat the negative effects of 911. Real estate bubbles have happened in local economies all over the US without any major economic effect. California and Hawaii real estate bubbles to name a couple.

However it was not in the Bush Admin’s intention to include the sub-prime market. But because the Dem Congress was picking up the loans (through HUD, Frannie and Freddie) and banks were demanded to loosen standards under the Clinton revised Community Reinvestment Act to give more housing to those who couldn’t afford it.

Now what’s going to happen is this, we are going to have unemployment of at least 10% for 5-7 years before the unemployment rate begins to drop. For every month of large unemployment about equal to the average of all the other months, add another year to the time recovery will begin to occur.

So if we get another 500,000 jobs lost next month, that will be 6-8 years before recovery starts. That’s not when we get back to full employment before the recession started neither. That alone could be 4-5 years with another year for each month the unemployment rate drops another 500,000.

So folks, we essentially fscked for the next 10 years at least.

Another great idea screwing us is the Clinton signed China as favorite nation trade status. We just basically handed our economy, and superpower status, over to them. Too many people to live the high standard of living the US currently enjoys. The flood of cheap labor alone is causing a huge economic impact the world over.

The primary reason for the huge $4.60 a gallon of gas last year?, China sucking up the world oil, just before the Olympics, as a demonstration of it’s new economic power.

Who is the largest foreign holder of US debt? China.

Who is the largest holder of US debt. The US itself!

Talk about fudging your own books!

Now the US Government can’t balance it’s own budget, how the heck is it going to mange heath care?

European countries that went with socialized medicine and forced people to pay realized something. People will use the system excessively to try to get as much value out of their labor and the system as possible.

Clearly more thinking needs to be done and less left leaning ideology.

Posted by Pete Tousan | Report as abusive

there are a million jobs or more from the booming cannabis business, but Americans can have none of them.

Posted by Mark Godfrey | Report as abusive

This all sounds so familiar. I had just graduated from college in 1973 and what happened? The Oil Shock that resulted from the Arab Oil Embargo. I know that for many people reading this this is simply a historical footnote, but trust me, our economy almost collapsed in a matter of weeks. The gas lines, the overnight unemployment, and the Watergate hearings, it seemed that the world was falling apart. Forget about finding work. Even McDonald’s wasn’t hiring. What did I do? (You can spare me any of the sanctimonious blather about selling yourself or grabbing hold of the entrepeneurial spirit. When you are down to your last $500 and have nowhere to fall back to you do what you have to. I couldn’t go back home because there wasn’t one to go back to.) I joined the US Army. It was the very last thing I wanted to do. Viet Nam was winding down, so I didn’t have to worry about going into combat. I did my hitch and when I got out I went back to grad school. Things turned out alright in the end, but I still recall the empty feeling I had when I realized I wouldn’t be able to make the next month’s rent. That sort of thing stays with you.

Posted by Bob Foster | Report as abusive

fail goal of bush and obama administation

Posted by anonymous | Report as abusive

good read

An ounce of sweat is worth an ocean of tears.

Posted by kelly p | Report as abusive

will danger of lost generation resulted in population decline ?
To what degree this danger affect those unemploy ?
Will it reduce human activity that cause global warming ?
or people decide not to have children ?
Earth can’t take all 7 billion human ego.
Polar ice cap begin to melt, all coastal city sink below current sea level.
If earth population is reduce then this economic crisis is a good thing for overall human survival.

Posted by mikelvon dusel | Report as abusive

Unemployment,Recession,Jobless, Bad Economy…these are the words i been hearing from last two yrs. What can we do ??? As long as i know for real, rarely few jobs are there…anywhere you apply …In Reply you will get an Email : we hire someone who is more eligible for this position, …well nothing can we do about it…Wait and watch, I hope $ maintain its value in International market…otherwise we will be like Zimbambwe Currency one day.
Keep working hard, but how if we dont have job, where can we work hard…I think the system needs to be change,
like tax-IRS, social security…and the state tax…govt only believe in sucking money from general people and sending it to co’s who are about to br. down…what about the money govt gave to GM,WACHOVIA,WAMU,CHASE…SO ON ???
if you missed one $ to IRS, they will charge you with interest next yr…???

Posted by Hoi Hoi...Mazza Padi | Report as abusive

In my opinion this bound of long-term economic crisis was caused by a abnormal economy development model,namely,extremely-high-profit model: every business and government is pursuing the maximum magin of profit,which in the end harm the overall societal consumption capacity and confidence.Only when the world leaders realize this fact can the world recover completely from the deepening crisis,we need a low-profit economy model.

Posted by David Tao | Report as abusive

hope this gets published

greenspan can rot in hell,beryankee
can burn in hell!
i pray the are in the 9th level of hell!
where lava oozess all over there bodies for eternety!

my best regards to americans!
ill see you in the fema camps.
and if you dont post this.
may god have mercy on YOU.

Posted by doug big | Report as abusive

[...] Bron: [...]