It’s the fight of a generation. In this corner, weighing in at 42.5 million people, with a 12.3 percent unemployment rate and $294 billion of combined student loan debt, wearing skinny jeans and headphones: 20 to 29-year-olds. And in this corner, tipping the scale at 36.9 million people, with an unemployment rate of 6.6 percent and a median household networth of $162,000, wearing Crocs and a pair of bifocals: 55 to 64-year-olds.
Lets get ready to rumble.
This isn’t exactly what’s happening in the jobs arena. More accurately, generations are fighting each other from within for work. A 24-year-old is more likely to compete with a peer for a job than with a 60-year-old. But in terms of who has it worse, old or young workers, it’s worth measuring the differences between the two age groups to see which is more in need of help.
A recent report by the Government Accountability Office comes down on the side of easing the plight of older workers, more than 50 percent of whom have actively sought a job for more than half a year. As a result, the GAO recommends a handful of policies, including offering subsidies to businesses that hire older workers, expanding job training programs for seniors, and compensating workers over 55 who accept lower-paying jobs.
In a recent OpEd for the New York Times, Dean Baker of the Center for Economic Policy Research and Kevin Hassett of the American Enterprise Institute point out just how devastating unemployment can be for older workers, leading to significantly higher rates of death and illness. Also, once they lose a job, older workers have a much harder time getting back into the workforce. “The policy challenge is harder for older workers,” says Hassett in a phone interview. Although younger workers get fired more, they also get hired more. Older workers tend to see only the downside of that churn, says Hassett, partly because businesses are reluctant to make long-term investments in them. “If you hire a young guy and invest a lot in his training, you have his whole career to recoup that investment,” says Hassett. “If you train an older guy, he might retire in a few years.”
Yet there’s evidence that the real jobs crisis is taking place a generation or two down the food chain. Unemployment rates for young Americans are significantly higher. Teenagers looking for work have about a 25 percent jobless rate. For black teens, it’s about 40 percent. Unemployment consistently goes down as age goes up. Not only are young people coming out of college with an increasingly heavy burden of student loan debt; they’re coming into a job market where they’re less likely to earn enough money to pay that off in a reasonable time.
That has far-reaching consequences. Today’s young workers are likely to have lower earning (PDF) potential over their careers, and their inability to pay off their student debt will keep them from buying homes and cars and a whole lot of other stuff that helps juice the economy.
In a paper released last week, Manhattan Institute senior fellow, and former Department of Labor chief economist, Diana Furchtgott-Roth offers a counterattack to the GAO recommendation, arguing that compared with young people, older Americans have it made. From 2002 to 2011, the number of employed people aged 55 and older grew by 8.9 million, leading to an overall increase in labor force participation rate among older workers. ”They’re the only group that’s made job gains over the last 10 years,” says Furchtgott-Roth. That’s likely as much a function of necessity than choice, as many seniors squeezed by a busted housing sector and sagging retirement accounts have been forced back into the work force.
To Furchtgott-Roth, at least they’re working. And at least they have wealth, even if more of it is going toward helping out their young-adult children. Not only are older Americans better off than young people today, they were wealthier as young people 30 years ago. A November 2011 Pew study shows that in 1984, households headed by people younger than 35 were 68 percent wealthier than in 2009. At the same time, Americans 65 and older are 42 percent wealthier today than in 1984. The lack of jobs and ability to accumulate wealth is creating a big social problem. “We’re creating a generational gap that’s widening, and we’re failing to build the future for this younger generation,” says Furchtgott-Roth, who worries that we’re undercutting the value of education by lowering its return.
Economist Richard Fry, co-author of the Pew study, says its too early to say the value of education is being undercut. The market still pays a heavy premium for educated workers, he says, if not in wages paid, then certainly in the way it punishes workers without a college degree. Still, he’s concerned about the consistent lack of employment for young people. Work-force participation among young adults has been declining since the 2001 recession. Part of that can be explained by younger workers going back to school. But even when you control for that, “there’s still some evidence that employers are favoring more experienced workers over younger ones,” says Fry. “Things have definitely gotten more difficult for younger workers.”
Does that mean they’re worse off than older workers? Not necessarily. In the opinion of AEI’s Hassett, it’s not a fair comparison. “Both situations are terrible, but their problems are different.”