National Security & Defense

How Millennials Get the Short End of the Policy Stick

(Prasit Rodphan/Dreamstime)
It’s time to start turning the tide.

Diana Furchtgott-Roth and Jared Meyer are the Manhattan Institute think-tankers behind the new book Disinherited: How Washington Is Betraying America’s Young. We talk about graduation season and what’s to come. — KJL

 

Kathryn Jean Lopez: Bottom-line question: Are college grads this year getting jobs?

Diana Furchtgott-Roth: College grads this year are doing better than in prior years, but as a group, young people are doing worse. Six years into the economic recovery, the unemployment rate for young people ages 20 to 24, 10.1 percent, is over twice the unemployment rate for those 25 years and older, 4.5 percent.

The percentage of teens and young people employed or looking for work, known as the labor-force participation rate, is at the lowest level since the government began keeping records on this in 1948 (55 percent).

From 1968 to 2007, the percentage of 18- to 31-year-olds living with their parents held steady at around 32 percent. By 2012, that number had increased to 36 percent. Among young people 18 to 24 years old, 56 percent lived at home in 2012 — a historic high.

 

Lopez: What are the job prospects of high-school grads this year not going onto college?

Furchtgott-Roth: The teenage unemployment rate is 18 percent. The rate for African-American teens is 30 percent. We recommend that high-school graduates get some post-secondary-school training, particularly community college. Community college costs about $3,000 a year, and financial aid is available. Students who major in one of the health-care professions (occupational therapy, radiology technician) or in a computer-related field can earn about $45,000 a year after only two years of schooling. Or they can take the credits that they earn and transfer to a four-year college, which saves them a substantial amount of money.

Jared Meyer: While going to college is no longer the guarantee of success that it used to be, opportunities for those without any education beyond a high-school degree continue to disappear. Students are stuck — they are told that they must go to a four-year college to be successful, but doing so requires taking on large amounts of debt. Seventy percent of college graduates walk across the stage with student-loan debt, and the average debt is $27,000.

Though people need to continue their education to succeed in today’s economy, not everyone needs to go to a four-year college. Considering that 4 in 10 college freshman will fail to graduate within 6 years, pushing more students straight into university is not the best path forward. In addition to community college, technical schools provide an attractive, affordable education option, as they closely tailor coursework to local employers’ needs. High-school guidance counselors need to reevaluate their bias against community colleges and technical schools so students can take paths that better fit their unique needs.

 

Lopez: Even before that, you write that “America has failed, and is failing, to properly educate its young.” Where would you start to fix it? Are Common Core debates missing the point or distracting?

Furchtgott-Roth: I would allow parents to have more choice over where to send their children to school. Nevada just passed a law allowing the tax dollars to follow the child to the parents’ choice of school. It is morally repugnant that we require kids to go to failing neighborhood schools. We don’t require them to use their food stamps at neighborhood grocery schools, or limit them to Medicaid doctors in their neighborhood. There would be a revolution if we did. There should be a revolution because we require kids to go to poor schools — based solely on their parents’ zip codes.

 

Lopez: Millennials “have been disinherited from their birthright.” Explain.

Meyer: America is in fiscal trouble and young people are being asked to shoulder the burden — a burden they did not place on themselves. Politicians have mastered the genius — albeit evil genius — game of promising benefits now, and passing off the unfunded, irresponsible promises to those who are too young to vote (or who are not even born yet).

Everyone knows that America is $18 trillion in debt. But what people do not often hear is that when future spending obligations on entitlements are compared with future tax obligations, the so-called “fiscal gap” is over $200 trillion. Paying off the federal fiscal gap would require an immediate increase of 57 percent in all federal taxes, or cuts of 37 percent in all federal spending except interest payments on the debt. These percentages only increase as tough political decisions are postponed. Compared to their parents and grandparents, young people will either be stuck paying much more for government services, or they will receive fewer benefits.

 

Lopez: Surely this wasn’t intentional. Betrayal still seems a bit much.

Furchtgott-Roth: It wasn’t intentional. Parents and grandparents are equally upset that many young people cannot find jobs and are still living at home. Politicians find it easier to avoid tough decisions and votes. They avoid fixing entitlement programs such as Social Security and Medicare because they don’t want to be attacked by the other side. So these programs have spiraled out of control.

Meyer: Though this betrayal not intentional, it is real. Many government programs disburse concentrated benefits but have diffused costs, and the young consistently end up bearing the costs but missing out on the benefits. On issue after issue, we see the same pattern — the old are winners, and the young are losers. In order to ensure that America remains a country of opportunity, we must restore the birthright of young people — and the time to do so is now.

 

Lopez: Why should elderly Americans, who have concerns of their own, care about the plight of millennials? Your chapter “Stealing from the Young to Enrich the Old” might not poll well in Florida.

Furchtgott-Roth: The favorite subject of Florida retirees is their grandchildren and when they are next coming to visit. They care. And our proposals exempt people over 55. We suggest changing the indexing of Social Security benefits to price levels in the economy rather than wage levels and gradually raising the retirement age. It is better for millennials to be paying into a program that will be there for them when they retire.

 

Lopez: Your next chapter is “Paying for Parents’ Health Care.” To some extent, should they be? Do they owe something to their elders?

Furchtgott-Roth: Young people are certainly betrayed by the Affordable Care Act. It isn’t affordable for them, and because of the high deductibles, for many it isn’t care. There’s no reason for poorer millennials to pay higher premiums so that their richer parents can pay lower premiums. Plus, most young people don’t even have the option of buying a bare-bones plan that would insure them against catastrophic events such as cancer or falling off their bike in traffic.

In 2014, 27-year-old males saw their premiums rise an average of 91 percent because of the law. In contrast, premiums for the average 64-year-old rose only 32 percent.

The data show that young Americans are facing hurdles to success that are higher than they were in the past.

High premiums have prevented young people from entering the insurance market. As of March 2015 the number of 18-to-34-year-old enrollees was more than 40 percent below the ACA’s target, despite the individual mandate. There is currently only 1.1 young person enrolled for every enrollee above the age of 55, even though that ratio was initially projected to reach 2.4 to 1.

 

Lopez: Disinherited explains: “These days many Americans born between the early 1980s and the beginning of the 21st century, often called ‘millennials’ or ‘Generation Y,’ have not seen success. For them, achieving success will be more difficult than it was for young people in the past.” Isn’t it early to be declaring this?

Meyer: While we don’t expect that progress will come to a halt, or that the entire millennial generation will not achieve the American Dream, the data show that young Americans are facing hurdles to success that are higher than they were in the past. The debt continues to increase, the Affordable Care Act’s negative effects on the young are clear, educational achievement is stagnating, student-loan debt is at an all-time high, occupational licensing is more widespread than ever, and job-killing regulations continue to accumulate year after year. Whatever the government hopes to win in devising policies that leave an entire generation under assault, its victory is Pyrrhic, with only young victims in its wake.

 

Lopez: Regarding these numbers: “Over five years into the economic recovery, the unemployment rate for young people ages 20 to 24 is 11 percent overall and 20 percent for African Americans. The teenage unemployment rate is at 20 percent, and the African-American teen unemployment rate is at 33 percent.” What does not having a job do to a young person? What does it mean for these people?

Meyer: People who cannot get their first jobs cannot get their second or third, and there are many skills that are learned on the job that school cannot teach. Everything from high minimum wages to bans on unpaid internships at for-profit companies to excessive occupational licensing reduces career opportunities, especially for those just starting out. When we make it more difficult to reach the first rung on the career ladder, this has devastating implications for young Americans’ future success.

 

Lopez: Disinherited says: “What is troubling is that the biggest decline in labor-force participation is among workers ages 16 to 24, from a rate of 61 percent in 2004 to 55 percent in 2014. In other words, young people have been hit the hardest by the recession and slow economic recovery.” But are unemployed 16-year-olds really a problem?

Furchtgott-Roth: The unemployed are those who want to work but who cannot find work. Some 16-year olds need to work, to help their families, to save for college, or to pay routine expenses. So for them, not being able to work is indeed a problem. America used to be the place where anyone could get a job. Raising the minimum wage to $15-an-hour levels, as is happening in Seattle, San Francisco, and Los Angeles, means that these young people not only cannot earn money, but they cannot get the soft skills needed to excel in the workforce — showing up on time, staying the whole day, being pleasant to a boss and co-workers who are not necessarily pleasant to them. Plus, they won’t have a reference for their next job.

 

Lopez: “Only one-third of 27-year-olds, those who graduated college during the recession, are married.” What concerns you most about this?

Furchtgott-Roth: It’s worrying that millennials are delaying major life-cycle events such as marriage because they think their employment prospects are not good enough. This means that they might have fewer children, which is a loss for them and for the Social Security system. Social Security needs more children to support retirees, not fewer.

States are throttling entrepreneurial instincts in the cradle. What’s wrong with America when kids can’t even have a lemonade stand?

Lopez: “Over the course of a career, 4 in 10 Americans will need to obtain the government’s permission to work.” Why is that a problem?

Furchtgott-Roth: Funny that you should ask. Earlier this month, June 11, two children were told to close down their lemonade stand in Overton, Texas, because they didn’t have the right permits. They got the permit to sell lemonade, but not the health permit. The girls wanted to earn money to buy their dad a Father’s Day present. States are throttling entrepreneurial instincts in the cradle. What’s wrong with America when kids can’t even have a lemonade stand?

Meyer: These laws are a major impediment to entrepreneurship, and they have ballooned over the last 60 years (less than 5 percent of the workforce needed a license in the early 1950s). Occupational licensing extends far beyond doctors, lawyers, and accountants. Those working in professions that pose no danger to public safety, such as African hair braiders, tour guides, and interior designers, all must get expensive, time-consuming government permission slips to work. Though proponents of these laws claim that they protect public safety, most occupational licenses do little more than protect established businesses from new competition.

The Institute for Justice, a public-interest law firm that fights to protect Americans’ right to work, examined how licensing requirements vary by state, and ranked the states. The unemployment rate in 2012 (the latest comparable data available) for 16- to 19-year-olds in the 10 states with the least burdensome licensing requirements was 19 percent, compared with 27 percent for the states that have the most burdensome requirements. For those ages 20 to 24, these numbers were 11 percent and 14 percent, respectively.

Occupational licensing not only cuts off avenues for work, it also makes services more expensive. Licensing increases prices by around 15 percent, depending on the occupation. While this may not seem to be a lot, for an 18-year-old who needs a haircut for his first job interview, every dollar counts.

 

Lopez: What’s the best minimum-wage answer?

Furchtgott-Roth: As I said above, America always used to be the place where people could get jobs. With a minimum wage of $10 an hour, you have to have skills worth $10 an hour in order to get a job. A minimum wage of $15 an hour means you need even more skills. It’s immoral and discriminatory against poor, low-skill, and inexperienced Americans to pass a law saying they are not allowed to work if they have skills that are not worth $10 or $15 an hour.

 

Lopez: Why is the “Tommy Groves” story important? To what extent is the story of Obamacare?

Meyer: In addition to the premium and deductible increases that Tommy and millions of other Americans who were forced to change their plans experienced, his story highlights government incompetence. Tommy had to endure hours on the phone with those running his Affordable Care Act exchange, and he saw firsthand how bureaucrats refuse to take responsibility. As he told us, “I don’t want other people who are thrown off their employer’s health insurance to go through what I did. It was miserable and a complete waste of my time. Nobody listens to you. Nobody takes responsibility. The only advice I give people who are going to be stuck dealing with the health-care exchanges is, ‘Get ready for the bureaucracy.’”

 

Lopez: Jared, what’s your compelling plea of the millennial?

Meyer: Millennials need to realize that government is not the solution to every problem. Instead, Washington has consciously made decisions that make it more difficult for them to achieve success. Though the failures of the past administrations have left many young people politically unaligned, in order to be heard, millennials need to engage in the political process. Unfortunately, even if young people ignore the political process, the political process does not ignore them.

 

Lopez: Diana, what are the most jarring rallying-cry numbers?

Furchtgott-Roth: I am most concerned about how we are failing young people in education. If you don’t have a good high-school education, you can’t succeed in a two- or four-year college and you can’t get a good job. In America, only 80 percent of high-school students graduate in four years, a share that declines to 65 percent among African Americans. In many urban areas, barely half of students graduate from high school.

I am most concerned about how we are failing young people in education. In many urban areas, barely half of students graduate from high school.

The money we are spending on primary and secondary education ($13,000 per student per year) is not producing improved results. Since 1970, the public-school workforce has almost doubled, to 6.2 million, while student enrollment has gone up by less than 10 percent. Half of all public-school staff members now work in non-teaching roles. From 1950 to 2010, non-teaching positions in public schools increased by 700 percent. We need more innovative, talented teachers to fix American education, not more administrators and bureaucrats.

 

Lopez: What do you hope happens with your book? Who is the audience?

Meyer: The book is for young Americans and anyone who care about their futures. Betraying a nation’s young is not a partisan issue, nor is it a generational issue. We hope that others take our theme of government action favoring the old at the expense of the young and apply it to other topics that we did not address. Other policies concerning energy, criminal justice, the value of money, and housing all follow the same unfortunate story.

 

Lopez: Bottom-line platform for a presidential candidate who wants to give millennials their inheritance back? Can it even be done?

Furchtgott-Roth: Of course it can be done. On the federal level, reform entitlement programs. Get rid of red tape that prevents firms from expanding and entrepreneurs from starting new jobs. On the state level, put in place more school-choice plans, such as those in Nevada and Louisiana, and get rid of burdensome regulations on occupational licensing, including those that prohibit kids’ lemonade stands. Allow people to get the skills to work, and then get rid of the obstacles to employment creation.

Meyer: Our young people are as talented and as deserving of success as their parents and grandparents. People who should have fulfilling, productive lives are sidelined, unemployed, or underemployed. Meanwhile, America expects millennials and others of the disinherited generation to pay higher taxes so that middle-aged and elderly Americans can receive more from Uncle Sam. Rather than hindering millennials’ progress, we need to provide the right conditions for them to succeed.

Washington must allow young people to use the skills they have. This means America must evaluate its countless regulations, laws, and policies through the prism of how they affect new entrants to the workforce. The Internet and technology fields are currently the most unregulated sector of the economy. In this arena, America’s young people are in high demand and add significant value. We need to work to transform the country so that more areas can replicate the successes seen in Silicon Valley and Texas.

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