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If You Were Starting Off at Age 25...

I read on Mish Shedlock that the birthrate has fallen to a 25-year-low, in part because young adults are having such a hard time finding jobs. Mish believes that America is in for a decade or two of structurally high unemployment. I certainly don't envy young people starting off in life today, since greedy and irresponsible Baby Boomers -- America's Worst Generation -- have stacked the odds against them. But what advice would you give to a frustrated and discouraged 25-year-old today about making a living? 

We must guard against the tendency of oldsters to get suckered into 'grass is greener on the other side of the mountain.' Otherwise we will tend to romanticize a dream job as an antidote to decades of frustration and disappointment suffered in a real job.

It is easier to say what you wouldn't start off in, if you were 25 today. Manufacturing is ancient history in our post-industrial society, of course. And yet I'll bet colleges still teach useless subjects like math, chemistry, engineering, and physics. But it could be counter-argued that most of the industrial sector's decline has already happened and that it has bottomed out because of government protection, which preserves a sticky post-industrial residue such as military industries, "Government Motors", green energy, and the like.

The last few decades most of the employment growth was in health care, education, debt engineering (aka finance), and law enforcement. But as always, it might be risky to assume that these trends will "grow to the moon." It was amusing to run into this quote from Seneca yesterday:
Yet nothing involves us in greater trouble than the fact that we adapt ourselves to common report in the belief that the best things are those that have met with great approval,--the fact that, having so many to follow, we live after the rule, not of reason, but imitation.

It is the example of other people that is our undoing...
Our 25-year-old must try to do more than merely extrapolate the hot trends of the last few decades; otherwise he will fall into the classic trap of thinking some idea is safe because everybody accepts the idea, which ironically makes the idea past its prime and therefore dangerous. "Conventional" does not mean "safe." 

Take health care. Emotion runs high on "government versus private," so much so that it hogs attention from the mathematical fact that, at 18% of the economy, health care increases have to slow down. This might be hard for people to believe since health care has seen inexorable growth for decades now.

Another long-running trend our 25-year-old must be cautious about is becoming a government employee, especially at the local level (school teachers, police, firemen, etc.) This category of workers has evolved into the upper class of the American labor marketplace. In the endlessly downsized private sector, employees live in fear that, when quarterly earnings are announced, the figure will come in at 49 cents per share compared to Wall Street's prior expectation of 50 cents per share, and thus another 5-10% of the jobs will be eliminated or outsourced. In contrast the local-government employees must only worry about a serious recession that erodes the local tax base. If they are even shrewder they have gotten onto the federal payroll; wouldn't that make them virtually layoff-proof? After all, the federal government runs a deficit decade after decade. Apparently it can stay in business by printing unlimited amounts of money to cover any shortfall of funds.

Since these government jobs must be done in the USA they haven't felt competition from China; the jobs have been so safe that strong unions have grown up in the government sector, in contrast to the inexorable decline of unions in the private sector. I remember a unionization drive with university employees around 1980 by -- get this! -- the United Auto Workers. You must give the UAW leaders credit for having the perspicuity to see that their union was doomed in the automobile sector because of competition from Toyota and the rest, and that they needed to move into a quasi-government sector like education, where politicians will see to it that you can borrow yourself blind for inexorably higher education costs.

The recent recall election in Wisconsin and several municipal bankruptcies in California should be a warning to our 25-year-old that (unionized) government employees are about to get their long overdue come-uppance. 

The private sector has largely eliminated "defined benefit" pensions in lieu of "defined contribution" plans, such as 401K and IRAs that are the individual's responsibility to manage. Only the government sector still gets "defined benefit" pensions. Politics aside, it is a mathematical impossibility to pay the "defined benefit" pensions that the recipients expect. These pension plans are based on actuarial tables and the assumption of earning 7-8% on the pension fund investments. How do you do that when Bernanke is running a multi-year Zero Interest Rate Policy (ZIRP)? 

The construction industries were red hot for many years. Besides the political and financial hangovers from the sub-prime housing bubble, recovery will be held back by demographics: young adults (permanently unmarried) will be forced to live in the basements of their parent's home, as they shuffle from a part-time job at a restaurant to a part-time, benefit-less job at the dollar store until they're middle-aged, at which point they get laid off because they're earning 70 cents per hour more than the minimum wage.

This post is starting to sound like a gloom-and-doom, anti-government, financial newsletter. I've chosen to focus on 'what not to do' first because the negative side of the ledger is usually more tangible and concise. Next post I'll talk about what our frustrated 25-year-old should do.



Ed said…
I look forward to your 'should' list.
My not so humble opinion is they should try being as self sufficient as possible with regard to food.
Secondly, develop a skill and/or knowledge that is NOT single type of business dependent.
Third, work/sell such skills as an independent contractor; DO NOT work "for the man" be they public or private.
XXXXX said…
I see some tendencies in those in their 20's to be quite different from us baby boomers. I know I rather blindly believed that making money was pretty much my prime purpose and value in life but I see that to be much less so now. Not with all, some still want the moon. It's hard to know percentages with any accuracy.
But surely there are many young people who are walking away from the desire to lash themselves to the mast for the big bucks.
I also see them want less material things as well. Again, not all, but many. There seem to be many who wander, as marriage rates are lower and there isn't a whole lot to keep them tethered.
The success and growth of our economy has always been dependent upon consumerism and this tendency to do without doesn't help that but I think an economy dependent upon consumerism is bound to fail sooner or later anyway. Gosh, I buy so much in thrift stores since there is mighty good stuff there for cheap.
Of course, it seems what the young will not do without is all the handy dandy devices and games which simply didn't exist 40 years ago.
Ed, food really is underestimated by young folks, isn't it? If they're not careful a vast fortune can be squandered on food, in addition to health complications.

I agree with the principles you've mentioned.
Welcome back, George. You're probably right about young folks being even more addicted to gadgets than we old farts are. Of course gadgets can be reasonably cheap.

Perhaps the gravest danger of the gadget comes from the fact that 'the medium is the message' applies to each different type of gadget. This can result in a lot of time being squandered.
XXXXX said…
To answer your initial question though, Boonie, I think we baby boomers shouldn't really be offering any advice. I totally agree with your inital statement that we have set an example of greed.
Thanks for the welcome back. I have been moving actually cross country, downsizing, donating to charities things I initially spent thousands of dollars for. Shedding the outer vestige of my material youthful days of being bound to the mast of financial gain. On the other hand though, it's amazing how appreciative one can be to have a desk and chair to sit on again.

Offering advice to others tends to be based on one's perception of mistakes made in their personal life. It's a different culture out there now than the one we were young in. I think it's better to simply stand behind the younger generation's vision of the change needed and have confidence in them. There really is no ultimate fixing the world, you know.
Larry said…
Ditto, With ED,The more self reliant you can be, the better off you will be. Larry
Anonymous said…

If the Kodger hears this blasphemy he will have your flogged, drawn & quartered and you name and words wiped from the Internet

As he preaches that due to industrialization only 50% of us need to work 10- maybe 15 years max to enjoy life, he states in the future people will work less and less. He says that millions now have the means to enjoy their freedom. Afterall he won his freedom 30+ years ago. Now you may need to register for the Blogger federal protection program.