Menckens Ghost

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Is this where the USA is headed?

The following sobering Wall Street Journal article details the economic travesty inflicted on younger generations in Europe, especially in Italy and Span, by ever-increasing labor laws, entitlements, and social spending.  The paradox is that the more job and social protections that the government gives workers, the more that older workers have security at the expense of younger ones. 


Can this happen in the USA?  Actually, it is happening now.  The trend over the last four decades of both Democratic and Republican rule has been accelerated by the Obama administration---that is, the steady and dramatic increase in laws, regulations and agency actions in the areas of safety, health, medical care union organizing, family leaves of absence, equal opportunity, medical care, disabilities, unemployment insurance, and greedy featherbedding by public-sector unions.  Even more onerous are the huge unfunded liabilities for Social Security and Medicare that will be borne by younger generations.  Then there are the tremendous military and veteran costs of maintaining our empire, costs that are a lot less in Europe, because Europeans have wisely shifted their military costs to us as we have stupidly and eagerly taken on the costs...  



In Europe, Job Protections for Older Generation Are Barriers for Younger Workers

Earnings Gap Looms for Younger Generation Dependent on Short-Term Contracts

Updated Aug. 8, 2014 7:58 p.m. ET

Andrea Tarquini, center, recently moved back in with his parents in Rome, sleeping in his boyhood room, after losing his job four years ago. Massimo Berruti for The Wall Street Journal

By the time the parents of Serena Violano were in their early 30s, they had solid jobs, their own home and two small daughters.

Today, Serena, a 31-year-old law graduate, is still sharing her teenage bedroom with her older sister in their family home in the small town of Mercogliano, near Naples.

Ms. Violano spends her days studying for the exam to qualify as a notary in the hopes of scoring a stable job. The tension over her situation sometimes spills over in arguments with her sister over housework or their shared space. And with her 34-year-old boyfriend subsisting on short-term contracts, Ms. Violano doesn't even dare dream of building the sort of life her parents took for granted.

"For our parents, everything was much easier," she says. "They had the opportunity to start their own life. Instead, we don't have any guarantees for our own future."

Ms. Violano's stunted adulthood and dashed expectations mark a generational divide between younger and older Europeans that is challenging the Continent's dream of broad-based prosperity.

In Europe's weaker economies, people in their 20s and 30s often have little hope of achieving the careers, wealth and economic security enjoyed by their parents. In places like Spain and Italy, the employment rate has tumbled for people under 40 since 2008, even as it has stayed relatively steady or grown for their parents' generation.

Their predicament is exposing a painful truth: The towering cost of labor protections that have provided a comfortable life for Europe's baby boomers is now keeping their children from breaking in.

The older generation benefited from decades of rock-solid job protection, union-guaranteed salary increases and the promise of a comfortable retirement. All this has allowed them to weather Europe's longest postwar crisis reasonably well.

By contrast, many younger Europeans can hope for little more than poorly paid, short-term contracts that often open a lifelong earnings gap they may never close. Employers in many countries are reluctant to hire on permanent contracts because of rigid labor rules and sky-high payroll taxes that go to funding the huge pension bill of their parents.

The breach is widening: Median income for people over 60 rose between 2008 and 2012 in nearly every European Unioncountry, according to Eurostat; it declined for people under 25 in almost half the EU countries, including in Spain, Portugal, the U.K. and Holland.

This has left young people increasingly dependent on the older generation. In turn, parents are frustrated that children in their 30s and even 40s can't cut the cord.

A recent study by EU social research agency Eurofound showed that the number of people aged 18-29 living with their parents rose to 48% from 44% between 2007 and 2011, while youth poverty has risen almost everywhere in Europe.

The rift will weigh on future growth in Europe, now experiencing a fragile recovery, since lengthy spells of joblessness for young people can penalize earnings for years and drag on growth. Over the next two decades or so, the forgone wages of young people in Spain and Greece, with youth unemployment over 50%, could translate into lost gross domestic product of about 8% and 6% respectively, according to a January 2013 report by analysis firm TD Economics.

Italy offers a striking example of the generational gap. The employment rate of Italians under 40 fell nine percentage points since 2007, while it rose the same amount for those between 55 and 64 years, according to Eurostat.

The Italian economy slipped into its third recession since 2008 in the second quarter of the year, making it even harder for the young generations to bridge the gap with their parents, who enjoyed a phase of economic expansion. Italy's triple dip into recession also complicates the battle of young Premier Matteo Renzi against youth unemployment, which climbed to a new record high of 43.7% in June.

The steady climb of boomers like Vincenzo Violano, 67, and his wife, Irene, 62, fueled rosy expectations for their children.

Vincenzo earned an accountancy diploma and started working at 24, first in the private sector and then in local municipalities, before retiring in 2010. His wife got a stable job as a middle-school teacher soon after graduating in education.

When the Violanos bought their two-level apartment abutting a sprawling park in Mercogliano in the late 1990s, they wanted more space and autonomy for their two teen daughters. They gave them the largest room in the house, with twin beds and a big closet, never imagining they would still be sharing it as adults 15 years later. But like many Europeans, young Italians are leaving the nest at increasingly older ages. In 2012, 64% of Italians 18 to 34 years old lived with their parents, up from 60% in 2004, according to Eurostat.

Serena used to imagine her 30s as a new, exciting phase. Instead, she feels stalled, having spent the past four years working as a low-paid legal apprentice and studying for the notary exam. In the meantime, notaries have seen their income fall by 45% in five years due to the crisis.

"And now, I'm more than 30 and I'm still here, waiting," she says. "I feel like my life is constantly hanging in the balance."

One source of the problem is the proliferation of low-paid, short-term contracts, expanded in Italy and Spain in the 1980s and 1990s as a way to help young people find jobs because it made it easier for employers to hire and fire relatively cheaply. In 1998, 20% of Italians under 25 were temporary workers. Today more than half are, according to Eurostat.

But that created a labor market split between young people and baby boomers and opened a stubborn earnings gap. Entry-level wages began dropping in Italy in the early '90s and continued to fall, according to a 2013 Bank of Italy analysis, dropping nearly 30% between 1990 and 2010 for men. Subsequent salary increases never caught up.

Large layoffs in the past five years, which disproportionately targeted young people because of the contracts, then compounded the problem. The employment rate for Spaniards under 30 has halved since 2007 to 32% but stayed steady for the older generation.

As a result of lower wages and higher unemployment, spending by households headed by Spaniards under age 30 was lower in 2012 than in the late 1980s relative to the national average, according research by Pedro Albarran, economics professor at the University of Alicante.

The Spanish economy was booming in 2006, when Danna Domingo, then 24, won a job mixing customized medicines at a hospital pharmacy in Girona, in northeastern Spain. Yet she was hired on a temporary contract, and for five years, her bosses chained together consecutive contracts lasting from just a few days to up to three months.

Meanwhile, the situation of her parents, a teacher and the manager of a music academy, was starkly different. Spain's laws make it nearly impossible for her mother, a civil servant, to lose her job. Her father took over a city-owned music academy that did well in the country's boom years.

Ms. Domingo's temporary contracts left her ineligible for raises or promotions. Banks rejected her home mortgage applications, while landlords declined to accept rental agreements in her name.

At the hospital, the petite technician seethed silently at middle-aged workers with permanent contracts who seemed to take their duties lightly knowing their job was secure. Ms. Domingo sometimes had to work double time to compensate for the lackadaisical pace of older colleagues, meticulously concocting, for example, chemotherapy medicines for individual cancer patients, she said. She even got additional training in the hopes of securing her job. A spokesman for the hospital said neither its culture nor contracts dictate "that someone with an indefinite contract would work less than someone with a temporary contract."

Constant worries about her next paycheck caused her to lose sleep and weight. Once, she ignored doctor's orders to rest after a bicycling accident and returned to work right away because she feared losing her contract, she said. She lost her job in 2012, after switching to a temporary contract at a different hospital.

Earlier this year, Ms. Domingo landed her first permanent contract?part time, working evenings at a hospital radiology department for less than ?1,000, or about $1,350, a month. She sobbed so hard for joy when she called her boyfriend with the news that he thought something terrible had happened, she said.

Despite the meager pay, she can now dream of buying a house or having a family. But she has given up hopes of mirroring her parents by having three children, resigned to having just one. Like many young Spaniards putting off childbearing, she had delayed having a child for fear that a pregnancy would hurt her chances of winning a new contract. On average, Spanish women today have their first child in their early 30s, an age that has been rising for decades, according to Spanish government statistics.

"I feel like I'm running behind," she said.

Weak entry-level wages and short-term contracts have kept European youth tethered to their elders and dependent on "generational welfare." For instance, Italian grandparents are providing more essentials for their grandchildren. Baby boomers bought 15% of all diapers and about 30% of all children's cookies last year, up from 12.5% and 27.6% respectively a year before, according to Nielsen research.

But by supporting their children financially, parents have unwittingly also blunted public pressure for changes to labor rules and pension rights that could make it easier for their children to get a start, says Luis Garicano, a prominent Spanish economist at the London School of Economics.

For Andrea Tarquini, a 44-year-old son of two pensioners, returning home was an extreme solution. He had left at age 22 and worked in a call center. He lost that job four years ago and tried to start a video production company. When it struggled, he was forced last December to move back home, where his movie posters, DVDs and books now contend for space with his mother's oil paintings and his nephews' toys.

"I feel guilty because my choices are falling back on them," he says. "My parents have become my social safety net once again."

His 67-year-old mother, Maria Giuseppina, says Andrea's return to their two-bedroom apartment in a working-class Roman neighborhood obliged the whole family to reconsider roles and spaces, leaving her anxious about her family's future.

With a small living room and one television to share, Andrea often tries to leave his parents space, spending his free time in the tiny bedroom he shared with his sister as a child. He's single and isn't planning to marry soon. Italians and Spaniards now typically marry in their early 30s, a decade older than in 1980, according to the United Nations.

In turn, Mrs. Tarquini fears that the family finances?hers and her husband's pensions total only ?1,400 a month?won't be sufficient to support Andrea in the long run if his new video company doesn't take off.

The couple, who once owned a perfumery, has been forced to sacrifice summer holidays, outings to the theater and dinner with friends.

"Sometimes I have to make up excuses, when they invite us out for a pizza, because now we can't afford it," says Mrs. Tarquini, who sometimes takes anti-anxiety medication because of her worries.

Andrea gave himself one year to make his company work or start searching for a stable job that would allow him to regain his independence. But he and his parents know that goal may be far off.

"I'm trying to accept this situation ? but I don't have much hope left," says Mrs. Tarquini. "He's a man now and his return was a broken dream for all of us."

Write to Ilan Brat at and Giada Zampano

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