A Lost Generation. That sounds ominous, haunting, almost unimaginable. How could that be?
In the United States, it was the generation of young people who came of age during and shortly after World War I. In Britain, the Lost Generation was the flower of youth decimated during the Great War. It often implicitly referred to upper-class casualties who were perceived to have died disproportionately, robbing the country of a future elite.
In France, those who passed through the fiery furnace of war were the Génération au Feu, the “generation in flames.”
Fast forward to today. Some would contend that we have our own Lost Generation, as history will show that the first decade of the 21st century was a step back for the American middle class.
While the earnings of middle-income Americans have barely budged since the mid 1970s, the new data showed that from 2000 to 2010, they actually regressed.
For American households in the middle of the pay scale, income fell to $49,445 last year, when adjusted for inflation, a level not seen since 1996. And over the 10-year period, their income is down 7 percent.
“Economists talk about the lost decade in Japan. Well, with these 2010 data, we can confirm the lost decade for the American middle class,” Jared Bernstein, senior fellow at the Center on Budget and Policy Priorities told CNN Money.
Housing is a main culprit, as middle class families have most of their wealth tied up in the equity of their homes, which has taken an absolute a beating in a recession that has never left for some. High unemployment has only added fuel to the fire, leaving many people with little or no income at all.
Add to this dangerous mix rising prices. Even accounting for inflation, it costs more to fill your gas tank, go to the doctor and put food on the table than it did only 10 years ago. In short, it’s been a perfect storm for the middle class to be gutted, knocked down and dragged through the proverbial mud. Trust me my friends, I know this firsthand.
Two Trends That Don’t Help
“The American Dream has been under assault for 30 years,” said former President Bill Clinton, who cites two major trends as contributing to the destruction of wealth. The first is the idea of the shareholder supreme.
About 35 years ago, the notion of what a corporation changed, Clinton told Aaron Task with Yahoo’s Daily Ticker. Previously, corporations were “more or less” equally responsible to shareholders, employees, customers and the communities where they operated.
“Now, shareholders are up here and everybody else is way down there,” Clinton said.
Then there is popular notion – witness the rise of the Tea Party — of government being viewed as the enemy. Clinton said we’ve had a “30-year anti-government rant,” which is a uniquely American phenomenon.
“Instead of figuring out how the government and the private sector can work together, saying that ‘government is the source of all problems and if we just choked it off, never another regulation, never another tax, never had another program all will be well.’ There is not a single, solitary example on the planet where that’s worked, including in America.”
Earlier this month, the Census Bureau released its annual report, showing that the ranks of America’s poor swelled to almost one in six people last year, reaching a new high as joblessness hovered above 9 percent for a second year. The number of uninsured edged up to 49.9 million, the biggest in more than two decades.
The overall poverty rate climbed to 15.1 percent, or 46.2 million, up from 14.3 percent in 2009. It is the largest number on record dating back to when the census began tracking poverty in 1959. Based on percentages, it tied the poverty level in 1993 and was the highest since 1983.
The official poverty level is an annual income of $22,314 for a family of four.
These are sobering numbers. But rather than a lost generation, I think of today’s middle class as being abattered generation. For the most part, Americans still have not given up on the dream. They hope, they believe that things can improve.
And somehow, someway, despite the statistics, I have to think they are right. We may be down, but we are not out. We have some very deep reserves in this country in terms of strength and perseverance. (We also have some pretty good demographics on our side, which is another story.) Eventually, this ship will right itself and certain robber barons – those who nearly brought on financial collapse — will be defanged.
An Ugly Truth
Meanwhile, we will likely muddle through this difficult period with little or no job growth for the foreseeable future. And that puts unrealistic demands on economic development organizations, which are for the most part judged on job creation by board members and elected officials who are either clueless or purposely demagoging.
In my prior life as an economic developer, I was told after I was hired, that it was promised that our organization would be responsible for the creation of 5,000 jobs over a period of time. I said that was nuts. I wasn’t there very long.
Laith Wardi, president of ExecutivePulse, a consulting firm specializing in advising economic development organizations on matters of business retention and expansion, agrees that job creation is no longer a realistic barometer, because net job growth will be limited to only certain pockets in the country. (I happen to live in one of them.)
“When economic developers and government officials set new job creation as their mantle or primary goal, they are going to fall short of that goal. Most communities are simply not going to be creating jobs,” Wardi said.
So there it is. There’s the hand grenade rolled into middle of the room. There’s the ugly truth. Net job growth will be a pipe dream for most places.
Like the trenches of World War I, we are seeing the human casualties that are the result of huge structural changes that we are having a tough time understanding and accepting. And one of them is this: Fewer people will be needed to do the work.
By definition, as manufacturing becomes more productive, and the U.S. is the most productive country in the world in terms of manufacturing efficiency, fewer warm bodies are required.
And that is the real story of the lost generation – those who are (and will be) not needed. As a result, they will be relegated to menial jobs if they can find them at all. The jobs of their fathers are gone.
In today’s fragile environment, it is becoming more clear every that Europe is the wild card. If things get ugly, Europe can take us down. I wish that wasn’t true.
Concerns are mounting that European banks may not have sufficient capital to withstand a default by Greece and slowing economic growth caused by governments’ austerity measures. Lloyd’s of London stopped depositing money with some banks in Europe’s peripheral economies, Luke Savage, finance director of the world’s oldest insurance market, told Bloomberg earlier this week.
“There are a lot of banks who, because of the uncertainty around Europe, the market has stopped using to place deposits with,” Luke Savage, finance director of the world’s oldest insurance market, told Bloomberg. “If you’re worried the government itself might be at risk, then you’re certainly worried the banks could be taken down with them.”
The worst case scenario, which is a widely held sentiment in the US financial community, is that if Greece goes into default, it could provoke a domino effect with defaults by Ireland, Portugal, Italy and Spain.
This would be Armageddon. It would turn current-zero growth performance in the industrialized world into a worldwide depression.
If that were to happen, a lost generation may turn into lost generations.
Need a partner in results-oriented site selection? Contact me, Dean Barber, at 972-890-3733 or at email@example.com Barber Business Advisors, LLC is a site selection and economic development consulting firm in Plano, Texas. Please visit our website at www.barberadvisors.com