Let's take a look at how Europe is doing with its socialist democracies. We know that a number of countries got all politically correct about paying people more money with more health care and better retirement and, predictably, the people's representatives kept asking for more and more until people were retiring with full pensions at 50 and, finally, there was no money for it and those countries entered into a long-term fiscal crisis. Many Greeks have fallen from middle class to subsistance and are barely eeking out a living at all. Things are better in Spain, Portugal and Italy but not for kids who want a job. Unemployment among 18-30 year olds is running in a range of 20%-50%. Lest you think this is not a big deal, how would you like it if you had to leave your country and move to some foreign place just to have a chance to get a start in life. Spanish, Italian, Portugese and Irish are leaving their families and homes for greener pastures in the Eurozone. And in places where the kids can't get out, they've got revolution. The Arab Spring is driven in part by the same age group facing a bleak future but without the ability to get out of the country and start somewhere new.
Stephen writes us from Germany with insights into the problem and a look at the German solution:
Rulers, I'm so sick of this EUSSR. Yes there is very high youth unemployment in most member states of the EU. Between 25% ( France) and 57% (Greece). Even a rich country like Sweden has a youth unemployment rate of 23%. Now what would a sane political leader do? Deregulate? Lowering minimum wages? Get rid of red tape? No! They give taxpayers money to emloyers to make them employ young people or sanction companies who won't employ young people. So why does a company employ workers?
The answer is very simple: If a worker will produce more than the combined costs of wage, taxes, health care, pension and insurance the employer has to pay , than he will be hired, when a worker doesn't produce more,than the costs of hiring he won't get a job. So how much can a young unexperienced kid, coming right out of school produce for his boss? I don't know, but in France, Greece, Portugal, etc., it must be less than the costs of hiring, otherwise youth unemployment wouldn't be so high. In Germany the youth unemployment rate is 8%. In France the general unemployment rate is 10.14 %, but the youth unemployment rate is 25% So where is the difference? In most countries in Europe there is a very high minimum wage (9.43€ in France; if you are under 18 and if you have less than 6 month job experience your employer can pay you a lower wage).
So let's compare this to the situation in Germany. I'm a teacher in a trade school, teaching young students, becoming house painters or car painters. When this young men and women start their apprenticeship with the age of 15 they work 4 days a week and go to trade school once a week. Their wage is 450€/month in the first year, 500€/month in the second year and 650€/month in the last year of their apprenticeship. They work 40hours/week, so their hourly wage is 2.80€ before taxes and about 2€ after taxes. After 3 years they have to pass an exam and then they become well educated journeyman and have usually no problem to find a good paid job. Most of the time their master craftsman keeps them in his business.
I think this is one of the reasons, why we don't have high youth unemployment. It is very hard for a young kid to produce goods and services which are worth more than 10€/hour. But everyone should be able to produce goods and services worth more than 3€/ hour. And after some time of on the job training and education he/she can produce more and gets a higher wage.
I would love to hear your comments from all over the world. Please tell me how you deal with youth unemployment in your countries.
P.S. What does this socialist intervention in the economy mean to us as Rule#1 investors? More public debt, more money printing to finance the debt, higher taxes, like the 75% tax rate for the rich in France, more unemployment and therefore more government interventions in the economy. How long can this insanity last? I don't know, but the Soviet Union existed 70 years.....so maybe I should look for another country to live in...