Youth unemployment around the world is growing apace and young people are starting to be heard, with hundreds of thousands pouring on to the streets to protest about the seeming unfairness of it all and the lack of jobs. Free markets deliver the most efficient allocation of resources but their distribution may still be unjust.
The activism of the young has provoked an explosion of anger from the American right, including the likes of Rush Limbaugh, who so effusively supported the Tea Party. "These protesters, who are actually few in number, have contributed nothing," he said on his radio show. "They're parasites. They're pure, genuine parasites. Many . . . are bored trust fund kids, obsessed with being something, being somebody. Meaningless lives, they want to matter."
No reverse gear?
Scary stuff, but Limbaugh does have a point. I think the young are protesting because they do want to matter. It isn't their fault that there are no jobs. Youngsters need hope and too many have none, and that may come to haunt us all. As long as the protests remain peaceful, they are likely to have a big impact: governments worldwide are likely to get into trouble with their austerity agendas if the protests are joined by mothers with children and retired people.
Occupy Wall Street, the protest that started all of this, is apparently supported by most New Yorkers, according to a poll this month by Quinnipiac University. Sixty-seven per cent of New York City voters say they agree with the protesters' views; only 23 per cent do not.
In Britain, there is growing opposition to Chancellor George Osborne's refusal to accept the obvious - that his policies are directly responsible for the pain that young people are experiencing. A powerful editorial in the New York Times of 14 October, entitled "Britain's self-inflicted misery", stated that the coalition government's "quack cure" had failed:
Austerity was a deliberate ideological choice . . . It has failed and can be expected to keep failing . . . slashing government spending in an already stalled economy weakens anaemic demand, leading to lost output and lost tax revenues. As revenues fall, deficit reduction requires longer, deeper spending cuts.
Cut too far, too fast, and the result is not a balanced budget but a lost decade of no growth. That could now happen in Britain . . . Austerity is a political ideology masquerading as an economic policy. It rests on a myth, impervious to facts, that portrays all government spending as wasteful and harmful, and unnecessary to the recovery. The real world is a lot more complicated.
It is all so unnecessary. But I have a sense that change is in the air. People are waking up to the reality that growth has stalled and consumers have stopped spending. Bond yields are low because the economy is tanking.
The small growth of private-sector employment has not compensated for the collapse in public-sector employment as predicted by the government. Over the 12 months to June 2011, private-sector employment grew by 264,000, while public-sector employment fell by 240,000. It is worth noting that the Office for National Statistics (ONS) also produces estimates of what has happened to employment since then. Over the three-month period between June and August this year, employment fell by a further 178,000. It will be interesting to see the mix between public- and private-sector job losses in due course.
Data from the National Institute of Economic and Social Research published on 11 October does make it look as if the coalition may well be driving us into the second Great Depression. I have presented earlier versions of the chart (below), which now includes the most recent ONS data revisions. This version is alarming. It shows the decline in output from the starting point and how long it takes to reverse each setback. The present slump looks worse than any other in the past 100 years; it is comparable in depth to that of the 1930s, having fallen by over 7 per cent, but is of longer duration and still is far from over.
We are 44 months in and less than half of the output drop has been restored. It is clear what Osborne's policies have done. Recovery was proceeding merrily under the previous chancellor, Alistair Darling, but has shown little growth over the past nine months.
Add insult to injury
Youth unemployment hit 991,000 in August, with the unemployment rate in the 16-24 age group hitting a record high of 21.3 per cent. So what did the government have to say about this? Chris Grayling, the spin merchant and employment minister, who has responsibility for overseeing the new Work Programme, was sent out to blame anything but the government's failed policies. The line is that the increase occurred because of what was happening in the eurozone, and wasn't that bad, as nearly a quarter of a million were in full-time education. That was an insult to the young.
Let's look at this nonsense. First, there is no evidence that the recent rise in youth unemployment has anything to do with the eurozone. Rather, it has everything to do with a freeze in public-sector hiring, the squeeze on public spending and the removal of help for the young that the Labour government introduced, such as the Education Maintenance Allowance.
Second, unemployment among the young has always been calculated as the sum of those not in full-time education plus those in full-time education looking for work. That is how the EU calculates youth unemployment in all countries. Since May 2010, unemployment among 16-to-24-year-olds has risen by 67,000, from 924,000 to 991,000. Unemployment among those in full-time education has fallen by 24,000, from 293,000 to 269,000, while those not in education has risen by 91,000, up from 630,000 to 721,000. The unemployment rate of youngsters not in full-time education now stands at 20.2 per cent, its highest level since such data first became available in 1992.
Grayling speaks with forked tongue.
David Blanchflower is the NS economics editor and a professor at Dartmouth College, New Hampshire, and the University of Stirling