Disinherited. Diana Furchtgott-Roth

minimum wage is set above someone’s skill level, that person is left on the sidelines. Businesses are not forced to pay the minimum wage, because they always have the option to not hire people at all. If the minimum wage rises too high, employers have an incentive to replace their less-skilled workers with more-skilled ones or with machines. The first rung of the career ladder remains out of reach when the minimum wage is too high, and this has far-reaching effects later in young people’s lives.

      While the minimum wage has been politicized, its negative consequences should concern people across the political spectrum. Linda Mack, owner of a bike store in Silver Spring, Maryland, is a liberal Democrat. Yet when her county voted to raise the minimum wage in three increments to $11.25 an hour, she foresaw problems for her business and for the young people she trains. “I want to teach people how to work and hold down a job,” Linda told us. “I agree that competent people should all be making $11.25 an hour. But when I bring new people in and attempt to train them, there is a reverse cash flow. My newest people are a drain on my staff and our cash. They are effectively useless for months.”

      She continued: “I start people at $8.00 an hour. So the summer help that we must bring in would bleed the business dry at $11.25 an hour, in that they really can’t do much their first summer other than say hello and point to the bike pumps so visiting cyclists can pump up their bikes. In year two, they are usually worth that $11.25 or more, or I don’t bring them back. The cost of bringing new workers into the workforce falls more heavily on my shoulders than ever before. I am going to have to raise prices to cover this social good, training young people to think and work.”

      Linda had a well-educated, intelligent young woman working for her. Her biggest challenges were learning to come to work every day, do her job competently, present herself professionally, and understand that failing to show up caused hardship for her colleagues. Some might think that these skills are just common sense, but many people have to learn them.

      Linda does not know what the solution is. “I think that I’ve been effective in training young people, on my little micro scale. But I do think an $11.25 minimum wage is going to cause a big adjustment in the cost of services and goods, create an even bigger underclass of unemployable people, and cause some fairly drastic changes at my small bike shop.”

      Prohibitions against unpaid internships harm the very people they are supposed to protect. Just as with increases in the minimum wage, businesses are less likely to invest in training young people in the hard and soft skills necessary for a career if they have to pay a high cost for the training. Firms from Condé Nast to Fox Searchlight have discontinued their internship programs. It would be far better to view internships as education that comes with the added benefit of real-world experience. Laws that discourage young people from finding work make it harder for them to gain crucial career experience. This lack of early workplace exposure can have profound social and economic consequences later in life.

      Our solutions and conclusion are presented in Part IV: Where To from Here? In Chapter 7: Reclaiming the Disinherited Generation, we describe solutions to ballooning entitlement spending, ineffective education systems, and workplace constraints, which all combine to create an environment that systematically imperils young people’s futures. Those with access to a good education and a broad network of connections will continue to do well. But what about those who are kept from succeeding in school and are not blessed with professional connections? What will happen to them?

      Some, such as New York Times columnist Paul Krugman, think that the solution is more government spending and higher taxes. As he sees it, deregulation is the root of the problem. If government were larger and gave more handouts, and taxes were raised to fund these goodies, then young people would do better. Extensive data from European economies show that this argument does not hold water. Countries in Europe have higher taxes, free or subsidized education, heavily subsidized health care, and ample leave for vacation, illness, and childbirth. Yet youth unemployment is even higher in Europe than in America. The unemployment rates for Greek and Spanish youth hover above 50 percent, and the average for the European Union is close to 25 percent.¹⁶

      In Chapter 8: Conclusion, we show how politicians in both parties are responsible for the betrayal of America’s young. Partisan talking points are not enough to end this outrage—all these destructive policies began long before the current administration. While the problem is bipartisan in nature, the solution is, too. Putting an end to that which disadvantages America’s youth should be a major concern for people all across the political spectrum. The time has come to recognize that holding back a nation’s youth is the antithesis of fairness and no way to make economic or social progress.

      While conversation about any aspect of the systematic betrayal of America’s young is useful, we focus on the three major policy failures—ballooning government spending, ineffective education systems, and workplace regulation—that combine to create an environment that places young people at a disadvantage. This betrayal is not intentional. In this book we lay out the scope of the problem and what will be necessary to solve it.

      Plainly stated, Washington is robbing America’s young. Our country is facing a crisis, and change is essential in order for young people to achieve the future they deserve.

PART I

       STEALING FROM THE YOUNG TO ENRICH THE OLD

      America’s national debt is $18 trillion and climbing. Social Security and Medicare, mammoth programs that provide generous benefits to seniors, consume 40 cents of every dollar spent by the federal government, a proportion expected to increase. When future spending obligations are stacked up against expected tax receipts, America owes $205 trillion—more than 12 times our GDP—a figure that dwarfs the oft-cited $18 trillion number.

      Today’s young people will pay the bills when they inevitably come due, while today’s seniors enjoy a comfortable retirement. Working people contribute 15.3 percent of their paychecks to payroll taxes that only partially fund these programs. If Washington does not act to reform entitlements, it will mean either a much higher tax bill for millennials or a steep reduction in benefits.

      At the state level, runaway pension plans for public-sector employees pose a serious threat to state budgets. As well-connected public-sector unions fight against any changes to generous pensions, it is the poorly represented taxpayers, the young people just starting their careers or those who cannot yet vote, who will end up footing the bill.

      Taxes and unfunded deficits are just one side of the story. Government programs such as the Affordable Care Act rob the young in other ways. Young people, especially young men, have seen their health-insurance premiums soar under the new health-care law. Regulations that artificially hold down the premiums of their parents leave young people to pick up the slack.

      New mandates on the labor market will also harm young people when they take effect. In 2016, small businesses that do not offer health insurance as a benefit will need to pay the post-tax equivalent of $60,000 in fines to hire a 50th full-time worker. This will slow the growth of hiring and discourage millennials from seeking a job. Youth labor-force participation in America is already at historic lows—only 55 percent of young people are in the workforce.

      While many government programs—Social Security, Medicare, the Affordable Care Act—have the admirable goal of caring for the elderly or helping the uninsured, they also have unintended consequences. The unseen losers, those who silently shoulder the costs of these programs, are America’s young. The following section explains how government steals from the young to enrich the old—and how we can redesign policies and programs to work for everyone.

CHAPTER 1