Revanth

Matha Adlai E. Stevenson Individual Economic Paper

The Core Venture

In a dynamic and ever changing work environment, employers seek out versatility and adaptability. The ability to learn new skills and improve existing ones is the key advantage of the younger demographic. This important attribute is what gives new workers value thus allowing them to enter the workforce. However, this value does not outweigh the experience, knowledge and skills possessed by veterans in the industry. This contrast between young and old causes higher unemployment for the youth in a tighter job market. Since late 2007, the start of the economic downturn, it has been harder for everyone to find jobs with current national unemployment at 7.9%, but especially for college graduates and the youth their rate is at 15.5%. This difference is representative of needs by employers for knowledgeable and experienced workers during a recession. The reason behind this is that training costs time and money, which in a recession few companies possess. During a recession employers look to cut waste, occasionally lying off the least beneficial members. Generally employees who do not contribute much to the companys growth are the youth because they are still learning, in comparison the elderly already have been trained and are less maintenance. On a larger scale, occasionally some experienced workers are also laid off and are searching for jobs. Companies looking to hire, often times will choose the experienced over new as it is overall a cheaper and more efficient alternative. Experienced workers also possess the advantage of contacts formed over the years. Knowing and having contacts is very valuable when looking for a job as CNN estimates that only 15-20% of all jobs are listed publically meaning that up to 80% of hires come from asking around in the industry.

Revanth Matha Adlai E. Stevenson Individual Economic Paper

Many college graduates are unable to use this tactic and so a majority of them will compete for a limited number of openings which experienced workers which reduces an already few positions available. The reports by the Bureau of Labor Statistics indicate that there are 3.7 million available jobs to those who possess the proper skills. Specifically there is a surplus of around 360,000 jobs in the science, technology, engineering and math areas (STEM) areas while only 120,000 are unemployed. To fulfill the demand in this area, employers are offering high wages, outstanding benefits and resorting to hiring immigrants. The demand for labor was so great that the average salary had increased in certain fields by 21.2% since 2004 while the rest of the nation took a 8.2% pay cut. It seems that that people are just looking for jobs in the wrong area of work. The biggest factor contributing towards unemployment is simply that the younger generation is not skilled enough to gain jobs or do not want jobs in areas that have them in areas STEM areas. Many of these fields, engineering for example, require use of advanced mathematics and scientific principles of physics and chemistry to develop new technology. Currently in the US there are will be an estimated 40,000 engineers graduating from college less then half since 1982. Their prospects for jobs are a 72% placement within the first 6 months and 92% after one year versus the national average of 46% and 61%. The primary reason for low unemployment among STEM careers is that a high number baby boomers currently hold these positions and are retiring at a rate of 52,000 people per annum. This leaves 12,000 vacant positions not accounting for the 3.2% growth in the industry. Without an increase in students taking up engineering in the

Revanth Matha Adlai E. Stevenson Individual Economic Paper

near future, unemployment will continue to increase or stay the same, and immigrants will come to our nation leading to economics consequences. The economic consequences caused by the unemployment of the youth, include an increased deficit and decreased competitiveness globally. On a national scale unemployment and its cycle is relatively simple. A decrease in workers is a decrease of workers paying tax. A decrease in tax revenue leads to smaller budgets. During a recession the government is expected to engage in monetary and fiscal policy, which requires capital to ease the flow of credit. Due to a smaller budget but increased demand for money the government will respond by decreasing interest rates and spending its discretionary funds on job creation and welfare. The consequences of these actions are that the government will have to borrow money or print money. Typically the US government does a mix of both which results in an increased deficit and larger and inflation. Many 16-29 year olds require jobs to pay for college and basic durable goods such as their first car, appliances and housing. College in particular is important because it would allows youth gain proper training and degrees to prove to employers that they are ready for work. A lack of an educated workforce would be detrimental in the long run and would require the increased immigration of foreign workers. In order to compensate for lack of money to pay for expenses, people around this age would need to take out loans. The average college graduate currently comes out with $26,000 in debt and will only increase as time goes on. As for durable goods, it is during that age that many people purchase their firsts. When people do not have the basic necessities to live by themselves it requires them to live with their parents or caretakers. This explains the

Revanth Matha Adlai E. Stevenson Individual Economic Paper

mean age of people officially leaving home increasing to 27 years of age. The effect of this is an increased burden on the elderly population as their savings are used up to accommodate another being and may lead them into the red during retirement years. On an international level there will be an increase in immigrant workers who take up high skilled labor as the youth failed to attend college and thus cannot attain those careers. High skill labor often pays more and as such immigrants of this type on average make $78,000 their first year. When the youth finally catches up and attempts to take these spots back, immigrants will already be established and experienced giving a disadvantage to domestic workers and closing off potential employment opportunities. The biggest consequence of immigrant workers is the exchange of funds in the currency markets. When it is time for immigrants to leave the nation they must transfer dollars to their nations currency. When this starts occurring en masse global currencies may not be able to keep up depreciating the dollar causing inflation. Another consequence caused by the transfer of money out of the US is a 10% out tax, which would be beneficial in the short term but since the money has left it has no chance to engage in the marginal propensity to consume and marginal propensity to save factors within the US economy. What this means is 1 million dollars in the United States would cause a $57,345,000 loss for the GDP with current tax rates and propensity rates. This decrease will surely hurt American industries, businesses and consumers. In order to avoid this potential collapse a few solutions are possible, the US Government can provide incentives such as a decreased tuition cost for majors where jobs are available, the government can instill policy to restrict foreign workers or higher tax rate on foreign workers and the government can increase hiring by giving tax

Revanth Matha Adlai E. Stevenson Individual Economic Paper

exemptions for every new worker hired. The first kind of policy deals with encouragement of people to get into certain fields by providing education opportunities at discounted costs. One popular idea currently is that workers pay no tuition for certain majors but in exchange pay a portion of salary once hired to pay for the costs initially. The second policy is to discourage foreigners from coming and hoping businesses invest and hire domestic labor. Although a good idea the potential for failure is high as the corporation may move its location to a foreign nation creating no net benefit. Lastly the government can give tax breaks and incentives or subsidize the cost of training employees. This is the most popular option as business has more incentive to higher and it increases marginal propensity to consume due to increased savings. The long-term benefit of options would create job surpluses and skilled labor while discouraging foreign entry into the markets so that overall the entire economy is benefited. Once a cycle starts its hard to stop. Benefits are compounded over time, which is why its important to act now. The youth must be trained to be able to compete in the job market. If not done the consequences are a high debt and weak currency. It can only be fixed if the government passes laws encouraging education in STEM careers, business hiring and restriction or international workers. Overtime if noting is done Americas youth will be worse off then their predecessors resulting in a negative compounding. It is best for the nation as a whole to struggle hard and raise the quality of education leading to a better and more fulfilling life.

Revanth Matha Adlai E. Stevenson Individual Economic Paper

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