We have all heard of Japan’s “Lost Generation”, the young adults who entered the workforce during Japan’s decade of economic stagnation (generally the 1990s). Since the Japanese economy did not create sufficient numbers of new jobs to absorb these new entrants, these youths-including highly-trained graduates from good universities-ended up taking whatever type of work they could get. 3.3 million people who planned to enter Japan’s lifetime employment economy ended up taking menial odd jobs, contract work or temporary jobs. As explained by BusinessWeek in May 2007 , many of these jobs:
- Paid poorly, forcing many to live with their parents, rather than their own homes;
- Provided limited job security, which diminished marriage prospects; and
- Offered few benefits, which discouraged pregnancies (thereby exacerbating Japan’s falling birthrate).
Worse still, these jobs did not make use of these peoples’ existing skills and did not provide the type of new skills that would prepare them for more responsible positions. So when Japan’s growth resumed in the 2000s, companies shunned these workers in favor of younger, more recent graduates whose skills were current and who were not tarnished by spotty, low-level and non-traditional job histories.
What will be the long-term fate of this Lost Generation? Although it’s always dangerous to predict the future, it’s hard to foresee a future that will be kind to this generation.
So what does this mean for the U.S.?
The Gen Y Challenge
Although I ‘m certainly not predicting that the U.S. will suffer a full lost decade, we could easily suffer a lost half decade. U.S. employment peaked in December 2007 and, according to The Wall Street Journal’s article The Great Recession: A Downturn Sized Up, Stanford economist Bob Hall states that job losses have been piling up at a faster rate since any time since 1948–a pace that Hall expects us to surpass over the next couple months.
These job losses are expected to continue at least through the end of 2009, and possibly well into 2010. Even when the recession ends, growth rates are expected to remain low and most companies will increase the hours of current employees before hiring new people. And as we now recognize, a number of these lost jobs in industries ranging from automotive manufacturing to financial services are unlikely to come back at all. Although growth fields, such as healthcare, education and, increasingly, government are likely to sop up some unemployed workers, it is not yet clear which other industries are going to offer large numbers of sustainable, high-value job opportunities for newly minted knowledge workers—or over what timeframe they will do so.
True, the U.S. is not Japan. Workers who—due to no fault of their own—miss the first step of the employment ladder, are less likely to suffer a lifelong personal stigma. Moreover, some of those new graduates that are financially able are making the best of employment situation by going to graduate school. Even so, many of those Gen Y’ers who are forced to divert from their chosen career paths will face a big challenge. After all, when new jobs do become available, who are companies most likely to hire:
- Applicant A, a 22-year old that just graduated; or
- Applicant B, a 27-year old with the same educational qualifications, that has spent the last 3-5 years in menial or temporary jobs that did not exercise existing skills or create new ones?
Okay, newly graduating Gen Y’ers have the potential of becoming one of America’s new Lost Generation. Who will make up the second potential Lost Generation? Consider the Baby Boomers—Gen Y’s parents.
Baby Boomer Lost
It’s ironic. Two years ago, labor force economists and far-sighted corporations were in a panic. Baby Boomers were preparing to retire en masse and there were not enough Gen Y’ers to replace them. Even those companies that expected to be able to attract new entrants were struggling with challenges of capturing and managing the transfer of knowledge from retiring workers to their replacements.
That was before the Great Recession. Baby Boomers, in their mid- and late-50s, are now among the most prominent victims of the layoff ax.
It may be a something of a stretch to consider these people part of a Lost Generation. After all, most have already enjoyed 30 to 40 year careers. Moreover, weren’t many of these boomers planning early retirements, anyway?
Many of them were. But that was before the recession and before many of them recognized that their savings were far below what would be required to fund retirement, much less accommodate unforeseen medical costs or the growing potential of outliving their savings. According to an AARP study that was conducted before the bust, 73% of people over 50 did not even have sufficient income or assets to meet emergencies. Now, as explained in careersecretsauce, many of these “reluctant retirees” are finding themselves out of work at a time when:
- Their 401K and home values have been decimated;
- They have years before becoming eligible for Social Security or Medicare and
- Many will have trouble securing or affording health insurance once their COBRA plans expire.
Worse still, given the tough time that most older people have in finding new jobs, and the limited number of new jobs that the recovery is likely to produce, few have much hope of finding productive, well-paying jobs in their fields.
Even if these involuntary employees do find productive jobs or manage to create sustainable businesses of their own, many will lose the promise of a secure retirement. Fewer will be able to muster the spending that will be required to fund new jobs for either themselves, or their children.
Am I overstating this problem? If not, what can be done to reverse or moderate this spiral? Although I plan to address these and other perplexing dilemmas in future blogs, I need your help. What do you think?
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