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INTRODUCTION AND SUMMARY: THE OVERARCHING PROBLEM

In a speech to high school graduates in Topeka, Kansas, in May 2014, First Lady Michelle Obama told the assembled students: “I am so proud of all that you’ve accomplished. . . . And I cannot wait to see everything you will achieve in the years ahead.”

But these days many Americans born between the early 1980s and the beginning of the 21st century, often called “millennials” or “Generation Y,” have not seen success. For them, achieving success will be more difficult than it was for young people in the past.

This is the first generation of young Americans that our government systematically disfavors and the first generation of Americans whose prospects are lower than those of their parents. They have been disinherited from their birthright.

Many older Americans think that they are disadvantaged by today’s culture or by old age in general. Claire Sommers, in her eighties and living in Brooklyn, finds it hard, for instance, to use modern technology such as computers and smartphones. Her husband, Sonny, finds it increasingly difficult to complete daily tasks around the house.

But in terms of government spending, Claire and Sonny are winners—unintended winners, because they never wanted to take advantage of their grandchildren, but winners nevertheless. Washington politicians increase the federal debt with unfunded promises to retirees, and, if Claire and Sonny’s grandchildren get jobs and pay taxes, they are the ones who will end up funding that debt.

Over five years into the economic recovery, the unemployment rate for young people ages 20 to 24 is 11 percent overall and 20 percent for African Americans. The teenage unemployment rate is at 20 percent, and the African-American teen unemployment rate is at 33 percent.¹

Job creation is proceeding slowly, but the largest share of gains is going to Americans ages 55 and older. Young adults have hardly benefited from declines in the unemployment rate. Many, discouraged, have given up on finding work and are leaving the labor force. The percentage of teens and young people employed or looking for work, known as the labor-force participation rate, is at the lowest level since the government began keeping records on this in 1948. In contrast, Americans 55 and older are working in increasing numbers and now have the highest labor-force participation rate since the early 1960s.² Since the late 1990s, the labor-force participation rates of workers 65 and older have been rising steadily as well.

These trends of increased labor-force participation by older workers are commendable—after all, life expectancy continues to lengthen. What is troubling is that the biggest decline in labor-force participation is among workers ages 16 to 24, from a rate of 61 percent in 2004 to 55 percent in 2014. In other words, young people have been hit the hardest by the recession and slow economic recovery.

Male Employment Population Ratio, by Age

Source: Bureau of Labor Statistics, Current Population Survey

This is causing millennials to delay important milestones in their lives, such as getting a full-time job, moving out of the family home, and buying a house. More are working part time, because that is all the work that they can find.

The percentage of employed 20- to 24-year-olds who work part time was 21 percent in the mid-1980s. This percentage grew steadily to 30 percent by 2008 and then rose to 36 percent in 2014—an increase of more than 70 percent in just a quarter century. The percentage of employed people over the age of 25 who work part time increased only 11 percent over that same time period.³

Those unable to find jobs find it difficult to pay rent or qualify for a mortgage. From 1968 to 2007, the percentage of 18- to 31-year-olds living with their parents held steady at around 32 percent. By 2012, that number had increased to 36 percent. Among young people 18 to 24 years old, 56 percent lived at home in 2012—a historic high.⁴ “The unwritten social contract of their [parents of millennials] era presumed that the economy would be strong enough so that when children reached a certain age, they could be ‘launched’ into the adult world and would not crash. It’s this contract that has now broken down,” explains columnist Robert Samuelson.⁵ Only one-third of 27-year-olds, those who graduated college during the recession, are married.⁶ Starting a family is much more difficult while struggling to find work.

Percent of 18- to 31-Year-Olds Living at Home

Source: Pew Research Center tabulations of March 2012 Current Population Survey data

Each section of this book is able to stand on its own. Readers may find some chapters more interesting than others and can follow their own progression while reading the book. We interviewed a number of people in the course of our research. Some were glad to speak on the record, and we have provided their full names. Others preferred to be anonymous, and when quoting them or discussing their experiences, we use only their first names or a pseudonym. The book is divided as follows:

Part I: Stealing from the Young to Enrich the Old describes Washington’s expansion of entitlement benefits and other government services, along with the taxes young people will have to pay to support them, mostly to subsidize older Americans. The federal government has a debt of $18 trillion, and this is only projected to rise.⁷ Entitlement programs such as Social Security and Medicare are bankrupt. Unfunded liabilities driven by these programs push the total federal fiscal shortfall to more than $200 trillion. When Social Security and Medicare were originally put in place, no one forecast that they would grow so rapidly and take over almost two-thirds of the federal budget. In addition, state governments face $5 trillion in unfunded liabilities, mostly in retirement-benefit debt.⁸

In Chapter 1: Unfunded Promises, we describe how politicians in Washington are taking from the future earnings of young people, many of them not old enough to vote, to pay for services for their parents and grandparents, who do vote. Burdened with an obligation to pay government debt they did not incur, young people begin life at least partially robbed of their birthright.

Their parents and grandparents, beneficiaries of the New Deal and Great Society programs that are now bankrupting America, never intended this. They are deeply concerned that their children and grandchildren cannot find jobs and are facing a future of decreased opportunity. They never anticipated that their comforts would come at the expense of their progeny. But, regardless of intentions, that is what has occurred. The question remains, What can be done to create a system that is more fair and sustainable?

Mary Parrilli, now in her twenties, living outside Chicago, told us: “I am outraged. We have been scammed, end of story. I do not expect to get back any of the money I am paying into Social Security—to me, it’s just another tax. I think people should help the elderly, especially their own family, but it is immoral for the government to force this upon us. This is a perfect example of punishing the young and successful, and rewarding the irresponsible.”

We know the increasingly devastating fiscal condition being handed to our nation’s youth. Every Social Security and Medicare Trustees Report and every Budget Outlook from the nonpartisan Congressional Budget Office shows fiscal deficits far into the future. These deficits drive the national debt even higher, and someday the bill will come due. Only substantial tax increases or spending cuts will solve the problem, and, judging by the current political climate, these are not coming anytime soon.

Our budget is controlled by “dead men ruling,” in the words of economist Eugene Steuerle. “In 2009,” he writes, “every dollar of revenue had been committed before that Congress walked in the doors of the Capitol.”⁹ Because of automatic entitlement spending, Congress is unable to balance the budget without taking direct action to rein in the growth of these programs. To make matters worse, spending in 2009 was $3.5 trillion and revenue was $2.1 trillion, leaving a deficit of $1.4 trillion.¹⁰ Seven years from now, the deficit is expected to surpass $1 trillion again and continue rising after that. This will leave debt held by the public at more than 79 percent of GDP in 2024, compared with about 73 percent now.¹¹ While this disproportionate spending is clearly a major component of the future problems facing America’s youth, the issue extends far beyond the fact that young people will be stuck with their parents’ and grandparents’ debt.

As if this were not enough, the Affordable Care Act has raised health-insurance premiums for young Americans and lowered them for middle-aged and older people. Young, healthy Americans are, in effect, being required to pay for the health care of older Americans. We address this in Chapter 2: Paying for Parents’ Health Care. Rather than solve the problem, Washington has added to it by raising the cost of insurance for millennials and lowering it for their parents.

We interviewed Tommy Groves (not his real name), a young professional working at a small firm in Washington, D.C., whose health-insurance provider terminated his coverage. Tommy’s employer gave him a set amount of money to spend on health insurance, and he spent hours on the computer trying to purchase insurance through the D.C. health exchange, called D.C. Health Link. When that failed, he spent hours on the phone. Even that was not sufficient to allow him to enroll, so he had to visit the office to sign up in person. Tommy’s premium for his “silver plan” went up to $225 a month from his $175 pre-ACA rate.

Before the passage of the Affordable Care Act, premiums for 18-year-olds cost about one-fifth those of 64-year-olds.¹² Since older people are at a much greater risk of serious health problems than are people just out of high school, it makes sense that insurance companies would charge the 64-year-old more. Given that income typically rises with age, the 64-year-old would be better able to afford the higher premiums. But the new law prohibits insurance companies from charging older people more than three times as much as it charges young Americans, so premiums for people such as Tommy had to increase.

Part II: Keeping Young People Uneducated describes educational barriers to progress. Young people are disadvantaged from their elementary and high school years until they graduate from college—and beyond. In elementary and secondary school, ill-qualified teachers are protected from being fired. This favors older teachers, but it harms young teachers and the students who would benefit from high-quality teachers.

In their college years, young people are encouraged to attend a four-year university, even if doing so is not the right choice for them. The current system of federal student aid raises the cost of college tuition, so students are forced to take on debt that will burden them for many years after they graduate. We need to encourage innovation in the classroom at all levels of learning, whether through charter schools, voucher programs, or massive open online courses to reverse the trend of declining educational performance.

The betrayal of America’s young begins with America’s primary-education system. In Chapter 3: The Failure of Primary and Secondary Education, we show that states do not require children to pass content-based exams to progress to the next grade, so children are often shuffled from one grade to the next on the basis of attendance, even if they do not know the material.

Maybe states do not apply educational standards because many students would be hard-pressed to meet them. Once the envy of the world, America’s primary-education system has deteriorated. With the rest of the world catching up to or pulling ahead of the United States in educational achievement, failing to prepare students for an increasingly globalized economy is the height of unfairness.

Nowadays, many public schools are run for the benefit of their employees rather than their students. Compounding the lack of achievement are teachers’ unions that stubbornly resist commonsense educational improvements, such as charter schools and voucher programs. When it comes to delaying school openings from 7:15 a.m. to a time more suitable to teenagers’ well-known sleep schedules, school boards resist change in order to maintain a status quo that public-sector unions support. Unfortunately, many local governments choose to protect union interests over their students’ futures.

Some families can manage to send their children to private schools, and others can afford to move to better school districts. But many millennials are doomed by a failed public school system that cannot meet the demands of a 21st-century economy.

After students graduate from high school, the betrayal continues. In Chapter 4: Drowning in College Debt, we show that more than 7 in 10 college students take out loans to finance college, and the average amount of student loan debt is $29,400.¹³ But many students graduate with little hope of finding a job, left with nothing but a mountain of debt to repay. William Bennett, secretary of education from 1985 to 1988, has shown how “politically charged pseudo learning” has diminished the value of a college degree, while government financial-aid programs have pushed the cost of college tuition sky-high.

Even though the return from a two-year community-college education in a generally well-paid field, such as health-care services or computer programming, can be greater for the individual than the return from a four-year college degree, many high school guidance counselors do not recommend community college. College-trained with bachelor’s degrees themselves, they look down on community colleges or worry that they will be penalized for recommending two-year institutions to low-performing students. Instead, they shovel entire classes into four-year colleges, ignoring the looming high level of debt at the end of the process.

Connor Wolf, a young political reporter, sat down with us to talk about college debt and the state of higher education in America. “Most if not all decisions in life should be based on a cost-benefit analysis,” he said. “This is especially true for major financial decisions like college.” While this point might seem obvious, most people do not approach higher education with this mind-set.

What Connor told us next was surprising. Even though he said his college experience was superb, he has some reservations: “If I were to look at it now, I would say beyond a doubt that the benefits I received from going to college didn’t come close to the price of that experience, and, from what I understand, many students and recent graduates feel the same way.”

Connor also described the frustration and pressure he felt while trying to find a job after college graduation. “I imagine that trying to find a job is unnerving in any circumstance when a person is young and competing against people with much more experience, but with a bad economy and a lack of available jobs, it only becomes more frightening,” he said. “After graduation, I looked for any job, from an entry-level position where I could start building a career to a basic restaurant job so I would be slightly less broke. There was nothing available. Finally, after four months, I found a catering job that provided me with enough money to afford to start some internships related to my career interests. I didn’t get a college-level job until a year and a half after graduating, yet I consider myself lucky because many recent graduates are still struggling. It really is unacceptable.” As Connor’s comments make clear, America has failed, and is failing, to properly educate its young.

The next step in our betrayal of millennials is in the workplace. Part III: Regulations That Cripple the Young shows how Washington and state governments prevent young people from entering the job market. This is done in multiple ways. Occupational licensing requirements are meant to protect public safety, but they instead protect established businesses and workers at the expense of everyday consumers, entrepreneurs, and young workers; and they make many promising career paths prohibitively expensive or time-consuming to enter.

Minimum-wage laws, though well-intentioned, make it more difficult for the young and low-skilled to acquire valuable work experience. Unpaid internships, which teach the hard and soft skills necessary for future success, are limited. Again, the government is telling young people that they are not free to work. We need to roll back these destructive labor-market laws at every level of government so the first step on the career ladder can be within reach for all young people.

Washington should do as much as possible to ensure that young people—who have large debts to pay off, including outstanding college loans, and little to show in the way of education—can get a job and start earning income. But the reverse is true. In Chapter 5: Licensing Requirements Keep Out the Young, we describe how occupational licenses restrict millennials’ ability to start their own businesses. Occupational licensing is an often-overlooked but substantial barrier to the workforce, and it extends far beyond doctors and lawyers. Countless occupations—from manicurists to door-repair contractors to auctioneers—require a license from the government in order to work. Over the course of a career, 4 in 10 Americans will need to obtain the government’s permission to work.

Despite the claims of proponents, these occupational licenses do little to protect public safety. Rather, they protect those who are already established in their careers from the competition young workers would generate. Interior designers, though licensed in only three states and the District of Columbia, need an average of six years of training to work, but who has died from clashing drapes? In contrast, emergency medical technicians who hold lives in their hands need only 33 days of training.¹⁴

Occupational licensing has a disproportionately negative effect on young people looking to start their careers. Paths to entrepreneurship are cut off, not only for them but also for older workers looking to start small businesses. This further limits the creation of local jobs that open opportunities for young people. Today’s occupational licensing policies bring back memories of medieval regulations aimed at protecting established tradesmen at the expense of potential competitors. In the Middle Ages, tradesmen formed guilds to lock out newcomers. Today, all levels of government implement policies that protect established, politically connected workers. This keeps young people from fully participating in the workforce and following their career dreams.

Occupational licensing is not the only factor in preventing young people from working. Chapter 6: Banned from the Job Market describes the high minimum wages that keep younger millennials out of work. Similarly, once commonplace, unpaid internships in for-profit companies are now disallowed out of concern that companies might use them to exploit the interns.

University of California economist David Neumark has shown that young workers with low skills are harmed the most by the minimum wage. This is not surprising given that half of minimum-wage earners are between the ages of 16 and 24.¹⁵ If people cannot get their first job, how can they get their second or third? People who take minimum-wage jobs gain entry into the professional world. Once they are in, they can keep rising.

When the 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.