A piece this week on the portion of Americans working in their prime received a lot of attention, but the fact of the matter is that this is a trend that has gone turbo over the last few years. The author noted that the participation has declined to 75.7% for 25-54 year olds down from pre-recession level of 80%. These are people that have simply dropped out of the job market. While it skews the unemployment rate to a more flattering number, it has a truly devastating impact on the economy and on the individuals that find the sofa more appealing than hitting the bricks in vain.
This is really a male-oriented phenomenon even though participation among prime-age women is at its lowest point since 1988.
One of the myths about the overall decline in worker participation is that it's simply baby boomers checking out for The Villages. That's not the case at all, and in fact, Americans over 55 years old have seen millions in net job gains since the Great Recession began. This is all about young men losing faith in the promise of the greatest country in the world. What was once an exciting rite of passage, going from teenager to young man, is now a right of passive going from sofa-bound teen to sofa-bound adult.
This didn't get the attention that news out of Spain and polls out of Greece did, but make no mistake, yesterday's vote in Ireland to continue accepting EU treaty austerity conditions could have completely derailed a very fragile situation had it been rejected.
Voters in Ireland voted 60% in favor of ratifying the EU treaty after they rejected EU treaties in 2001 and 2008.
Still, austerity is tough, and people in Ireland are pissed. Poverty has grown, although I don't blame that on austerity. Political parties and unions are fanning those flames and pointing that finger. Keep in mind that Ireland is similar to Greece in the sense that its long battles with Britain made it long to be a part of greater Europe. For Greece, its battles with Turkey also added to the need to have greater Europe get its back. That said, however, these countries got to their economic crisis in different ways.
While Greece embraced the welfare state, Ireland became a shining example of how a nation could turn it around.
When Ireland joined the EU, its average wage was only 63% of the EU, and at one point after, it zoomed to 125%. It's been especially painful and humiliating for Ireland, which fought so hard to create a vibrant economy. I'm sure they will get back there sooner than another of the other names in the PIIGS acronym. In the meantime, they are toughing it out under a plan that aims to take the deficit to GDP from 32% in 2010 to under 3% by 2015 (it finished last year at 13%).
Here's the price Ireland had to pay for an €85.0 billion bailout (€67.5 in loans from EU, IMF, UK, Denmark and Sweden and €17.5 billion from its own reserves and pensions).
> -€2.8 billion in welfare
> Cut 25,000 public sector jobs
> Payroll savings €1.2 billion
> Minimum wage cut by 1 Euro to €7.65
> Increased tax collection of €1.9 billion
> VAT 23% from 21%
> Student tuition hike
> Water tax by 2014
> Pension related tax by 2014
Congratulations to Snigdha Nandipati for winning the Scripps National Spelling Bee with the most appropriate word of the day: guetapens. This is a French-derived word that means ambush, snare or trap, which is where the western world finds itself these days. Those that are trapped are the ones that work while being pressured by those that don't work and their political allies working for reelection instead of national greatness.
In France the guy promising the easy life won, and now global markets are trapped by the prospect of Greece holding onto its welfare state and reneging on obligations to those that lent them money. Markets are also trapped by frozen decision-makers whose hand wringing exudes ineptness. It's like that slow motion train wreck that makes us all feel helpless. Yes we are trapped now after being snared, and each day our fading hopes are ambushed even more.