If you’ve been keeping half an eye on economic news, the UK has of late been looking pretty spiffy relative to its advanced economy peers, with 2014 growth forecast at 3%. Even though unemployment in the UK is at its lowest level in five years, the young and the long-term unemployed haven’t benefitted to the same degree.
One issue that doesn’t get the attention that it merits is the destructive psychological impact of being out of work. Work doesn’t just provide money, as critical as that is. It provides a way of organizing your time, social interaction, and a place in society, even if that place is not really where you’d like to be. Being unanchored is extremely taxing. Recall that the Japanese get people to quit by giving them a desk and nothing to do. The lack of legitimacy, the implicit shaming of being isolated is sufficiently punitive as to induce workers to give up their pay and being able to tell their families they have a job.
The BBC reports on the results of a survey by the Prince’s Trust called the Macquarie Youth Index, which is based on a survey of roughly 2200 16 to 25 year olds. 13% were what the survey called Neet: not in employment, education, or training.
The survey found high levels of suicidal thoughts and self harm among this group, and high levels of stress among the young generally. Key excerpts from the article:
The report found 9% of all respondents agreed with the statement: “I have nothing to live for”…
Among those respondents classified as Neet, the percentage of those agreeing with the statement rose to 21%.
The research found that long-term unemployed young people were more than twice as likely as their peers to have been prescribed anti-depressants.
One in three (32%) had contemplated suicide, while one in four (24%) had self-harmed.
The report found 40% of jobless young people had faced symptoms of mental illness, including suicidal thoughts, feelings of self-loathing and panic attacks, as a direct result of unemployment.
Three quarters of long-term unemployed young people (72%) did not have someone to confide in, the study found.
Martina Milburn, chief executive of the Prince’s Trust, said: “Unemployment is proven to cause devastating, long-lasting mental health problems among young people.
In past downturns, I’ve seen studies that suggest that people recover quickly from unemployment-related depression once they find work. But as much as finding employment would clearly be a huge boost, I’m not sure if it will have the same salutary effect as in the past. Many jobs are part-time, and there is very little job security, particularly for young people, who as the most recently hired, are often seen as the most disposable. Again in Japan, a wide cultural gulf has emerged between those who do manage to land a job on the traditional corporate career path, and that of “freeters” who often work for the same companies, but only on short-term contracts. The difference between freeters and salaried workers is sharp in Japan, and freeters are clearly second-class citizens. From a 2011 post by Michael Dziesinski:
In Japan, globalization has caused many companies to downsize and resort to a contract-for-hire work force they can jettison at any time to stay profitable. However, unlike globalized corporations in other countries, many big Japanese companies still prefer to hire fresh 20-something college graduates as their regular employees with full benefits. The remainder of their work force are ‘outside hires’, contract workers: freeters.
Contract workers may have gone back to school as an adult or have worked for several years learning the same skills in the industry as regular hires. However, that on-the-job work-experience by contract hires is not considered valid on a job application by Japanese corporations. So re-skilling and adult education in Japan means, even if you can get hired into a middle class labor position, most likely you will be a contract worker with no real chance to become a full time employee at the “big” corporations the rest of your working life. You are relegated to a precarious working class existence in society with little job stability.
This is why there is a growing population of aged 30+ freeters (contract workers) in the Japanese work force. Freeters and NEET are basically the same group of Japanese workers either in contract employment (and show up in data as freeter) or unemployed after a stint working (and are classified in labor data as NEET) . Collectively, this marginalized population of Freeters and NEET are rapidly becoming Japan’s new working class with no viable path to a mainstream middle class career. Many of these 30-something freeters want to start families or be bread-winners, but lack the job stability to settle down into family roles with any confidence.
And there is a great deal of evidence in America that one’s early employment trajectory makes a huge difference in career earnings; a bout of early unemployment or taking lower-paid jobs appears to have a lasting impact. So while young people are presumed to be resilient, it’s not hard to imagine that differences in degrees are differences in kind, and that the post crisis era will impose long-term costs that aren’t fully recognized now, including on the mental health of young adults.
As disheartening as this story is, I find it particularly hard to take when I contrast it with a New York Times account about how investors are rebelling at out-of-control top-level pay at the restaurant company Chipotle:
In the case of Chipotle Mexican Grill, the paydays for both [chiefs] were supersized. Chipotle paid its founder and co-chief executive, Steve Ells, $25.1 million in cash and stock last year. It paid Montgomery F. Moran, the company’s other co-chief executive, $24.4 million. Those figures put the men, college buddies who are now running the country’s hottest fast-food chain, near the top of the charts for executive paydays.
Each man individually made more than the chief executives of larger companies like Ford, Boeing and AT&T. Together, they made more than all but the highest-paid chief executive among the country’s biggest 100 companies, Lawrence J. Ellison of Oracle.
But that is not the whole picture. Since 2011, Mr. Ells and Mr. Moran have each made more than $100 million on top of their salaries through a complex mix of stock awards. Now the pay packages and unusual co-chief executive arrangement are drawing scrutiny from investors….
“C.E.O.s of far bigger and more complex, more profitable companies are paid less,” said Scott M. Stringer, the New York City comptroller, who oversees $150 billion in city pension plans. “They’re paid more than Lloyd Blankfein at Goldman Sachs and Jamie Dimon at JPMorgan.”…
And several shareholder advisory groups, including Institutional Shareholder Services and Glass Lewis, are campaigning against the pay packages, setting up the meeting on Thursday as a public test of investors’ willingness to challenge ballooning executive pay…
Chipotle’s founder, Mr. Ells, earned 778 times the median salary at the company in 2012, the 11th highest such ratio of the top 250 companies in the Standard & Poor’s 500-stock index, according to Bloomberg.
And though general managers at Chipotle can earn upward of $100,000 a year, the average starting salary at one of the company’s 1,600 restaurants is about $21,000 annually. Earning that wage, a Chipotle employee would have to work for more than a thousand years to equal one year of the co-C.E.O.s’ pay.
Although this case is particularly extreme, you see it replicated all over the sorts of companies that provide fallback jobs for workers, namely restaurants, retail, low-end service jobs. The CEOs get massive pay packages as the bulk of their employees face unstable working conditions and meager wages. We didn’t have this sort of yawning disparity 20 or 30 years ago, which indicates it isn’t necessary, but has become a new normal that has become institutionalized. A few efforts to push back are underway, like the shareholder vote at Chipotle, $15 an hour minimum wage proposals, and Rhode Island’s maximum wage bill. These are important starts, but it will take a lot more to move social norms back to a healthier and more productive allocation of rewards.