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Home Publications Blogs Beat the Press The European Central Bank Is a Much Bigger Problem for Italy's Young Than the Elderly

The European Central Bank Is a Much Bigger Problem for Italy's Young Than the Elderly

Thursday, 18 July 2013 04:50

A New York Times article reported on the aging of Italy's population and bizarrely implied that this was the cause of high youth unemployment. The piece tells readers:

"With older people in the Mediterranean living longer and longer lives — and with fertility rates low and youth unemployment soaring in Italy, Greece, Spain and Portugal — experts warn that Europe’s debt crisis is exacerbating a growing demographic crisis. In the coming years, they warn, there will be fewer workers paying into the social security system to support the pensions of older generations."

This paragraph came immediately after a paragraph telling readers:

"Many of their children [of today's elderly] have high school or university degrees and are now retired from public or private sector jobs. And their children, the ones born after 1970, generally have university degrees — and are struggling to find work."

The claim that Italy is suffering from too few young to support the retired population and that the young cannot find jobs are directly contradictory. This is like telling us that Italy is suffering from a heat wave and sub-zero temperatures.

The problem of not enough young people is a problem of lack of supply -- too few young people to provide the goods and services the country needs. This should manifest itself in a labor shortage. Companies are trying to get workers but cannot find them. There will be large numbers of jobs going unfilled with wages rising rapidly as employers bid against each other to hire the workers who are available.

By contrast the high unemployment rate, even for university grads, is evidence of lack of demand. In this situation there is no shortage of available workers, the problem in the economy is not enough demand. In this story, if Italy had a few more million centenarians, who were spending pensions without working, then it could create the demand needed to employ the young. 

Of course the world is more complicated. Because of the failed policies of the European Central Bank, prices in southern Europe got out of line with prices in northern Europe. As a result, much of the demand created by the elderly in Italy goes to Germany rather than Italy. But this is a story of incompetent central bankers, not demographics.

Comments (4)Add Comment
Now for the Weather, A Surplus and Shortage of Hot Air and Cold Air at the Same Time
written by Last Mover, July 18, 2013 5:56
This is like telling us that Italy is suffering from a heat wave and sub-zero temperatures.

Even dumbed downed journalists know reporting average temperature is not news, so they make up people with their head in the oven and their feet on a cold floor and report them. Works for economics too.
Chills and Fever
written by nassim sabba, July 18, 2013 7:29
"Italy is suffering from a heat wave and sub-zero temperatures"

That is not outside the realm of possibilities, especially if you have some virus attacking your brain, you get chills and fever at the same time. But then again, that is when you are very sick and your mind has given up rationality. Maybe we should give the sick author a break. But then, that should be in mentioned at the start or end of the article, that the author penned this piece under chills and fever, and whatever that does to the brain's cognitive and analytical functions.
Some lines never get old
written by Jennifer, July 18, 2013 2:31
Just like inflation is just around the corner-the idea that too many old people will kill the economy is a regular economic theme. Doesn't matter whether its Italy, China, the US, if there is a smaller population of younger worker to older people you can get a column out of how this is a problem.
Don't forget about calculator-breaking gastritis
written by Matt, July 18, 2013 10:52
@nassim sabba: don't forget about the well-known ability of gastritis to break calculators:



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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.