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.