Friday, October 23, 2009

Impact of High Unemployment on Young Americans

Compounding the problem, baby boomers are remaining employed beyond their anticipated retirement age, as they have watched the value of their homes along with their 401(k) accounts shrink. Skittish over their own financial futures, they are remaining in the workforce longer which also has a negative impact on young people seeking employment.

The roadblocks this generation currently faces may reverberate long into the future. That’s what happened to young Japanese who tried to enter the workforce during Japan's decade-long recession of the 1990s. Dubbed the “lost generation” by economists, Japanese who came of age during that era have struggled to make gains along the career ladder and now account for a disparate proportion of Japan’s low-income and homeless populations. In other words, it’s not as though today’s young Americans can simply wait out the current recession and expect their career trajectory to continue as normal once the economy recovers.

To avoid creating a “lost generation” of Americans will require facing up to what is causing jobs to disappear. Private sector job growth is virtually non-existent. This is particularly the case in the manufacturing sector where 5.5 million American jobs were lost from 1999 to 2009.

There is a common sense solution available which would get the private sector moving again and bring good jobs home to America. Under the Hartman Plan, our onerous corporate tax system, with its 35 percent tax rate and its 6.2 percent employer portion of the payroll tax, would be replaced by a revenue-neutral, 8 percent business-consumption tax that would be border-adjusted. All goods and services coming into the U.S. would pay the 8 percent tax while all exports would receive a comparable tax credit or tax abatement as an offset to its company’s business consumption tax. Suddenly, the U.S. would become competitive again with our trading partners.

Intel’s former chairman Craig Barrett has said, “Intel can move wherever it must to survive, but I sometimes wonder how my grandchildren will make a living.” If nothing is done, the American dream will die for future generations. Let’s be bold and replace a tax system which incentivizes shipping American jobs overseas with one which will reward the creation of jobs here at home.

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