By John Shinal
SAN FRANCISCO (MarketWatch) — The U.S. economy is much more productive than it used to be, thanks in large part to innovative products and services pioneered by the technology industry.
Yet there is a downside to that for older technology workers, as well as for younger ones that lack the most in-demand skills.
Two things reminded me of that recently: the news of more layoffs at Hewlett-Packard Co.
, and the persistently high unemployment rate for Americans ages 25 to 34.
While young tech firms such as Google Inc.
and Facebook Inc.
are hiring lots of skilled staffers, they’re not doing so in the same numbers that older workers are being canned by companies whose growth has flagged.
College debt hits well-off families
Rising college costs and a sagging economy are taking the biggest toll on a surprising group: upper middle-income families. (Photo: Getty Images)
For recent college grads in all occupations, it turns out the U.S. economy doesn’t need any of the skills a large percentage of them acquired at American colleges and universities.
The evidence is clear in numbers that are historically weak. The unemployment rate for those 25 to 34 years old was 8.3% as of July. That’s higher than it’s been in 25 years, except for the height of the recession from which our economy is still struggling to recover.
Even that figure, though, is overly rosy. Federal unemployment numbers miss a lot of folks who’ve either given up looking for work, or don’t file for unemployment benefits or both. It also doesn’t capture the additional weakness to the economy caused by people who are grossly underemployed.
College grads who flip burgers and live in their old bedrooms with their parents can’t afford to buy their own homes or do much of anything else for the U.S. economy.
Since the recession officially ended in 2009, about the only thing for equity investors to get excited about has been the promise of lots of cash going into the U.S. economy, courtesy of the Federal Reserve.
But a bull market needs robust and sustainable growth, not just cheap money, and the current recovery has been weak. That’s why the stock rallies sparked by the Fed’s largess over the past 18 months have so far been unable to sustain anything that might signal a new secular bull market.
Meanwhile, the debate over fiscal policy’s role in juicing the economy has been centered mostly on tax cuts — specifically on which income groups should get them and how big they should be.
Sarah Azad (center), a senior majoring in telecommunications at New York City College of Technology, chats at the 2012 Big Apple Job and Internship Fair earlier this year.
It can be argued that this or that tax bracket does the most to stimulate the economy. But no one can argue that the best tax cuts are the ones that stimulate economic growth.
Right now, one demographic group faces an onerous burden that amounts to a stealth tax on the economy. An entire generation of U.S. college students is finally figuring out that it’s been suckered into a lifetime of penury after taking out student loans that can never be repaid in a highly productive economy that needs fewer workers.
As college costs soared in the 1990s and 2000s, millions of college kids were given easy access to loans and told that they were investing in a bright future. But instead of opportunities to use their abilities, they’ve been presented with an economy filled to a supersize degree with “McJobs,” as novelist Douglas Coupland called them in his seminal book “Generation X.”
These students’ loans are so large that the payments are burying their personal balance sheets. What’s more, because of changes made to consumer-bankruptcy laws, the terms they face are more onerous than ever, on par with some of the most predatory terms faced by credit-card customers.
It’s worth pointing out that students who are working but can’t pay their loan bills are no more at fault for their predicament than all the investment managers at commercial banks that bought toxic derivatives from Wall Street.
If banks deserved a bailout by the U.S. taxpayer, surely the young people of America who’ve earned a college degree deserve the same consideration.
If those banks deserved a bailout by the U.S. taxpayer, surely the young people of America who’ve earned a college degree deserve the same consideration.
With aggregate U.S. student debt now at $1 trillion and steadily rising, forgiving just half of that figure would have a huge and lasting impact on economic growth.
Such a program wouldn’t have to be a handout, but an incentive. For example, students who were fewer than 30 days behind on their payments and stayed so would have half of their balance forgiven over time.
The U.S. government could negotiate terms with Sallie Mae
and other lenders enjoying fat loan margins, thanks to guarantees on those balances made by U.S. taxpayers. The lenders can be given a choice: Shoulder half the cost of such forgiveness, or be cut out of the student-loan market.
The program would have a multiplier effect throughout the economy, which relies above all else on consumer spending. It would be good for America and good for stocks.
Rather than sending checks to banks that will simply use the money to hire more low-skilled collection agents, those who had to borrow to earn their shot at the American dream will have a legitimate shot to achieve it.
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