The Welfare State's War Against the Young

In the welfare states of the western world, young adults are the biggest losers. They pay substantial taxes to support Social Security and other government pension programs, yet their own future benefits – to be paid by those yet unborn – are under threat as populations decline or grow only slowly. Moreover, as a class, the elderly are far wealthier than young adults. In the United States, depending on the year assessed they have from ten to sixty times as many assets on average.

On egalitarian grounds (assuming that increasing equality of outcomes is proper role of government), such intergenerational transfers without means testing could only be justified on the premise of relatively rapid future economic growth, such that the youth of today will enjoy far wealthier retirements and longer and healthier lives on average than today’s elderly generation. While I tend to agree with this projection, the wisdom of the crowd demurs: the majority of Americans, for instance, fear their children’s lives will be worse than theirs. In any event I doubt most young people would be willing to take the wager on economic growth needed to be at peace with the transfer even on these grounds.

State intervention in the labor market is an even more harmful policy for the young. In general, young people are worse prospective employees than older people, who have more experience and more skills and are more reliable. As result, the minimum wage hits younger workers harder. Similarly, laws that make it harder to fire workers also discriminate against the young. Employers are less eager to hire workers who are not easily fired for poor performance, and  even less eager to hire younger workers, who are less of a sure bet. Even younger workers who are employed are disadvantaged, if their current job is a poor match for their skills. These workers may be less likely to leave their job in favor of a better one, if jobs are harder to find. By remaining longer in ill-suited jobs, they put off valuable experience in work that is a better fit.

In the United States, we observe higher unemployment rates among younger people. In continental Europe, where the minimum wage is generally higher relative to the average wage and where job protections are generally much stronger, youth unemployment can reach stratospheric levels. In Greece and Spain, it approaches a quarter of the cohort. And unemployment is one of the greatest sources of human unhappiness—the cause of social isolation and depression.

A more flexible labor market serves the young. It affords them the chance to experiment and gain skills. It permits them to work at low wage jobs to support themselves as they try to pursue dreams, like becoming an actor.

So why don’t young people vote to weaken the welfare state? One reason is that the young vote and focus on the details of politics less than the old. They have not gained the habit of voting and have more enjoyable distractions.   But the left has also put together a generationally effective electoral package that appeals simultaneously to the egalitarian ideals of the young and to the desire for entitlement protection of the old. President Obama’s electoral success is in no small measure due to his rhetorical mastery of this kind of joint appeal.

This powerful political combination has maintained and often increased the size the welfare state. But given that the costs of the welfare state to the young bulk ever larger, the left’s appeal to the young  may be unsustainable. The greatest political imperative for classical liberalism today is to make liberty — a political ideal no less than equality — programmatically attractive to the young.  The growth of the welfare state makes them ripe for ideological conversion.